CorporateGovernance posts
FeedPosted Jul 17th 2009 3:20PM by Zac Bissonnette (RSS feed)
Filed under: Management
The Obama administration proposed legislation yesterday that would require fully-reporting publicly traded companies to give their shareholders a
non-binding vote on executive compensation. Under the proposal, directors would have to ask shareholders what they think before going ahead and doing what they were going to do anyway.
Administration insiders
predicted that the measure would pass Congress easily, but that isn't stopping the Chamber of Commerce and the even more infamous Business Roundtable from opposing the measure.
Why would anyone what oppose a non-binding vote is beyond me. Why are they so opposed to taking a straw poll of their shareholders to find out what they think about their pay practices? Why are they so opposed to companies soliciting the opinions of their shareholders?
If anything, this measure doesn't go far enough. What's needed in the boardrooms of America is a revolution -- where shareholders take back their company from lazy, incompetent and just plain crooked directors who bankrupted General Motors, sent
Bank of America (NYSE:
BAC) onto the welfare rolls, and turned
American International Group (NYSE:
AIG) into America's most degenerate gambling addict. And non-binding resolutions will lead to a non-binding revolution, which is really no revolution at all.
Posted May 11th 2009 4:30PM by Zac Bissonnette (RSS feed)
Filed under: General Motors (GM)
Interim
General Motors (NYSE:
GM) Chairman Kent Kresa has hired Spencer Stuart, a New York firm, to help him locate candidates to replace at least half of the beleaguered automaker's twelve directors.
The Wall Street Journal reports (subscription required) that Mr. Kresa has originally planned to conduct the search himself, but was persuaded the a search firm could perform the job more quickly. Replacing the board of directors is important politically as GM looks to present enough of a fig leaf of change to prevent President Obama from pulling the plug and plunging the company into bankruptcy.
Continue reading General Motors hires firm to find new board of directors
Posted Apr 17th 2009 8:44AM by Zac Bissonnette (RSS feed)
Filed under: Management, Bank of America (BAC)
The Wall Street Journal reports (subscription required) that momentum is building behind a shareholder proposal that would separate the role of chairman and CEO at
Bank of America (NYSE:
BAC). The company's annual meeting will be held on April 29 and has the support of Proxy Governance, a leading proxy advisory firm. The proposal is sponsored by the Service Employees International Union.
There are two angles to this. The first is that chairman and CEO Ken Lewis is a discredited clown who has presided over a level of value destruction with few historical precedents. That he has a job at all anywhere is amazing and disappointing, so of course it would be great to find someone else to be the chairman if he must remain as CEO.
Continue reading Bank of America urged to split CEO and chairman roles
Posted Mar 19th 2009 12:40PM by Zac Bissonnette (RSS feed)
Filed under: Management, Law, Amer Intl Group (AIG)
While American politicians whine self-righteously about corporate governance travesties at bailed out companies they had every opportunity to extract concessions from, Australia's government is actually taking steps toward long-term improvements in executive pay practices.
The
Wall Street Journal reports that "Treasurer Wayne Swan said the center-left Labor government will amend the Corporations Act to require shareholder approval for any termination payments that exceed average annual base salary, which excludes additional compensation such as shares or stock options."
Continue reading Australia clamps down on CEO pay the right way
Posted Mar 4th 2009 11:40AM by Zac Bissonnette (RSS feed)
Filed under: Management, Bank of America (BAC)
Bank of America (NYSE:
BAC) Ken Lewis' compensation fell by 80% in 2008 as the company's stock declined by 66% and a pair of just plain stupid acquisitions primed the company for an even greater fall. In 2008, Ken Lewis took the steps that transformed one of the most powerful financial institutions in the world into a welfare diva, narrowly avoiding nationalization by sucking at the nipple of Uncle Sam. Either way, shareholders have all been wiped out.
Aside from not paying Lewis a bonus, what did Bank of America's
compensation committee have to say about all this? "Regardless of our profitability and continued progress and growth, our performance for 2008 did not meet our expectations, including a loss for the fourth quarter."
Continue reading Bank of America compensation committee can't muster much criticism
Posted Mar 3rd 2009 2:00PM by Sheldon Liber (RSS feed)
Filed under: Management, Rants and raves, Scandals, Politics, Serious Money, Recession
One of our reader's who blesses us with frequent comment's,
B. Harrison, left the following tidbit for us recently (responding to:
Buffett suffers big losses at Berkshire Hathaway) and I thought I would share it because this sentiment comes to us frequently.
- "And the American people are simply apathetically sitting back while our CORRUPT Congress who enabled and allowed all of the corporate FRAUDS, continues to allow the CORRUPT CEOs and Boards of Directors run those corporations, and to keep their ill gotten "weath" that they amassed while mismanaging the corporations, and orchestrating and perpetuating all of those FRAUDS."
I do not agree that the American people are "apathetically sitting back".... They are voicing their opinions on the web, in letters and emails to their representatives, they take to the streets and protest, they sell the stock of poorly run companies and file class action suits. The truth is that they are frustrated because
our representatives have an unwavering singular focus, and that is to sustain themselves in office. Nothing takes a higher priority then that; it's called political self preservation.
Continue reading Serious Money: Frustration is not apathy!
Posted Feb 2nd 2009 7:00PM by Mark Fightmaster (RSS feed)
Filed under: Bank of America (BAC)
We may need to have a talk with
Bank of America (NYSE:
BAC) ... a talk about tact and smart spending. Remember last week? You know, when President Obama lowered the hammer of shame on banks that were wasting their money? Perhaps BAC doesn't.
I was going to avoid writing about the Super Bowl today (mainly because I am a Cincinnati Bengals fan that hates the Steelers), but I found a story questioning the thought process of BAC and its sponsorship of the NFL Experience. This traveling exhibit has been a mainstay at the past 18 Super Bowls and it features sports games and interactive entertainment stretched over 850,000 square feet.
Continue reading Bank of America sponsors the NFL Experience ... a bad move?
Posted Feb 2nd 2009 5:45PM by Jonathan Berr (RSS feed)
Filed under: Management, Citigroup Inc. (C), DJIA
Over the weekend, the
New York Post reported that former
Citigroup Inc. (NYSE:
C) Chief Executive Sandy Weill and his family flew on a company jet for a vacation in Mexico weeks after the New York-based bank received a $45 billion bailout from the federal government and said it would slash 75,000 jobs. Today, the now-disgraced banker said he will give up the perk
According to the
Wall Street Journal, "Weill's office said in a statement on Monday morning that `in light of the unprecedented circumstances that Citi finds itself in' he decided to stop using Citi aircraft immediately." Wow, if you did not know any better you would have thought he had given up his left arm instead of a seat on a luxurious jet.
Continue reading Sandy Weill gives up Citigroup corporate jet
Posted Jan 23rd 2009 5:00PM by Zac Bissonnette (RSS feed)
Filed under: Management, Columns
Carl Icahn has been making the round doing everything short of stripping naked on CNBC to get his message across: Corporate governance in America is a complete joke and a major contributor to the mess we're in now. Shareholders and lawmakers need to get on the ball and do something about it.
In an
op-ed piece in today's
Wall Street Journal, Icahn writes that government bailouts have essentially plowed hundreds of billions of dollars into poorly-managed companies that still have same poor governance structures and lazy and incompetent managements and directors.
What can Congress and President Obama do? Icahn writes that "First, Congress needs to pass legislation giving shareholders enhanced rights to elect new boards, submit resolutions for stockholder votes, and have far more input on executive compensation and other issues. As companion to these reforms, Congress needs to pass legislation that prevents managers from making it more difficult for shareholders to exercise their ownership rights."
Icahn has been complaining about corporate governance in America for literally decades. He was lionized as an opportunist and corporate raider but the events of the past few months are proving that he was on to something.
Here's an idea: President Obama should create a cabinet level position of corporate governance that can work with all branches of government to improve shareholder right and management accountability. And the first Secretary of Corporate Governance should be none other than Mr. Icahn.
Posted Nov 24th 2008 1:24PM by Zac Bissonnette (RSS feed)
Filed under: Management
The Wall Street Journal reports (subscription required) that RiskMetrics Group is advising investors to withhold votes from corporate directors who approve tax "gross-ups" to cover taxes on forms of executive compensation like perks and golden parachutes offered in the case of a merger or buyout.
I've always thought that the whole tax gross-up thing was ridiculous . Do people earning 8-digit pay packages really need help paying their taxes? Worse, the tax gross-ups could also make it harder to figure out the total compensation given the absurd legalese that is found in proxy statements. But was it really that big of a deal? Or was it just a complication that really didn't result in any additional shareholder cash being wasted? A company that pays $6.5 million plus $3.5 million in tax gross-ups is no worse than one that pays $10 million in cash.
But according to RiskMetrics, tax gross-ups are indicative of an "anything goes" corporate culture: S&P 500 firms offering tax-gross ups to their executives had golden parachutes 61% bigger than those that didn't -- without including the value of the gross-up!
The one nice thing that has come out of the market mayhem is a renewed interest in corporate governance. Tales of executive looting are making the front-page of newspapers, and Congress has taken interest. Whether anything will come of it depends on the willingness of the large institutional investors that control the voting rights to most of the stock in this country to put their foot down.
Posted Oct 6th 2008 3:55PM by Zac Bissonnette (RSS feed)
Filed under: Management, Politics
With financial institutions imploding in a wave of writedowns -- and executives who delivered mind-bogglingly bad performance walking away from the wreckage with millions -- Carl Icahn is seizing on the current environment to push his agenda on corporate governance reform.
Icahn
announced today that he is forming United Shareholders, a lobbying group, to push for legislative reform that would outlaw shareholder-unfriendly corporate bylaws like poison pills and staggered boards.
Lobbyists get a lot of bad press, but this sounds like one effort that will actually be promoting the interests of ordinary investors. In recent months, we've seen the dangers of bad governance and poorly-aligned pay packages that induce executives to take excessive risks.
It seems that Icahn, who has spent most of his life building one of the largest fortunes in the world, is now looking out for his legacy. If Icahn's lobbying and blogging efforts have any effect on the way companies are run, it will be a good one.
Posted Sep 5th 2008 10:30AM by Zac Bissonnette (RSS feed)
Filed under: Law, Scandals
Former
Tyco (NYSE:
TYC) CEO Dennis Kozlowski and former CFO Mark Swartz asked New York's Supreme Court to
throw out their convictions on the grounds of insufficient evidence -- Kozlowski had been convicted of grand larceny.
As despicable of a character as Kozlowski is, he doesn't belong in prison: Tyco was a corporate governance train wreck, and he was essentially jailed for being paid an obscene amount of money. Tyco was not a massive securities fraud and, in fact, has produced solid returns for its shareholders.
One of the flaws with the Tyco case -- and it extends into media coverage of corporate governance today -- is that it held an executive responsible for gross negligence on the part of the board of directors. By throwing Kozlowski in jail and writing him off as a crook, the real threat to shareholders was essentially let of the hook: complacent and compliant directors at public companies.
Free Dennis Kozlowski, stop wasting taxpayer money imprisoning someone who was more reflective of an era than evil, and move onto bigger battles.
Posted Jul 21st 2008 5:31PM by Zac Bissonnette (RSS feed)
Filed under: Management
A
piece in today's
Wall Street Journal (subscription required) discusses "an emerging breed of directors who reach out to shareholders", listening to concerns, explaining governance policy, and basically just acting attentively in communications with shareholders.
But not everyone's so sure it's a good thing. There are concerns about Reg FD and selective disclosure -- directors can't say anything that material and non-public -- but directors should have enough familiarity with securities laws to know better. If they don't , they're probably ill-qualified for the Sarbanes-Oxley world.
I like the idea of directors holding meetings with investors, or even just talking on the phone. First of all, it's nice to see directors actually doing something to earn their keep. I'd support the idea of non-executive chairmen being required to stuff envelopes for a few hours a week because being a director is one of the easiest, least stressful, least time-consuming jobs there is.
Concerns about selective disclosure and undermining management aside, here's the thing: directors can always listen to shareholder concerns, and refusing to hear from the people you work for is just plain arrogant. They might not be able to say much, but they can always listen and, perhaps, learn about the issues that matter to their bosses: the shareholders.
Posted Jul 2nd 2008 2:07PM by Zac Bissonnette (RSS feed)
Filed under: Management
While calling Arthur Levitt's tenure as chairman of the Securities & Exchange Commission ineffective would be an understatement, he could, and still can, be relied upon to say the right thing. Now that the SEC finally has the quorum necessary to take action on a variety of issues, they should take Levitt's advice about proxy access changes.
Earlier this year the SEC made it impossible for shareholders to change the way directors are elected -- one of the most anti-investor events in recent history -- and it's time for that to change. Levitt writes in The Wall Street Journal that "While not a panacea, giving shareholders a bigger voice in the companies they own would go a long way in helping to restore trust."
Exactly. Some critics of strong corporate governance say that the SEC shouldn't meddle in these affairs. I basically agree: but the problem is that the SEC has meddled, making it impossible for shareholders to take control of their own companies when necessary.
Continue reading Arthur Levitt calls it right on corporate governance reforms
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