June 23 2008

A major event in American corporate governance has been the launch of The Icahn Report, the personal blog of American Billionaire Carl Icahn. Recent postings include such titles as “Corporate Democracy is a Myth”, “Absurdity of Corporate Board Elections”, and “About CEOS- Survival of the Unfittest”.

In Canada, Stephen Griggs is appointed Managing Director of the Canadian Coalition for Good Governance. On implications of the BCE decision. Crackdown on Nortel execs, as fraud charges are laid. On CCBE’s SMEs findings, and our plans for future work in this direction.

Catalyst releases latest stats on women in Canada’s boardrooms: ”The 2007 Catalyst Census of Women Board Directors of the FP500: Voices from the Boardroom reveals the old boys’ network is alive and well and continues to exclude women. Directorships tend to be handed out informally, and it is this network that is typically tapped for new blood, so say the findings. In other words, it’s who you know, not necessarily what you know that counts.” Catalyst’s news release here.

June 6 2008

Much coverage of an address yesterday by Jeffrey Orr, CEO of Power Financial Corporation, on the topic of corporate governance.  Report on Business‘ Janet McFarland reports, “Mr. Orr defended the rights of controlling shareholders to oversee their investments, arguing that corporate governance guidelines published by Canada’s securities commissions blindly promote a “paint by numbers” approach that doesn’t take into account the different ways companies are run.” The Financial Post considers Orr’s assertion that ” companies will refuse to go public or could seek a listing outside Canada if regulators follow through with rules that limit board participation by controlling shareholders.” Terence Corcoran considers, “The rights of shareholders: Nice phrase, important concept, the foundation of a market economy based on corporations. Why, then, has our system of corporate governance been overtaken by ideas that aim to undermine those rights?”

May 30 2008

The Economist looks at the corporate governance scene in Japan: “Corporate governance is weak. Companies look to the stockmarket for prestige rather than capital. Noisy shareholders are seen as a nuisance. Independent outside directors are rarities. Hostile takeovers are unheard of. Foreigners may complain most loudly about the isolation of Japanese companies, but everyone, especially the Japanese public, is a victim.” But there is reason to think change is on the horizon. More here.

On poor corporate governance in Kenya, which is deterring foreign investors from partnering with SMEs.

Corporate governance shortcomings of one of Australia’s largest companies “hints at the growing pains of rapidly expanding mining companies in the resources boom.” In general, however, top Australian companies are meeting standards.

On the push for a CEO/Chair Split at Exon Mobil: “The involvement of the Rockefellers highlights the nonsensical nature of the complaint often made by opponents of shareholder rights—namely that shareholder resolutions tend to be the politically motivated work of activists and trade unions. They are generous philanthropists, but the Rockefellers are no bleeding hearts. Their support for the resolution is driven by a desire to maximise the long-term value of their Exxon shares.” The vote did not receive at majority at the Exon Mobil AGM yesterday, however.

In Canada, Ted Rogers profiled. His son Edward also. Stephen Jarislowsky on the current financial situation: “This crisis is totally man made… It was made through sheer stupidity, a lack or regulation … indulgence and greed.”

Book Review: Why Woman Should Rule the World by Dee Dee Myers

I decided I had to read Why Women Should Rule the World after I heard Dee Dee Myers interviewed on CBC’s The Current last month. Her intelligence and experience made a remarkable impression, but it was her optimism that was so inspiring. Coupled with the absolute sensibility of her message: that empowering women is good for everybody. The title is provocative but Myers means it, defining world-ruling as “[taking] advantage of all that each of us has to offer.”

This book’s strength is its fusion of disparate ideas to form a comprehensive whole– so refreshing. Part of it is the politically sensitive nature of Myers’ material– she’s doing a lot of elaborate sidesteps on the way towards her arguments, in order not to be read as in attack mode.

But more than sidestepping, Myers articulates her ideas well beyond polemics. Part of this is her book’s hybrid nature: part memoir, part treatise. She is able to illustrate her own experiences in politics, the ways in which being a woman hindered her own advancement– as White House Press secretary she was given more responsibility than authority, which seems to be a typical story; how she was told, when she protested a subordinate colleague being paid a higher salary, that he had a family to support; the struggle to be likable in authority, which men are rarely faced with. Myers worked as Press Secretary in the Clinton White House for two years, worked in writing and television afterwards, and then got married and had a family.

She writes, “That’s my story, but…” The “but” being key, that hers is not the only choice. “Women want and deserve not only the flexibility to manage work (and family) from day to day, but also the ability to make choices that allow them to pursue their goals across a lifetime.” Her focus remains on power, however, because “[a]ssuming that women– even women with children– don’t want the top jobs means that too many women will never get the chance to make those important decisions for themselves.”

Myers’ reality is complex, and she asserts that women need to accept and support women whose choices are different from their own. She thinks of herself as a feminist, but from watching her son and her daughter she’s certain– “[it] isn’t nature or nurture: It’s both.” She acknowledges aggressive tendencies inherent in men in particular, but realizes these inherited traits aren’t our destiny. Dealing with the example of Margaret Thatcher: that it is too much to expect one woman to change everything, and surely her position altered the world’s opinion of what women were capable of.

That different can be equal: “That doesn’t mean that every man should be expected to behave one way, nor every woman another. Rather it means that women’s ideas and opinions and experiences should be taken as seriously as men’s– regardless of whether they conform to traditional stereotypes.”

Through her own experiences, statistics, and interviews with other women, Myers illustrates the various ways women can be systemically excluded from power. Showing that this is dangerous, not just in principal, but in terms of economics: she shows women as “the engine driving economic growth worldwide,” and not just with their immense consumer power, as she cites studies showing that Fortune 500 companies with the highest percentage of women on their boards have significantly higher returns on equity, sales and invested capital.

Myers explains that men and women experience the world differently, and she demonstrates how traits typical to women, such as negotiation skills and collaborative strengths, can be highly effective in business. Moreover that women’s own lives are strong training grounds for management experience– motherhood in particular. She cites examples of women playing key roles in peace processes around the world. That in achieving “critical mass”– wherein women are not token, but a strong enough force to actually make a difference– everybody wins.

Myers is not overtly prescriptive– the general nature of her arguments ensures her book’s relevance is wide. Surely different institutions must find their own way towards solution, by Myers’s book is undeniable impetus for them to do so. I would like to think a man would read this, and find it as fascinating as I did– and not get defensive. That women could cease slinging internecine arrows for a little while, and understand that ganging up on each other is part of a game we don’t have to keep playing. The world can be better.

“This isn’t what I think,” writes Myers. “It’s what I know.”

(Review originally published here.)

May 16 2008

Calls for Japan to shape up corporate governance processes: managers “discourage investment by failing to meet global standards” says the Asian Corporate Governance Association. Why India, with its developing corporate governance policies, is failing to establish “shareholder culture”. Hong Kong shareholder activitist quits Hong Kong stock exchange board, “accusing the bourse of deteriorating listing standards and succumbing to political influence.”

In Canada, as David Beatty winds down his term as Managing Director of the Canadian Coalition for Good Governance, he discusses findings showing that “[d]espite the belief that greed often lies behind bad governance, the companies with good, transparent boards appear to be the top performers.” An examination of the CEO pay debate: “When the U. S.-based Institute for Policy Studies calculates that chief executives in 2006 earned 364 times more money than the average worker, that is just a statistic. But when the institute points out that as recently as 1980 the multiple was just 42 times, it becomes a trend worth pondering. Is it possible business has changed so much in 30 years that the average chief executive is really worth that much more, relatively, than he or she used to be?”

May 9 2008

“Rebel” shareholders may force a vote on the controversial appointment of Marks & Spencer CEO Stuart Rose the position of Chairman. The other side of the coin across the Atlantic, as troubled Wachovia Corp’s CEO gives up the Chairman title. See further coverage here. Argument that “CEOs aren’t overpaid” put forth here.  On “say on pay” after the Aflac AGM, and further evidence that the movement is “losing steam”.

May 2 2008

With the US’s first “Say on Pay” vote coming up this Monday May 5 (at Aflac’s AGM), a RiskMetrics study actually shows less support in 2008 for “Say on Pay” resolutions:  “‘There’s a mixed view…’ argues Prof. Charles M. Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. ‘I think there are some concerns about its efficacy and impact. It’s a half-step.’ Elson asserts that other mechanisms, such as corporate reimbursement for proxy solicitation expenses, are ultimately more effective tools for shareholders to curb pay and other governance abuses.” Along those lines, on increasing demand for independent compensation consultation.

Lots of coverage on the death of UK Corporate Governance expert Derek Higgs. From The Telegraph: “In the wake of American corporate scandals such as Enron and Worldcom, Higgs was charged by the government in 2002 with examining the British corporate landscape and spotting weaknesses that could make executive abuse more likely. More specifically, he was asked to make recommendations on how to make non-executive directors more effective. His report, published in January the following year, began with a pointedly ironic quote from Walter Bagehot on the monarchy – “We must not let in daylight upon the magic” – and insisted that corporate Britain should do just that.”

Jeremy Warner notes that Higgs’ Code of Conduct on Corporate Goverance has never been more relevant than in our current economic situation. “Ah, but it didn’t prevent the avarice-driven madness of bankers or the collapse of Northern Rock, some will say. Maybe not, but think of how much worse it might have been with no constraints on the chief executive at all. “

April 25 2008

On the rise of majority voting measures: “Voluntarily embraced governance practices tend to avoid the complexity and arbitrary thresholds and requirements that imposed rules entail (and, in turn, the disputes that such rules and thresholds generate or the fact that their inherent arbitrariness detracts from their credibility).” In anticipation of high-profile AGMs in Nova Scotia over the next few weeks: “With several of the companies reporting a decrease in share value during 2007, analysts suggest investors may voice their displeasure not only about strategy, but also the hefty paycheques some executives are banking.” On Directors’ role in the precipitation of corporate greed: “It threatens to shove the whole world into a severe economic downturn, but not to alter in the slightest the happy state of those fabulously overpaid CEOs.”

And on the heights of Frank Stronach’s pay package: “At time when another Canadian titan sits in a U.S. prison for using a business as his “personal piggy bank” and there is a higher level of scrutiny on governance issues, it’s worth asking… if he’s really providing $70 million in value to shareholders.”

Finally, questions of independence, as Marks & Spencer much-scrutinized-of-late Chair/CEO is revealed as having invested in the business of a nominally independent M&S Director (and a member of the Compensation Committee).

Things on the Proxy Front

We’re not yet in the thick of our summer research project (whose results will appear this fall as Rotman’s “Board Shareholder Confidence Index” and Report on Business‘ “Board Games”), but our early research has pointed towards some interesting trends.

• Bank of Montreal and the Bank of Nova Scotia have both included “Areas of Expertise” with their Director biographies this year, this being particularly notable considering recent emphasis upon board accountability
• A tendency towards decreased dilution by a range of companies
• Majority voting policies continue to be adopted, and we’ve seen this already this year by Laurentian Bank of Canada and MDS Inc.
• Increased disclosure of Director information including ages and total value of equity holdings.

April 17 2008

On US activist shareholders after a Director resignation at beleaguered Washington Mutual: “This renewed focus on board accountability isn’t likely to die out anytime soon. Indeed, corporate boards that have been targeted by activist campaigns should be prepared for a tough fight.” At their AGM, a shareholder proposal to separate the Chair and CEO roles won 51% of the vote. Pressure on UK’s Marks & Spencer to compromise on their recent corporate overhaul. On Directors’ increasing clout in setting CEO Compensation. And US Labour Unions assert that CEO pay played a role in the mortgage crisis. New survey shows that most executives think that CEOs are overpaid and underperforming.