March 31 2009

It’s always interesting to read about corporate governance issues from the perspective of someone who doesn’t live the stuff day-in and day-out: in Saturday’s Globe & Mail, Christie Blatchford on the corporate culture of entitlement. On the growing push for CEO/Chair splits in the US. On how bailouts have affected governance of companies such as GM, whose CEO was just ousted. More here: “We now know that the “old-fashioned” governance construct of directors appointing management, and shareholders electing directors, is out-the-window if a company accepts federal funds.” Manulife’s payout to departing CEO “a misreading of the zeitgeist”. Jim Shaw of Shaw Communications profiled, providing a good look into a family-run company. And Livent execs found guilty– after ten years.

March 12 2009

Pension fund managers are called upon by the UK’s Treasury manager to “be more active in challenging company bosses to stop them making reckless decisions”. On big American companies getting rid of their executive planes, which also represents a business opportunity: “economy consumer airline Jetblue Airways Corp (JBLU.O) is running an advertising campaign that welcomes aboard big cheeses, bigwigs and head honchos — all those who might need to ditch the private jet.” India’s Industry of Chartered Accountants plans to set up Corporate Governance ratings in light of recent governance/audit scandals.

In Canada, Sun Life becomes the eighth major Canadian company to agree to “say on pay”, giving shareholders an advisory vote in determining executive compensation. The TMX group adopted the policy the day before, in addition to six major banks. Shareholder activist groups have been calling for Say on Pay through shareholder proposals, though TMX adopted the policy voluntarily. On 2009 as “the year of proxy fights” amongst mining companies. Canada’s financial regulation model touted internationally.

February 27 2009

Though Biovail reports increased profits for 2008, former CEO Eugene Melnyk (who maintains 11% ownership of the company) is still calling for a shareholder vote on “several resolutions to bolster Biovail’s corporate governance practices”. Melnyk’s attempt to overthrow the Biovail board failed in 2008, and he is still faces Ontario Security Commission proceedings for activities during his tenure as Biovail CEO. HudBay Minerals currently facing takeover attempt.

Corporate Goverance Lessons from MPL Communications Inc.– court decision comes down citing that ”the affairs of the company have been run in a way that is either prejudical to, or disregards, the interests of the minority shareholders”. Notable were excessive fees paid to a private company owned by two senior managers, interest-free loans to said company, and dubious claims of Director independence. “Two Ways to Fix Corporate Boards” includes board self-improvement at best, and proxy access if all else fails.

On how the US federal government’s increased stake in Citigroup may be undermining shareholders and corporate governance principles. At the same time, global investors call on President Obama to instate UK (and Canadian) style “comply or explain” corporate governance model. And on the role of business ethics courses in response to economic meltdown. UK Investment Fund F&C blames corporate governance failures for current financial crisis: “We believe that a failure in governance lies at the heart of the banking crisis. The events of the last few months have confirmed that the soaring pay packages for top bank executives were driven by extraordinary risk-taking rather than real, sustainable profits. Investors can be part of the solution, by spotting red flags and using their influence as shareholders to press for better governance practices.”

Nell Minow on “outrageous” CEO pay, and who is to blame: “I will tell you that the biggest disappointment I’ve had in this mess has been the absolute vacuum of leadership on the part of the business community… And we have completely failed to address the demand side of corporate governance, which is what shareholders must do. Shareholders have reelected these directors, have approved these pay plans, and have been enablers for the addictive behavior of the corporate community.”

February 9 2009

Last week began with CEOs of Canadian banks having their compensation “slashed“: “Those rare moves are coming at a time when some shareholders are pushing for a say on executive compensation, while taxpayers ratchet up their scrutiny after Ottawa committed billions more to shore up lending in last week’s federal budget.” South of the border, President Obama’s bailout package caps executive pay at $500,000, though critics are already pointing out loopholes. In the United Kingdom, Prime Minister Gordon Brown moves to “[sweep] away the old short-term bonus culture of the past and [replace] it with a determination that there are no rewards for failure and rewards only for long-term success.” And Nortel Networks are to give up their corporate jets.

Here for Corporate Governance predictions for 2009. “Queen of Good Corporate Governance” Nell Minnow sees Obama’s curbs on executive comp as her second choice: “I would have preferred to have the corporate community demonstrate some sense of responsibility, leadership and self-preservation by taking steps themselves to establish a compensation system that communicated a commitment to investors and taxpayers. ” Repurcussions of India’s Satyam corporate governance scandal continue here with thoughts about controls on internal auditors. More on “Wall Street pay in the age of Obama”. From The Huffington Post on the role of boards in the current financial crisis: “But little has been spoken about the boards of the great American financial institutions that have brought the world economy to its knees. Sure, Robert Rubin has been silenced for his complicity as a member of the board of directors of Citigroup. But little has been said about the more fundamental issues, conflicts and failure of corporate governance that have occurred on our long march toward the abyss.”

February 2 2009

So why don’t we bring this old blog back to life? The Clarkson Centre spent the summer months busy with governance research towards our own Board Shareholder Confidence Index, Report on Business’s Board Games 2008, and the Canadian Coalition for Good Governance’s Executive Compensation Report. The autumn months were devoted to an in-depth study of the corporate governance of Small and Medium-sized Enterprises (SMEs) listed on the TSX. We’ve also undertaken an extensive investigation into links between company performance and executive compensation, gathering five years worth of performance data. And in the midst of all this action? The economy up and died. So what’s up in the world of corporate governance now?

On “India’s Enron moment”, after the founder/chair of outsourcing firm Satyam confesses to billions in fraud, focussing attention once again on the need for independent Directors and auditors. On more corporate governance lessons we can take from Satyam. “The height of irresponsibility”: on President Obama’s reaction to Wall Street executive bonuses post bail-out. On a related note, bonuses etc. etc. for former boss at Merrill Lynch. From the U.K.: on that “part-time, old boys’ network” of non-executive Directors: ”The practice of “going plural”… is increasingly being questioned. Can non-executives with multiple roles grasp the full complexity of the companies they oversee?” Regarding succession, on Apple’s disclosure of their CEO’s health problems: “a sign the board is giving him too much leeway in determining his own fitness and deciding who will run the company, while depriving shareholders of relevant information”?

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?”