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”?