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.
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.”
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.”
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”?
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.
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?”
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.”