Why Corporate Governance Matters Monday, Jun 22 2009
Why Corporate Governance Matters
Financial Institutions Roundtable Speaker
Tuesday, June 16, 2009
Nell Minnow, President
Corporate Library
A little bit about libraries:
Nell opened by saying how much she has always loved libraries. And her sister is a librarian, Mary Minnow who also has a law degree and runs the LibraryLaw Blog
The Corporate Library is dedicated to research and analysis, finding the right information. That is why they chose the name of the company.
Corporate Governance:
Companies are hiding information in plain sight. They provide data on pay for their officers and directors, but they don’t necessarily reveal the salaries of the highest paid individuals.
TARP companies cannot offer bonuses so they adjust the salaries of their CEOs and other officers. These adjustments are always sizeable increases.
CEO contracts are part of the SEC filings (10K filings) and they are public. But some companies play games with filing them e.g. submitted after filing a Proxy statement so that shareholders don’t necessarily see them.
Nell mentioned a website – www.footnoted.org as a good resource on tracking compensation and benefits offered at various companies.
In addition to the Golden Parachutes that many executives have had – huge dividends awarded even as their companies failed – there are new options sometimes referred to as bullet-proof options or spring-loaded options.
Shareholders should be looking at what benchmarks are in place for measuring the effectiveness of the CEO.
The Corporate Library rates companies for the way the handle their CEOs. They look at contracts and benefits. If it looks as though the board of directors is unable to stand up to the CEO that is a bad reflection on the company. AIG, Countrywide, Enron were among many that Corporate Library rated badly.
One element that the Corporate Library looks at is how the company responds to shareholders’ proposals. One company had proposals from a 60% block of shareholders and the CEO was dismissing the proposal. Perhaps the proposal doesn’t have business merit, but the CEO should not be ignoring 60% of the shareholders. Would they ignore 60% of their customers?
Currently the SEC is proposing rules to allow shareholders to propose actual directors rather than just voting on a slate that has been proposed.
Other resources that Nell mentioned to find out company practices:
Leave a Reply
You must be logged in to post a comment.