Chairman - just another dead weight cost?

News that Legal & General, one of Britain's leading life insurance and pension providers, has finally managed to identify its preferred candidate to become chairman leads us to ask why the role of Company Chairman is seen to be a cornerstone of good corporate governance in the UK. While the US system of the all-powerful CEO may well have its defects, the UK system in turn has not lead to much better performance by the listed company sector. Both systems need a major overhaul but one thing is certain: separate chairman do cost money and may create friction as the CEO is constantly second-guessed.

Shareholder rip-off documented

A report by Patterson Associates, a firm of remuneration consultants, documents the sorry saga of (Senior) Executive Compensation schemes that are designed to feather the nest of chief executives and their acolytes in senior management. As we said in an earlier post, the fish starts to smell from the head and we stand by our suggestion that all efforts to reduce excessive executive compensation have to start with resolute action to reign in the compensation of chief executives. Then, and only then, would there be an incentive to bring the compensation of companies into a more equitable equilibrium and reduce the disparity between top pay, average pay and difference between top and bottom pay in the organisation.

Patent on Investment Methodololgy

News that Research Affiliates has been granted a US patent for an indexing methodology that selects and weights securities using fundamental measures of company size, such as dividends and sales should set alarm bells ringing in investor circles the world over. While the ruling only affects the United States there is the danger that US law gains ex-territorial reach or gets copied by other legislatures.Granting a patent on an investment methodology is akin to granting a patent to the first person that has opened a self-service supermarket. It is nonsense and makes a mockery of the true purpose of patent protection for technological and medical innovations. Fees charged by Research Affiliates are a extra drag on investment returns achieved by investor's funds. We hope that fund providers have enough intelligence to do their own index construction. This work requires only minimal skill and can be performed on any standard PC.

Simple way to make executive pensions transparent

'Filings don't tell full pension story' warns the headline in an article about the difficulty of finding out the full amount of pensions promised to company executives. Our prescription for simplifying executive compensation would also avoid this problem as all employees would be in the same company-wide scheme. Pension entitlements would be proportionate to base salary without any exception. (Compare our earlier post)