Activist investors are turning up the heat on companies that give relocating executives generous benefits to cover the cost of their depressed home values (Wall Street Journal, 25 Oct 2010)
While the issue of relocation expenses may appear to be of minor importance it is an issue that can and should be closely monitored by the investing institutions that are to a large extent the fiduciaries of private investors. It is unrealistic to expect institutional money managers to micro-manage the businesses they are investing in. It is not their job to decide, for example, what goods a department store will have in the showroom for the Christmas season. Therefore calls for investors to 'have a dialogue' with management is an empty gesture. (Apart from the question how managers would have fireside chats with possibly hundreds of fund managers and analysts in the case of large corporations. Equally, fund managers with several hundred holdings cannot be expected to have conversations with all those companies). So the only way forward to improve corporate oversight is to set clear guidelines and rules that investee companies have to meet. Help with relocation expenses depends on business judgement - just like any other form of pay. We at Pro Gov argue that the pay for top management should follow rigid guidelines. If pay at the top is under control the pay further down the ranks would also follow a more moderate path.
26/10/2010
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