Anyone still thinks that investment fiduciaries should run Corporate Governance?

Who are the 90% that waved through Lloyds Bank CEO Horta-Osorio's pension? The missing link in the whole debate about corporate governance, and inequality in particular, is the lack of any control that real end investors - the man/woman on the street whose savings are at stake - have over the actions that fiduciaries (and fund managers do NOT own any shares!). And make one guess how fund managers associated with Lloyds Bank voted.
(18-May-2019)
Lloyds wins backing for CEO’s pension — but 10% of shareholders dissent

Amundi investors urged to vote against chief’s pay deal

Major problem for the whole governance debate: The 'Shareholders' as the Investment Management Firms and/or Banks are often mistakenly called are in reality nothing but fiduciaries for the real end investors. But they have disproportionate power over corporate policies - and therefore our whole economic (market? capitalist?) system. This is a relatively recent development - just remember that Fidelity was a comparative midget in terms of AuM just 45 years ago, and Blackrock was only founded in 1986. No one seems to have thought of introducing a mechanism that allows end investors - the real shareholders - to influence - let alone control - the governance policies that are exercised on their behalf by these fiduciaries. To add insult to injury directly or indirectly they pay their fiduciaries twice, once with any management fees and again for farming out governance to third parties, known as Proxy 'Advisers'. Not many savers are informed about the fees that are charged by these advisers and how their performance is measured. At best they provide a fig leaf for the fiduciaries and at worst the fees they receive are an outright waste of money as fund managers should be able to assess companies they invest in in a 360 degree fashion, not just if the price will go up or down in the next five minutes. So to conclude: would the great unwashed public agree to pay CEO's the sums they get paid these days? I think the answer should be obvious.
(11-May-2019)
Amundi investors urged to vote against chief’s pay deal

IPO Roundtripping - Public left holding the bag

The re-emergence of Dell as a Listed Company can only leave a sour taste in the mouth of anyone who supports a Market System that benefits the great majority and not just a few clever financial engineers.
For a long time Pro Governance has argued that it is much to easy to take listed companies 'private' (a misnomer in the case of 'Private Equity' backed deals as PE firms are mostly working with money from Joe Sixpack even if it is allocated by fiduciaries in the money management food chain).
Dell returns to public equity markets

Bloomberg Chairman sits on Glencore Board

This creates not only a potential governance problem, it also means that the Public cannot be 100% certain that reporting is conducted on arms-length basis. Not without reason a wise man once said that freedom of speech (and media) means that 200 (very) rich can say what they want. Read the last line of this article!
(6-Nov-2017)

Bloomberg

Deutsche Boerse pays fine for supposed Insider Trades by CEO

Is this the proper way to handle this investigation? Is it just hush money? And who approves of these payments? Are the regulators complicit in a cover-up? And is there really no other person fit to run what was until not so long ago a quasi-public institution run for the benefit of its users? (Reuters)
(14-Sept-2017)

Top Execs sell stock just days before bad news is released

When well-paid (overpaid?) top executives behave like this one should not wonder that Capitalism and the Market System increasingly lose public support. It is only fortunate that the average citizen is not really able to properly put such blatant abuse of position into proper perspective. After all, how many do really understand what a million dollars (life changing amount for 99% of the population) means? The maths scores tell a story! And it will be interesting to see how regulators and the trustees of the savings of ordinary people (aka investment managers, private bankers) and the corporate and 'socially responsible' investment crowd are going to do about this.
(9-Sept-2017)
http://www.marketwatch.com/story/equifax-executives-sold-stock-after-data-breach-before-informing-public-2017-09-07?siteid=rss&rss=1

Morgan Stanley CEO Pay nicked through

A $22 Mio pay package for the CEO while ROE is stuck at 8pct - need one say more? Amd how can Morgan Stanley be a 'fiduciary' for billions of investors' funds? Put the fox in charge of the henhouse?
(23-May-2017)

Who runs the Show? Are Activist Investors given too much leeway?

News that 'Activist' investor Elliott Management and Arconic settle their longstanding battle should be seen for what it is: a black eye for corporate government. The number of board members handed to Elliott are out of proportion to the stake the firm has in Arconic. Giving investors board seats also creates conflicts of interest - hopes that 'Chinese Walls' work properly may be optimistic. Why create these conflicts when an arms-length relationship would do the job? And what role did the shareholders as a whole play in this 'agreement'? Who consulted them? And can the activist firm be involved in buying and selling the target's shares while negotiations are taking place?
Movers: Arconic and Elliott Settle

Citigroup Bonus Cap fails to sway Executive Pay Critics

While I applaud that some observers are rattling the cage in the C-Suite I am afraid the result will at best be an adjustment of some decimals behind the comma. 20 or 22 or 18 million, or whatever the number the CEO and his cronies in the Board decide to be 'fair' compensation to show up at the office, it is a number that is decided in a circular fashion - CEO 'invites' board members, board members 'reward' their buddy and hey presto we are all in this together.
The basic deficiency in Executive Compensation - and more importantly CEO pay - is the fact that the fiduciaries who are now supposed to represent the end investor (be they direct or indirect share owners) are just not doing their job, partly because they are in the same boat - be it as recipients of similar pay packages or because they try to get investment mandates from the pension funds the companies they invest are managing.
Only a dismantling of this nexus will lead to lower Executive Pay. As I suggested before, if just the pay of the CEO is controlled the rest of the executive pyramid will adjust accordingly. CEO pay ( and the 'incentive schemes' which have demonstrably be found to be useless) should always be voted on before it is set for each year (during the Annual Shareholder Meeting). All votes by fiduciaries should be based on proxies received not from some proxy agency that makes up its mind divorced from the desires of the end investor but from real people that are the ultimate owners of public companies.
(9 April 2016)

What is Inside Information?

A prominent Fund Manager was recently quoted as saying that he has the mobile phone numbers of most of the CEO's and CFO's his fund is invested in.
I seems strange that the question of inside information has not yet received more scrutiny by regulators as well as the media and industry representatives.
One has to assume that any conversation would lead to at least SOME bit of new information about the business progress these companies are experiencing. This information is by definition not available to the rest of the shareholders, large ones as well as individuals. So it is clear that this state of affairs makes a mockery of the idea of a level-playing field for all investors. Oddly enough fund managers seem to boast of - and expect - access to senior managers. And one has to assume that they are not just discussing the weekend's sportive events.
Even more astounding is the long-established practice that so-called 'sell-side' firms, aka as stock brokers, are the self-appointed gatekeepers and allocate access to company managements to their favoured stock broking clients thus introducing another murky element into the situation.
(1 April 2016)

Premier Foods told Nissin of US Interest

Strange things happen in Corporateland. It will be interesting to see what regulators have to say about this situation. Was Nissin an Insider after being told of potential bid interest? I guess if Joe Blogs would have been told by his girlfriend in the mailroom at Premier before quickly buying some shares the regs would have come down on him like a ton of bricks. So come on chaps at the FCA and/or PRA (wherever you hang your hats in the revolving regulatory circus) and shed some light on this. And the concerned 'fiduciaries' in the investment management firms should have a word to say as well, not least about the off-board transaction when a 'Private' Equity firm (handling the money of the wider public but keeping a hefty share for itself) got a sweet deal selling a stake to Nissin.
(30 March 2016)

(Too) Close ties between Executive and Board

No surprise there! While this case may be at the extreme end of the spectrum the current selection process for board members is inherently problematic. The Insiders - board and executives - basically select their own supervisors while the real members of the company in most cases rubberstamp the elections. And even then they are (poorly) represented by their fiduciaries, i.e. the investment institutions that manage their savings. Activist shareholders offer no solution either as their motives are highly conflicted and basically greed rather then the best interest of all stakeholders provides the main incentive. A wholesale revision of company laws it the only way out of this dead end. And please spare us the argument that 'free markets' must not be hampered and remember that corporate entities have been created by legislation.
Dish Suit Shows Close Ties Between Executive and Board Members (NY Times)
 (12 July 2015)

Board should communicate more with shareholders

This suggestion by Sodali Chairman John Wilcox merits our attention. But is not a key problem that the (Chief) Executive has a major role in selecting his own supervisors? Naturally there are Board Chairman in several countries that are nominally in charge but still there is a dis-connect as the shareholders are rarely able - and/or willing - to play a major role in selecting board members. There may be a director tasked with the role of being the point of contact to shareholder queries but it is often all behind closed doors (thus creating conflicted investors that may obtain inside information). But again, without such a dialogue, how can one expect shareholders to 'engage' with the companies they invest in?
(17 Oct 2014)

Proxy Advice - Should it be a business?

One can erect any number of 'Chinese Walls' in order to prevent conflicts of interest but I still wonder if the something as important as good corporate governance should really be handled by a profit-oriented entity, in particular one owned by a Private Equity firm which may or may not be in it for the long haul. What do you think?
(22 July 2014)

Stock Buy-backs - Poison for the Economy?

There were times and places where companies were not allowed to buy their own shares. This was principally meant to prevent share price manipulation.

Hewlett-Packard - one poor Acquisition after another

Hewlett-Packard could easily become Exhibit Number One for any future case studies about the dangers and pitfalls of hastily concocted acquisitions.

Board Members and Conflicts of Interest

News that Peter Brabeck, Chairman of Nestle and member of the board of Credit Suisse has borrowed a total of Sfr 14 million from the bank that paid him a total of Sfr 500,000 last year highlights the potential for conflicts of interests when a board member has senior positions in companies that are doing business together. In the days of the 'Old Boy Network' it was easy and convenient to invite people to sit on one's board as one knew them already and could be confident that they would see their role more as friendly advisor rather than as objective controller. Pro-Governance repeatedly warns that the practice of board members being selected by exactly the people they are supposed to supervise is deeply incestuous. When a board member is connected to a financial institution and a company that is in business contact (as client or investor) the possibilities for abuse multiply.
(25/03/2011)