CEO Pay Soars In 2016 - Wages Continue To Stagnate

Another black eye for the inept corporate governance crowd! (21-Mar-2017)
CEO Pay Soars In 2016 As Employee Wages Continue To Stagnate | Zero Hedge

Excessive Exec Pay: Unwanted USA Import

Corporate Governance in one country at a time of Globalisation is not going to work. Many nefarious practises (esp with respect to executive compensation) is imported from the USA. Business Schools there are regurgitating fake theories ('Incentivise Top Management a outrance and everything will be fine'), many leading asset managers and private banks are based in America and have little or no interest to adhere to local practises. The need to introduce better standards will only succeed if all major countries and fiduciaries are forced to sing to the same hymn sheet. If laws are difficult to introduce then only ratings that hurt the sales process of fund manager will be an effective interim measure.
A special relationship on high executive pay (FT, Paywall)

Survey: People highly skeptical of the role of big business

No wonder, given that Greed seems to be the main motivator for top executives (16-March-2017)
Brunswick survey on attitudes towards business - Business Insider

Top shareholders back Alibaba's controversial corporate structure

Alibaba's 28 partners, mainly founders and senior executives, want to keep control over a majority of the board, even though they own only around 13 percent of the company. (Reuters)
It is quite amazing that the authorities in Hong Kong, traditionally not known for strict corporate governance, make a stand and bloc this move while other, much older , financial centres with a reputation to lose are in a race to offer more 'flexibility' in order to chase the IPO business.

This raises a number of questions
1 - is there a race to the bottom in regulatory affairs, contrary to all intentions proclaimed by global regulators?
2 - what is the role of board - should Management pick directors (effectively controlling itself)?
3 - should different voting rights be allowed, and if so under what circumstances?
4 - what obligations - if any - do the financial 'advisors' facilitating the IPO have? are they responsible to shareholders or do they only have to look after their own narrow financial interests?
27-Sept-2013

Executive Compensation - no need for complexity

SEC Commissioner Gallagher uses time-worn excuse of  'sheer complexity' of executive compensation to put smokescreen over efforts to reform (curtail) top pay.

Should Shareholders control Corporate Lobbying?

Given the influence that the Super Rich 0.001 per cent have on the political process in the US (and the UK, Russia etc are not immune either) a strong argument can be made for Shareholders to assert control about the spending by Corporations on lobbying activities.
(19/12/2011)

Insider Dealing brought to light

The detection of a year-long insider scam by the US authorities may well serve as a deterrent to those tempted to perpetrate such a scheme. But the fact that wire-taps play such an important role in helping to uncover illegal insider transactions is also worrisome. When criminals stop using telephones to communicate with each other it may become more difficult to detect illegal schemes. High-risk sectors of the financial industry are another area where prosecutors find it hard to uncover illegal transactions as they can easily be hidden behind a smokescreen of large numbers of unrelated transactions.
(7/04/2011)

Merger Rules - Do not leave initiative to Politicians and Courts!

A decision by a Delaware Court appears to entrench a company's board to issue 'poison pills' when faced with a takeover bid. Pro-Governance argues for a long time that reforms of the corporate governance system in the US - and most other countries - cannot be left to politicians and courts.  We have repeatedly proposed that the rules regulating any takeover or merger proposal should be made subject to changed regulations. The top 100 fund managers in the world effectively control all listed companies as their combined holdings are the largest bloc of ownership. Unfortunately their managements are neglecting their fiduciary duties to the real owners of the shares, the individuals who are ultimately the true owners of all assets managed by banks, fund managers, insurance companies and pension funds. These owners are left without any voice in shaping corporate governance policies which leaves fund managers in a situation where they are only paying lip service to the demands for change in their behavior.

Banking Pay: US Watchdog had no bite

'The government's restrictions on pay at bailed-out banks had little lasting impact because officials soft-pedaled some issues and did much of their work out of the public's view, a congressional panel says. (Associated Press)
(10/02/2011) 

Bank Pay: Special Case of a general Problem

As the U.S. considers a new push on bank pay we would like to remind the Solons in charge that the fish starts to smell from the top. So part of the solution to excessive bank pay is reform of ALL top executive pay. As Pro-Governance (Pro-Gov) has repeatedly suggested, the combination of all top executive pay into a simple structure (basic salary and a bonus on a percentage basis that is distributed to ALL employees) would go a long way towards solving this problem. Once top pay is under control the CEO has more of an incentive to reign in compensation. Why do Jamie Dimon or Lloyd Blankfein need a 'bonus', for showing up at the office? As long as the major shareholders, the institutions - who are really fiduciaries for Jo Public - neglect their duties and delegate supervision to regulators, politicians or Stock Exchanges there will no end to this abuse and the saying will remain in force: nothing succeeds like excess!
22/12/2010

No effective Inquiry into high speed trading

While a former Goldman Sachs employee is exposed to the full force of the law after having been accused of stealing high speed trading secrets that generated millions of dollars in profits for the investment bank we are kept waiting for a full and public inquiry into the way these codes affect the public market in securities. I fear we will have to wait a (very) long time, be it in the US or elsewhere.

12/12/2010 

U.S. seeks to shield Goldman Sachs Secrets

"Federal prosecutors in Manhattan this week asked a federal district judge to seal the courtroom at the forthcoming trial of a former Goldman computer programmer accused of stealing the firm's computer code. The trial is set to start in late November." (Wall Street Journal, 27 Oct 2010)

Pro Gov continues to argue that the trading process in listed securities markets cannot be allowed to be dominated by secretive algorithms that are suspected to skim off profits at the expense of public order flow - be it from retail or institutional investors. The NYSE for example used have - and still has - very open rules about 'priority and predence' in relation to the execution of orders. In the age of computers it should also be possible to ensure that clear rules are adhered to - even if orderflow is measured in nanoseconds.
28/10/2010 

High-Frequency Trader fined in US

FINRA sanctions Trillium Brokerage Services, Director of Trading, Chief Compliance Officer, and Nine Traders $2.26 Million for Illicit Equities Trading Strategy. This is probably only the tip of an iceberg and investors will not be able to have confidence in the workings of securities markets until high-frequency trading is properly supervised and regulated.
13/10/2010 

May 'Flash Crash': Blame the Computer!

While the effort of the regulator in telling the story about the infamous May 2010 stock market 'flash crash' has to be applauded, it leaves the reader with no clear message about what is being done to prevent a similar debacle taking place in the future. The amount of selling unleashed by the presumed perpetrator - Waddell & Reed Financial, courtesy Barclays Capital - is not particularly large given the stupendous amounts of money managed today's 'fiduciaries' on behalf of the investing public. $4.1 billion can easily be mustered by literally hundreds of players - especially given the amount of leverage that is available in the derivative markets. So while we may accept that the flash crash was simply due to inept trading execution we are left with a sneaking suspicion that other 'investors' with a more ruthless killing instinct may just set off the next crash on purpose in order to cash in during the ensuing panic. A similar mechanism was at work in the 2007-2009 credit crunch when speculators drove down the indices in the derivative market for mortgage and asset-backed securities. This created a 'death spiral' in the market for these assets which contributed to the near-collapse of the global banking system. Ironically, 'investors' who were prominent in that game and in some cases made billions out of this dislocation are still feted as heroes by the financial markets and assorted cheerleaders in the financial media.
(01/10/2010)

Independent Investment Research under Threat

We are not able to confirm details in today's New York Times article about the lack of supportfor Dick Bove. BankAtlantic, a Florida bank, sued him, accusing him of defamation after he wrote a report about the banking industry in July 2008, just as the financial crisis was starting to boil over. The bank contended that the report falsely suggested that the institution was in trouble.
But if his claim that several associations that represent stock analysts or the securities industry declined his requests to help him pay his legal bills it leaves a sour taste in the mouth - to say the least. What use are the Securities Industry and Financial Markets Association, the New York Society of Security Analysts and the CFA Institute if they decline to make a stand for independent investment research. To cap it all, they declined to comment when approached by the New York Times. Even worse - the investment bank Ladenburg Thalmann, his then employer, chose to settle its end of the case by paying BankAtlantic $350,000, without admitting to any wrongdoing, and leaving Mr. Bove to defend himself.  We are glad to report that Bove won his court case against the Bank but is still left with legal bills totalling $800,000. The stakes in a case like this are high as any successful lawsuit against an analyst would deter critical analyst comments in the future and stifle independent research. (12/09/2010)

Are Media Investors responsible?

The controversy about the role of the media in the United States leads to the question about the responsibility of  investors for keeping the public domain free from distortions of the truth that is only designed to support a political view. Of course, it has always been accepted that a newspaper or other media product is partisan and states which aims it supports. But in a case where a media product aims to distort the facts and make political hay on that basis we doubt that the shareholders can claim innocence - especially if they are institutions that manage the money of the wider public as fiduciaries - pension funds, mutual funds and insurance companies. Socially responsible investment does not just mean to avoid tobacco companies or defense contractors, it also means a wider social responsibility like upholding minimum standards of morality and truthfulness in the public domain.(11/09/2010)

Intermix Acquisition: Directors accused of favoring bidder

We have for a long time argued that investors have to constantly be vigilant if they are shareholders in a company that receives a takeover bid. The interests of the executives and the board directors are not necessarily served by receiving the highest bid but may follow their own agenda. A recent court judgement in the case of the acquisition of Intermix by News Corporation rejects to objection of the directors to the court case brought against them. (04/07/2010)

Tax honesty on Carried Interest for 'Private' Equity

Managers of 'Private' Equity funds effectively manage money from Joe Public. There is nothing private to it - except the level of secrecy surrounding performance, fees and the compensation of the managers and the executives of the portfolio companies. Sometimes these people invest in funds or portfolio companies - but even if they do it tends to be on terms that favor them, i.e. they amount of money they put in is disproportionately small compared with the terms the public receives. So treating carried interest as a capital gain is to a large extent nothing but the abuse of a tax loophole by the insiders at the expense of the investing public. In addition, many funds - especially international ones - are located in tax havens which further diminishes their transparency and increases the tax benefits to their managers. Boosting efficiency of private industry does not require the private equity business. Installing better management would do the job as well - and at much lower cost.

US Lobbies stonewall increased shareholder influence

Pro-Gov campaigns for a long time to restrain corporate managements from apportioning a disproportionate share of company profits for themselves. Lobbies like the Chamber of Commerce - who does NOT represent the shareholders of large public companies - and corrupt members of Congress are stonewalling legitimate proposals to increase shareholder influence in companies. It is absurd to exclude the real owners from substantial decisions and it is high time that their fiduciaries - esp the large investment institutions - take more responsibility. Non-US shareholders should also take the gloves off and start making their voices heard - just like some US institutions (and 'activists') have been doing for a long time with respect to non-US companies. Finally, regulators and governments outside the US should support interventions in favor of more corporate accountability. At the moment, the executive 'class' has a free hand to help themselves to the fruits of enterprise that should really accrue to the investors/risk takers.

Compensation: Baseball benchmark sanctioned by Obama

When President Obama states that the compensation of CEO's is not excessive when compared to what some sports stars can earn he tacitly assumes that the compensation of sports stars is set in a free market. We want to point out the they benefit from the protection of intellectual property rights. We would argue that this protection may well be to the detriment of the public good and should therefore scaled back.