Gravediggers of Shareholder Capitalism

When company executives (and company boards) look after their own interest rather than the interests of the shareholders no one should be surprised if shareholder capitalism - and as a consequence capitalism itself - gets a bad name.

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.

Time to end the time of the 'Imperial' CEO

That some employees at Citigroup may be in shock (Financial Times) about the sudden departure of the CEO speaks volumes about the fact that the role of the CEO in today's corporation is vastly exaggerated. While no one would deny that the decision of the leader is critical it does not mean that this is necessarily a good thing as many examples in business (and history) show. Relying on the judgement and predelictions of a single person creates risks that would be mitigated in a more collegial system of leadership.
(20/10/2012)

PE firms accused of bid-rigging

While nothing is proven about the details of the bid-rigging alleged in a complaint opened by a Boston judge the accusation raises an important point

No more 'anger' or 'protests' about top pay

No more 'anger' or 'protests' over excessive senior management - and in particular CEO - compensation please. It is up to the 50 top global investment institutions (dare we say fiduciaries?) to get a handle of this (still growing) abuse. It is they who effectively have a controlling stake in all listed companies and are morally - if not even legally (due to various ethics codes and legislation to engage in corporate governance) – bound to put an end to excessive compensation for a tiny number of top executives. Or will legislation eventually be the only remedy? Voting by the Top 50 should be mandatory and public, any outcome should be binding on the company. To avoid endless discussion about each pay 'scheme' a few simple rules suggested by Pro Governance (a modified 'John Lewis' model) would do away with time-consuming and opaque 'consultations' (usually held behind closed doors).
(15/06/2012)

Pay: Pru (UK) sets poor example

The corporate oligarchy does not seem to be capable - or willing - to learn. To shower excessive rewards on the few (Seven) is morally despicable apart from being totally unproven to contribute anything to company performance. A good salary and a company-wide reward scheme open to ALL employees on a salary-based pro-rata basis should be incentive enough. Keeping one's job should be 'reward' enough, and under performers will be shown the way out (is that not enough 'incentive' to perform?). A major institutional investor such as the Pru (do they know that they are actually only fiduciaries for the real investors, do they care?) is critically conflicted in terms of corporate governance and should be a shining beacon for good behaviour...o tempora o mores! Any reader who agrees with us should get in touch - only numbers count in the battle for better corporate governance. There are plenty of studies and organisations working on the issues but they are basically either talking shops (sometimes well paid) or headless chickens without leadership.

Shaming the overpaid is not enough

If people are shameless they will not have any problem with putting their pay into the limelight, they might even be proud of it! Pro-Gov.org suggests that the pay for top executives should consist of basic pay and all bonuses, perks, pensions, 'incentives' (to get out of bed?) and 'rewards' should be strictly on a company-wide basis (John Lewis Principle) and the same percentage of base salary should be applied to all staff members when calculating such emoluments. This would radically simplify compensation structure and do away with expensive 'remuneration consultants'. There might still be a temptation to set the basic salary at too high a level. But this would be much easier to police than the thicket of remuneration schemes that only get more and more convoluted (to disguise the excess?).
(15/05/2012)

Revolution in the City?

This headline (CityAM) caught our attention this morning. Given the tense political situation in the World we expected pictures of bloodshed and mangled bodies. But no, the revolution referred to the 'protest' votes against top executive pay that were cast by the (institutional) shareholders of several large UK companies. But so far, this protest is not much more effective than the protest staged by Occupy Wall Street. First of all, the votes are not binding. In addition, the opposition against admittedly excessive top executive pay lacks a reliable compass. Even if one optimistically assumes that pay awards will scaled back (unlikely) or at least not increased much more in the future (are pigs flying?) the fact is that the whole discussion about top pay needs to focus on the key question: what is fair and justified 'compensation' for top executives? Claiming that top pay is set by 'market' forces is no answer as there simply is no proper 'market' price for top executives' pay. If there would be, remuneration would not be pegged so as to be in the 'top' quartile of the peer group. Company boards would be hard at work to develop a strong group of executives below the CEO level hat could take over if the CEO finds his pay as being too low. In addition, remuneration consultants would point out those CEO's that get by with less compensation and suggest that the CEO matches their pay - or else. Ultimately the question boils down to how the boards and remuneration committees are appointed. As long as the CEO has a decisive hand in appointing his own supervisors the problem will never be addressed properly. Similarly, the major investing institutions - especially the top 40 who control nearly two thirds of all assets - have to take up their responsibilities as fiduciaries for the ultimate shareholders. Either there has to be a way to give the end investors a say in the voting policies of their fiduciaries or the door will open for politicians to interfere more and more in this aspect of corporate governance.
(04/05/2012)

Status Seeking - nothing changed for 5,000 years

Reading a book about Egypt's ancient history recently I could not help but be reminded of today's corporate oligarchs. Officials in the time of the old kingdoms tried to outdo each other by ever more spectacular tombs, being as close as possible to the Pharaoh's tomb etc...what you see in Wall Street is not much different, the same atavistic instincts reign supreme, the apartment on the right spot (overlooking Central Park if possible), the weekend home in the Hamptons...is this all the progress humanity made during the past 5,000 years?
(18/04/2012)

How to move governance from theory to practice

How can the corporate governance discussion move forward from the study/discussion stage it is trapped in at the moment? There have been more than enough studies, discussions - even laws and regulations - in the past and in theory we should all live in a corporate governance paradise. But sadly this is not the case. So we would love to hear suggestions about what could/should be done to move things forward. Not more 'theory' please but practical measures that could easily be introduced.
(17/04/2012)