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)

Stockholders do NOT approve Pay of WPP's CEO Sorrell

Another twist in the never-ending quest of the WPP management led by CEO Sorrell. Are they really so desperate to receive every Penny they can get their hand on? What do they have to prove? But apart from this question - which is more a subject for a psychology site - one can say one thing: the REAL shareholders of WPP - or any other listed company - are usually not the ones that approve the one-sided and completely unnecessary 'incentive' schemes that inflate executive pay for the 0.1% that design their own 'compensation' schemes. In fact, their fiduciaries, large investment institutions such as Pension Funds, Investment Management firms and Mutual Fund Manager as well as Private Banks are the ones that wave these schemes through. They should stand up and be counted and not hide behind spurious 'governance statements' or - even worse - proxy advisers that are just an extra cost for the investors and responsible to no one. 'Best Business Principles' for Proxy firms may have been released just recently, but again they basically are designed by insiders for insiders.
(26 June 2014)

How to streamline Governance 'Clutter'?

Any student of the Corporate Governance debate that has evolved during the past 30 plus years (especially here in the UK) will sometimes be confused by all the different codes that have been published. So a call to 'clean up this clutter' by a prominent participant (Guy Jubb, Standard Life Investments) in the current governance debate has to be welcomed. But this leads again to the key problem: who shall be in charge of setting the governance code, shall it be the companies themselves, the investment institutions, government or the real investors themselves? And that still leaves out the 100 pound gorilla that dominates so much voting on corporate and governance issues, the proxy advisers.
(10 June 2014)

Minority Investors get better protection in UK markets

While not necessarily enough, the new  rules for 'premium' listings are a step in the right direction. But are they enough?
(2 June 2014)

Employee Buyout - next revolution in Finance

If anyone would have predicted in 1985 that Buy-out firms would grow to the enormous size they have reached now you would not have been taken for serious. Like Hedge Funds the LBO firms were at the margins of the financial markets. So my prediction that Employee-led buyouts (EBOs) may well be the next frontier for financial markets will be laughed at by most - if not all - my readers. But just look at an - admittedly extreme - example: the purchase of a major sports team in the US. With a little bit of organisation - and help from some investment bankers keen to participate in this new trend - the players AS A GROUP (Union?) could easily demand a seat on the table during the sale negotiations. Would any potential purchaser really want to proceed with a transaction against the wish of the key asset that he might want to pay an immense amount of money for? Key problem: any employer would like to take the 'divide et impera' approach and outmanoeuvre employees or their representatives. That is why 'alternative' unions would play a key role. They may actually be outsiders who sign up staff and then hire investment bankers to act on their behalf. These outside professionals could not be picked off by employers as they are not under their control. EBOs would go a long way to alleviate the problems of rising income and wealth disparity and move towards a proper shareholder democracy.
(30 May 2014)

Proxy Advisers - how are they selected?

I want to leave the question of whether or not the cost of employing proxy advisory firms can be justified for another day. But more importantly I would like to raise this point: on what substantive basis are investment institutions selecting a proxy firm. Surely it cannot be on price alone and must be somewhat related to the policies and rules a specific firm applies before it makes its recommendations. So hopefully there are major and detectable differences in the yardsticks each proxy firm applies - if not, why are there different firms, and can their different governance policies stand up to scrutiny? Which leads to the question: how do the investment firms justify the choice of a proxy advisory firm?
(29 May 2014)

McDonald's CEO Pay: Charge of the Governance Brigade

Nothing demonstrates the state of the debate about 'Executive' (or better: CEO) Pay better than this quote from Aeisha Mastagni, a CalSTRS Investment Officer, who stated  that "The compensation at McDonald's, in the grand scheme of things, it's quite reasonable".
Opinions may differ about the correct level of compensation for senior and top management but it would be helpful if clear yardsticks are set by investment fiduciaries and their paid advisers in the proxy industry. Constant ad-hoc battles on a case-by-case basis are a losing proposition that will regularly be won by incumbent management and their tame supervisors in the boards (they are by nature beholden to those who appoint and feed them).
(21 May 2014)

Pay: Nothing succeeds like Excess

It is simply amazing that CEO's of some colleges in the USA can rake in seven-digit compensation (24/7 Wall St). The drive to ever-higher executive compensation must be grounded in some deep-seated cultural or institutional trait as logic would dictate that any well-run organisation should have the capability to replace the man/woman on top of the heap with a cheaper alternative. The staff pyramid is rapidly widening from the top down and developing a deputy for any position should always be a managerial top priority.
(20 May 2014)

Strict Rules needed to protect (end) investors

This quote about the structure of the planned IPO for Alibaba demonstrates the need for rule-based governance. "You can't afford not to invest in these things. But if something goes wrong, you are left with nothing". The large investment institutions that are meant to be the fiduciaries for the real end investors (aka you and me) are not able or willing to draw a line over problematic practices that put the interests of their investors at risk.
(11 May 2014)

Reading List

Another trick used by bidders and activists - fair to other shareholders? (Harvard Law Blog)

Finance Capitalism - does it benefit the Economy or just the One Percent? (Business Insider)

Warren Buffett betrays his conviction, approves Coca Cola Pay Plan (Institutional Investor)