The New Anti-Trust Regime
While the SEC creates the rules, it’s up to the Department of Justice to investigate and pursue criminal actions and other violations. Key players are Attorney General Eric Holder and Christine Varney, assistant attorney general for anti-trust. Clearly, Team Obama is raising anti-trust issues to the forefront. The Administration’s stance on anti-trust was on display when the Federal Trade Commission launched an investigation into Apple and Google, alleging that the fact they share directors could amount to collusion. Google chief Eric Schmidt resigned from Apple’s board in August, but Arthur Levinson, chairman of Genentech, remains on both boards. Steve Jobs apparently agreed. Commenting on Schmidt’s departure, Jobs said: “Eric’s effectiveness as an Apple board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest.”
Barney Frank and Henry Waxman, U.S. Congress
His belief that the financial crisis was caused by the free market run amok has led Congressman Barney Frank, chair of the powerful Financial Services Committee, to host a series of hearings on bank regulatory reform before going to work on legislation to overhaul the system. The 69-year-old, 15-term Massachusetts Democrat grilled Treasury Secretary Timothy Geithner and experts on risk, derivatives, and other banking reform measures; examined the proposed Consumer Financial Protection Agency; and explored problems with credit rating agencies. He’s also a leading proponent of say on pay, arguing that excessive compensation resulted in “perverse incentives” for executives who took outsized risks to collect enormous paychecks. In a recently published biography, Barney Frank: The Story of America’s Only Left-handed, Gay, Jewish Congressman, reveals that he would like to cap his political career with a Cabinet position. Frank last year rose to the top of the list of D100 influentials largely due to his powerful role and his activist approach to regulation in financial services reform.
Another influential congressman is Califonia’s Henry Waxman. As chairman of the influential U.S. House Oversight Committee, he has been outspoken on what he sees as the abuses in executive compensation. Last year, he sent letters to chief executives participating in the TARP program, asking them to provide information about the total compensation paid or projected to be paid to the ten highest- paid employees for the last three years.
Christopher Dodd and Charles Schumer, U.S. Senate
If Barney Frank has a political counterpart in the Senate, it would be Connecticut Democrat Senator Christopher Dodd. The chairman of the Banking Committee was reported to be considering relinquishing that post to take over the Health, Education, Labor, and Pensions Committee following the death of his longtime friend and ally, Senator Edward M. Kennedy. Staying put, however, will allow him to continue to oversee what is expected to be wholesale reform of financial industry regulation, assuming he is reelected. The senior senator has been dogged by scandal and has been criticized for failing to address the financial crisis sooner. He also found himself defending his wife’s right to serve on corporate boards. He penned an op-ed in the Hartford Courant in May after Jackie Clegg Dodd was taken to task for serving on the board of Blockbuster.
If Dodd’s colleague, the senior Senator from New York, has his way, Charles Schumer’s name could become synonymous with shareholder rights in much the same way that Directorship 100 Hall of Famers Paul Sarbanes and Michael Oxley have become associated with accounting reform. Schumer’s “shareholder bill of rights” would give the SEC the authority to grant shareholders access to the corporate proxy for nominations to boards of directors. Some fear the bill would give union-backed shareholders who hold a small interest in a company the leverage to promote and influence their own agendas. Shareholders, including unions, could run a competing slate of board candidates. Schumer’s bill also addresses executive compensation, requiring companies to obtain shareholder approval for executives’ “golden parachutes.”
The Delaware Courts: Myron T. Steele, William B. Chandler III, Leo E. Strine Jr.
Nearly 100 miles north of Capitol Hill lies another major center of influence for boards—the Delaware court system. “Directors’ decisions must be reasonable, not perfect.” That sentence in one of the Delaware courts’ key decisions of last year allayed worries that civil courts would second-guess decisions made by corporate boards. The resolution of Lyondell Chemical Co. v. Ryan before the Delaware Supreme Court strengthened the protection of director decisions made in “good faith.” As reported in a Directorship cover story earlier this year, Delaware’s famed Chancery and Supreme Courts have remained unrivaled over the last 200 years. The sober reputation as the nation’s preeminent court system for litigating business disputes includes Supreme Court Justice Myron T. Steele and, of the Chancery Court: Chancellor William B. Chandler, and Vice Chancellors John W. Noble, Leo E. Strine Jr., Donald F. Parsons Jr., and the newly confirmed Travis Laster. In July, the Delaware Chancery Court applied one of its first applications of the Delaware Supreme Court’s ruling in Lyondell. In so doing, the Chancery Court, in Wayne County Employees’ Retirement System v. Corti, dismissed all shareholder claims stemming from a sale-of-control transaction, including a claim that the board had violated its duty of loyalty in negotiating and approving the transaction.
The Exchanges
The tenure of Duncan Niederauer, CEO of NYSE Euronext, has coincided with the most turbulent business period in NYSE history, yet the institution has emerged from this period with its reputation not only intact, but enhanced. It is also seen by many of our readers as an outstanding resource for directors as well as an example of proven, intelligent corporate governance both in its own dealings and its standards for listed companies (3,864 at the NYSE). The enormous impact that the NYSE Euronext has had on corporate America includes director committee independence, providing for executive sessions at board meetings, increased authority of the audit committee, and CEO certifications. Look for Niederauer to move forward on a number of initiatives in the coming year, including a modified uptick rule. Deputy Chairman Marshall Carter is charged with ensuring that the exchange operates with the same standards of corporate governance it expects from its listed companies.
Robert Greifeld, CEO of Nasdaq OMX, has emerged as a significant force in corporate governance. Appropriately for a global exchange, the Nasdaq OMX board of directors may be among the most international in composition of most U.S.-based companies. The exchange has 3,700 listed companies in addition to powering the operations of over 70 other exchanges who use the firm’s technology in 50 different countries. Despite an economic downturn that affected not only its issuers but Nasdaq OMX own share price, CEO Robert Greifeld kept the firm’s focus on international expansion, improved listing standards, and made aggressive moves into new technologies. Nasdaq’s influence over boards comes from its listing standards and some newer products, such as educational and information initiatives for directors and online board tools.
Andrew Cuomo, New York Attorney General
With Wall Street in his district, New York Attorney General Andrew Cuomo is among the nation’s most aggressive elected law-enforcement officials. Some wags in the Empire State expect him to push out sitting Governor David Paterson to seek the top job for himself. Meanwhile, Cuomo has focused no small amount of energy digging at discrepancies among bankers who received TARP funds and companies within his purview, such as AIG, that paid employee bonuses with taxpayer funds. In July, he released a review of bonuses paid to bank employees, noting the rewards far exceeded any profit. At press time, Cuomo issued subpoenas to five Bank of America directors, each of them current or former audit committee members, to find out what they knew about Merrill Lynch & Co.’s problems as the two companies prepared to merge.
Very interesting and very valuable for my MBA level courses on corporate governance at Lubin School of Business, Pace University. We began offering the first MBA level course on COMPARATIVE CORPORATE GOVERNANCE: A GLOBAL PERSPECTIVE, nearly four years ago. We now have added a second and third governance related courses and have under consideration both a double major for Accounting and Finance majors and a governance MBA. Your publications are very insightful and offer students a “real world” experience with governance and the important role of Directors.
Some years ago I created, edited and published the first texts available in English on all aspects of governance, company law and related industrial relations/labour relations (stakeholder laws)for the 12 major countries of Western Europe.
Professor John Alan James, Lubin School of Business, Pace University
Good job on a tough assignment. Of course no two people will ever agree on everyone who should or shouldn’t be on the list but the one person who immediately comes to my mind, and the minds of many in any discussion of corporate governance, is Robert A. J. Monks.
Bob was instrumental in creating a fiduciary duty for pension a mutual funds to vote in corporate elections. He found Institutional Shareholder Services (now part of the Risk Metrics Group), which many believe has almost monopoly power in advising institutional investors how to vote. He and Nell Minow (who you did include) then set up the LENS Fund, which paved the way for Relational Investors, GO and others on your list. Along with Nell, he then set up The Corporate Library, which you also include. You include several academics, all worthy, but it was Bob and Nell’s book, Corporate Governance, along with another earlier book by R.I. (Bob) Tricker, that virtually created the academic discipline.
I can’t understand how you missed this giant of the field… or maybe he’s on your list and I missed it?
We appreciate Jim McRitchie’s comment on Robert A.G Monks, and his achievements in the context of US corporate governance. In fact, Bob Monks was recognized by Directorship in our 2008 Corporate Governance Hall of Fame, and deservedly so (along with Bill Donaldson, Mike Oxley, Paul Sarbanes, and Ira Millstein). In addition to Bob’s many accomplishments, he also happens to be a first rate fellow and a delightful individual whom we admire and enjoy immensely.
– The Editors of Directorship
“has clearly helped the nation avoid further financial disaster and put the economy on the path to recovery.”
It’s been a year since your article. Perhaps you should reconsider that statement?
I’m going to have to echo Bill’s comment. While there certainly has been a “recovery” in the financial sector, thanks to a VERY generous Fed, the recovery everywhere else is completely lacking. It seems there are two different worlds, and if you’re not part of the financially connected, then you may not have the same view as the one described in the post.
I am glad to see Bob Monks getting a mention. A very impressive character who studied at both Cambridge AND Harvard and despite his many highly influencial positions has retained a salt of the earth personality. A very imformative post overall, thank you.
So here we are just over a year since this report was issued. Wonder where Barack stands now?