Since May, real consumer spending has been gradually rising. Technology spending is looking up, as computers age and Asian growth pulls demand for sophisticated components. New home construction is showing new life.

These will permit 2 percent GDP growth in the second half of 2009, but a second credit squeeze could knock down the economy again.

Regional banks are in a sorry state, laboring under failing commercial loans. Through August 2008, the FDIC closed or merged 83 banks into stronger institutions and 400 more banks are on the critical list.

Many forgot how to be bankers. With one eye on quarterly profits and the other on the Country Club BBQ, many loaned to retailers and commercial real estate ventures with dubious business prospects.

Even a casual trip through suburbia from 2005 to 2007 revealed too many stores selling the same stuff, and bankers were best positioned to know consumers were overextended.

Main Street scions of finance tried to diversify risk by selling loans to Wall Street, which packaged those loans into Commercial Mortgage Backed Securities (CMBS) and then sold the securities back to the banks. This round tripped debt is collapsing, destroying bank balance sheets.

The Obama Administration’s financial sector rehabilitation plan originally proposed public-private partnerships to purchase and work out residential and commercial debt.

Instead, the FDIC, with limited resources, is merging insolvent banks into somewhat stronger banks by agreeing to absorb huge losses.

Retailers, commercial property leases and CMBS failed later in the recession than the housing market, and the full impact on regional bank lending and credit markets is just coming into focus.

Moderate-sized businesses—those supposed to build President Obama’s green economy—can’t get credit. Wall Street bankers are not much interested in collateralizing business debt through regional banks—New York has had enough of the lending acumen of Main Street bankers.

Finally, big firms are paying smaller suppliers slower but demanding payments from them sooner, imposing a cash flow squeeze on the moderate-sized business whose bankers are turning them away.

Cash flow, credit and collapse could be the bywords of 2010 as smaller businesses and banks continue to fail and the recession takes a second dip.

The FDIC insurance fund stood at $10.4 billion in June and total losses are likely to double that. Either surviving banks will pay much larger insurance fees—making credit even tighter—or the Treasury will lend the FDIC money against fees that may be collected in better times.

The Obama Administration and Fed have done just about everything possible to keep doors open at the nation’s largest banks, lending money so cheaply that even an economics professor could make one profitable.

It’s high time for systemic relief for smaller banks—a Bad Bank to work out their loans and a wholesale revamping of how community bankers run their cottage investment houses.

Endlessly, pundits and analysts pronounce that small businesses are the innovators and job creators and critical to recovery.

They can’t do that job without meaningful rehabilitation of regional banks.
Peter Morici is a professor at the Smith School of Business, University of Maryland School, and the former Chief Economist at the U.S. International Trade Commission.

Deutsche Bank and Credit Suisse withdrew $15 billion of funding for the leveraged buyout of Huntsman Corp. by Apollo Management when the U.S. economic decline took hold, according to a report by Bloomberg. The banks were concerned the new company would be insolvent while Huntsman was reassured by “rock solid” financial statements of Apollo.

Each bank has agreed in the settlement to pay $316 million immediately and an additional $550 million each in senior debt over seven years.

Generally, banks can be expected to write these deals more carefully in the future, reported Bloomberg. Other investment banks were left with similar private equity obligations totaling $230 billion in August 2007. By December 2008, $105 billion worth of deals had collapsed. In addition, boards of directors will likely be more wary of leveraged buyout offers and their risks.

Private equity firms are learning to adapt in the new environment. Several are using their investor’s funds to purchase equity stakes in public companies. Others are investing in distressed banks. According to Bloomberg data, the total nominal value of leveraged loans by banks is down 81 percent from 2007. The nominal value of announced private equity transactions are down 60 percent over the same period.

Echoing the patriotic, warlike rhetoric of Warren Buffett, chairmanof Berkshire Hathaway, and the call for regulatory reform from BenBernanke, chairman of the Federal Reserve,  Dimon said the U.S. couldapproach a recovery by the end of the year if all participants pulledtogether: “There are modest signs of recovery and healing.”

JPMorgan’s bonds business had performed better in recent months, Dimon said. Citigroup said on Monday it had been profitable in January and Februaryand was experiencing its best quarter in more than a year.

Dimon expressed support for the mortgage modification program introduced by Obama and told a capital markets conference organizedby the Chamber of Commerce that the government’s stress test of bankswould create confidence: “I think a lot of the banks will be fine.”

Dimon “liked” the mark-to-market accounting rule, which compels institutions to value assets at current prices and has been cited as creating volatility owing to the illiquid market and hard-to-value assets, reports FT.  Dimon said, “We have taken it to a ridiculous point. I think it’s wrong to create all that volatility.”

Chris Dodd, chairman of the Senate banking committee, said at a Washington conference that Congress should resist intervening to alter the mark-to-market value rule.

The Senate’s Special Committee on Aging is expected to ask the Department of Labor tomorrow to establish regulations governing the composition and advertising of target funds. It is also planning to request that the Securities and Exchange Commission look into similar concerns.

AT&T’s CEO, Randall Stephenson, saw the value of his pay package fall 17 percent to $15 million in 2008, a reduction he asked for as heavy iPhone subsidies ate into earnings and the company lays off thousands of workers, reports BusinessWeek.

The Dallas-based company said yesterday in a regulatory filing that Stephenson asked the board not to pay him a bonus for 2008 because of the recession and AT&T’s plans to cut 12,000 jobs, or 4 percent of its work force. The job cuts, which will happen throughout 2009, were triggered by the economic crisis and the continued erosion of AT&T’s landline telephone business.

Overall, according to an annual year-end report issued by Catalyst this year in conjunction with Ernst & Young, women’s progression to the boardroom and C-suite was nearly stagnant. In 2008, women held 15.2 percent of the directorships at Fortune 500 companies, up almost negligibly from 14.8 percent in 2007, according to the “2008 Catalyst Census of Women Board Directors of the Fortune 500.”

Ilene Lang, president and CEO of Catalyst, a nonprofit women and board leadership organization founded in 1962, decried the findings: “Exceptional circumstances require exceptional leaders. Now more than ever, as companies examine how best to weather an economy in crisis, we need talented business leaders, and many of these leaders, yet untapped, are women.”

Globally, the outlook for executive women is, by comparison, even grimmer. Differences in some characteristics between foreign- national and American directors of S&P 500 companies are mostly insignificant, except for gender, according to the “Global Board Index,” a report issued by Egon Zehnder International. American directors are far more likely to be female than their foreign counterparts: only 5.8 percent of foreign-national directors are women, according to the EZ report.

Yet when it comes to CEO succession planning— that is, deciding whom to pay, not just how much—many of these same boards decline to invest in benchmarking internal CEO candidates against external talent. That is shortsighted. A board that forgoes benchmarking is, in effect, conducting succession with blinders on, unable to see or judge talent that is not immediately in front of them.

To understand its personnel needs, a basketball team wouldn’t measure the height or shooting accuracy of just its own players. It would want to know how they stacked up against the competition, and how much difference these attributes would matter, given the current make-up of the league. Similarly, companies benchmark many of their key processes against worldclass standouts—their supply chains against Wal-Mart and other leaders, their manufacturing processes against the likes of Toyota, their customer service against companies like Nordstrom’s. Boards, in particular, don’t operate in a vacuum when they’re evaluating company strategy. In fact, it makes no sense to talk about strategy without looking outward. Perspectives on CEO talent shouldn’t be limited, either.

Nevertheless, even some of the world’s largest corporations forgo external benchmarking of CEO talent. Perhaps the closest they come to it occurs when they are faced with an unplanned succession— the CEO unexpectedly departs, dies, or must be abruptly removed. In those circumstances, if there is no internal heir-apparent already in place, companies will often install an interim CEO while they search externally for a permanent chief executive. Although this executive search resembles benchmarking taken to its logical conclusion, the two should not be confused.

CEO benchmarking is a process through which the board is continually assessing internal and external candidates against company-specific challenges such as organic growth, growth through acquisition, turnaround, and the many other possible strategic and operational issues that the future CEO will likely face. Because these challenges are constantly evolving, benchmarking is an ongoing process that should be in place through planned and unplanned CEO successions alike.

Resistance and Its Consequences
Board resistance to CEO talent benchmarking springs from a number of sources and specific objections, but the ultimate source may be found in what is called “paradigm blindness.” We’ve heard for decades about the phenomenon of the “paradigm shift,” but little about the inability to see alternatives because of the norms and unacknowledged assumptions in which we unquestioningly operate. Paradigm blindness is the propensity to do things a certain way because we have always done them that way. So it is with much CEO succession planning: we don’t benchmark external CEO talent because we have never benchmarked external CEO talent.

The consequences of such blindness can be enormous in terms of value left on the table or value destroyed as a result of choosing a less-than-the-best available candidate for the top leadership position. Jim Collins, who Fortune called the “most influential management thinker alive,” has demonstrated that having the right leader at the top is the foundational condition for creating lasting greatness. Likewise, in one of the best studies quantifying the impact of CEO decisions on company value, Harvard professors Noam Wasserman, Bharat Anand, and Nitin Nohria show that the leadership effect is probably the most important controllable source of company value. In some markets, the leadership effect can account for up to 40 percent of the variance in performance or value. For a large U.S. company, the CEO decision has a potential impact on value worth billions of dollars.

Benchmarking is designed precisely to help overcome paradigm blindness and its consequences for CEO succession by measuring internal CEO talent against best-in-class external talent, determining any shortfalls in that internal talent, and using the information to improve the development of internal candidates. Such benchmarking can often be confirmatory: the board sees clearly that the internal candidate is equal or superior to external talent. That information—as valuable as the knowledge that internal candidates come up short—can prevent the board from simply taking the internal candidate for granted. When explicitly asked to look outside the paradigm and consider external benchmarking of CEO talent, directors often state specific objections. Among the most common:

Benchmarking external CEO talent is disloyal. Some directors may feel that by seeking independent assessments of bestin- class external CEO talent, they are showing a lack of trust in the sitting CEO, who may have been grooming a successor, and in the heir-apparent. But it’s no more disloyal to measure internal talent against external talent than it is for a basketball team to understand the attributes of outstanding players on other teams. It’s not a matter of the board’s loyalty; it’s a matter of responsibility.

There’s no need to look at external talent when there are a number of attractive internal candidates. Many companies certainly have deep benches with highly competent executives who may well be potential CEOs. But unless the board benchmarks them against external talent, it will simply never know what shortfalls they might have in the competencies that the company will need in the future. Further, internal candidates have been promoted and evaluated on the basis of their performance, not their potential. Their experiences and their accomplishments, no matter how impressive, simply may not be relevant to what the company will need most—a determination that benchmarking can help make.

Bringing in an outsider who doesn’t understand the business is so risky that benchmarking is beside the point. Even if there exists external talent that possesses all of the competencies that a company will need in the future, the board may understandably worry that the downside risk of someone new to the business is simply too great. Experience has shown that such concerns are certainly not unreasonable. However, benchmarking can provide the basis for making an informed decision about the trade-off between an internal successor with knowledge of the business and an external successor with precisely the skills that the company will require.

Looking outside might cause internal candidates to look outside, too. Board members fear that by seeking information about outside CEO talent, they will alarm internal executives who feel that they may be in line for the top job, causing them to jump ship at the first opportunity. First, insofar as benchmarking is an ongoing board process, as it should be, internal executives are unlikely to be disturbed by it. In fact, because really talented people have little to fear from benchmarking, they usually welcome it. Second, talent is almost always looking around for opportunities and people looking for top talent inevitably find it—a powerful equation unaffected by benchmarking.

People will talk. Directors worry that news will get around that the company is assessing external CEO talent. They fear that people will conclude that the company is in trouble and that the stock price will therefore suffer. Worse, they worry that the company could inadvertently be put in play. These fears are groundless— benchmarking external talent as part of an ongoing succession-planning process does not mean conducting interviews with external talent or otherwise sending signals that the company is in the market for a new CEO.

In fact, benchmarking is not only innocent of all those charges, it can play an integral role in CEO succession planning. The Center for Creative Leadership has conducted extensive research on executive selection that indicates it is better to consider both internal and external candidates for a senior appointment. Specifically, CCL researchers found that the candidate pools of companies whose internal selection proved successful contained more external candidates than the candidate pools of companies whose internal selection did not succeed.

Five Principles of Succession Planning
A decade ago, the National Association of Corporate Directors (NACD) addressed the question of CEO succession planning. In a formulation that has stood the test of time, “The Report of the NACD Blue Ribbon Commission on CEO Succession” offered five basic principles of the process:

• The goal of CEO succession is finding the right leader at the right time.
• CEO succession is a board-driven, collaborative process.
• CEO succession is a continuous process.
• The board should ensure that the CEO builds a talent-rich organization by attracting and developing the right people.
• Succession planning should be driven by corporate strategy.

Benchmarking external CEO talent helps realize all five of those principles, and those principles suggest how and where such benchmarking should be used in the CEO succession-planning process:

1. The Right Leader at the Right Time
In the case of the unplanned succession, a board that has benchmarked external CEO talent enjoys some considerable advantages. They know with a much greater degree of certainty whether an internal candidate is fully prepared to take over. Further, if the board concludes that no internal candidate is ready, then the board already has a head start on what needs to be a rapid and effective search for a new CEO.

In planned successions, benchmarking can be equally valuable in assuring that the company appoints the right leader at the right time. “Right leader/right time” is shorthand for the best possible conjunction of the CEO’s competencies and the company’s current circumstances. Yet board members have few ways in which their activities directly and concretely engage them with the company’s marketplace. Benchmarking CEO talent, because it entails a consideration of how the skills of individuals fit the strategic needs of the company, gives board members a palpable feel for the business as few other processes can and, in turn, leads them to better decisions about the business and its leaders.

2. Board-Driven, Collaborative Process
Boards differ, of course, in the degree of their involvement in CEO succession planning. At one end of the spectrum, some boards are minimally involved, and at the other end, some boards completely control the process. In the middle are boards that drive the process in close collaboration with the current CEO. This broad spectrum of behavior suggests that in the post Sarbanes-Oxley world, many boards are still feeling their way forward from the days of rubber-stamping toward the right degree of board activism. But given the importance of CEO succession and today’s higher expectations of board performance, the question is no longer whether to actively participate in the process, but how. Benchmarking external CEO talent provides boards with a constructive, systematic way to drive the process without being contentious.

3. A Continuous Process
Between 1995 and 2006, CEO turnover increased 59 percent. Since 2003, the average CEO tenure has declined from eight years to four years. In 2007, more than one third of CEOs had a tenure of less than three years. More than ever, succession planning has become a continuous process, rather than a once-every-fiveyears- or-so event. Benchmarking ensures that succession is continuous in more than a pro-forma way by keeping the focus on both internal and external candidates and, as the company’s needs evolve, reflecting that evolution in the changing cast of candidates, which acts as a hedge against complacency about already having identified a successor.

4. Building a Talent-Rich Organization
Given the shrinking tenure of CEOs, boards must not only think about the next CEO but also about the CEO after that. Benchmarking helps with understanding current CEO talent and can be used to assess internal and external high-potentials who could one day be CEOs. With an understanding of how the next tier of internal high-potentials stacks up against external talent, the board and the company can better develop or acquire outstanding talent at that all-important executive level, building a talent-rich organization and potentially preparing for the succession after next.

5. Corporate Strategy
Before considering any particular candidate to succeed the current CEO, the board should understand the strategic context in which the next CEO will have to operate: the key business drivers, industry trends, competitive landscape, markets, and financial goals that will help shape the company’s future. Then it is possible to define the competencies that the next CEO will need. Obviously, for example, a company that is likely to be in turnaround mode needs different competencies in a CEO than does a growth company planning to expand aggressively in new markets. To alter a familiar saying: If a company doesn’t know where it’s going, any CEO can take it there.

Given the sophistication, complexity, and range of strategies that companies might adopt, the competencies required of a CEO candidate can be highly specific, numerous, and hard to find. Once those competencies have been clearly defined, external benchmarking can tell the board how widely distributed such competencies are, where they are likely to be found, and how likely it is that anyone anywhere possesses all of those competencies in the highest degree. The exercise can reveal gaps in the competencies of internal candidates, or it may confirm that no ideal candidate exists and that the internal talent compares relatively well against external talent.

Human Element
Benchmarking has long been used as a tool for evaluating processes, products, functions, and other elements that can be compared through a variety of techniques and metrics. For example, companies benchmark their distribution practices against industry leaders through such metrics as percentage of on-time deliveries, customer satisfaction, costs, and the many other measures of distribution efficiency and effectiveness. Competing products can be reverse-engineered and compared to the company’s offerings. In all of these cases, benchmarking is a reasonably precise, often highly quantitative procedure.

When the focus falls on human beings, however, many people think of “benchmarking” as a synonym for loosely comparing individuals in an impressionistic and often intuitive way. In fact, in the right hands, the benchmarking of executives is a highly structured, systematic procedure that requires both science and art. Best practices include:

• Using an experienced third party to assess external and internal candidates in order to bring the requisite objectivity and uniformity;
• Giving the third party extensive exposure to the organization, its structure, culture, and aspirations;  Defining the job specifications for the CEO in terms of the company’s future strategy and the competencies that will be required to achieve it;
• Ensuring that the third party evaluates all internal and external candidates using proven, quantitative and qualitative methods of assessment; and
• Using the results to guide development activities for internal candidates.

Such a systematic, proven approach to the benchmarking of CEO candidates provides board members with precise, actionable information that they can use to help ensure a successful succession-planning process.

George Davis is U.S. co-managing partner and Justus O’Brien is co-managing partner of North American board services at Egon Zehnder International, an executive search firm.

December 2008 showed that turnover levels in the boardroom and c-suite continued to decline compared to all key executive sectors in 2007, according to Liberum Research.

Turnover in 2008 steadily declined as the fallout from the economic crisis ensued, leading to record unemployment numbers throughout the United States. As the economy continues to flounder, it looks as though companies are holding fast to their current executive and boardroom teams to wade through the crisis and strategize for the challenges ahead.

“The numbers for the entire year [of 2008] show it [decline in turnover] even better,” says Richard Jacovitz, senior vice president of Liberum Research. “This is really apparent when you look at the general unemployment numbers overall which remain awful and are getting worse.”

CEO Changes December 2008
				Management Change Description
Status	Internal	Joining	Leaving	Promotion	Resigned/Retired	Terminated	Totals
TOTALS	35	42	0	36	32	0	145
Percentages	24%	29%	0%	25%	22%	0%	100%

Board of Director Changes December 2008
				Management Change Description
Status	Internal	Joining	Leaving	Promotion	ResignedRetired	Terminated	Totals
TOTALS	40	210	2	38	87	0	377
Percentages	11%	56%	1%	10%	23%	0%	100%

• Eighty-one percent of survey respondents expect a decline in their own company’s business performance in 2009, and 35 percent are likely to make significant workforce reductions

• Most respondents are likely to curtail overall hiring, reduce 2009 salary increases and cut bonus payouts, while continuing to hire talent to fill shortages in key skill sets

• Worry about retirement investments tops the list of employee concerns, respondents report, outweighing employee anxiety about job security

• A deep or prolonged economic downturn could force more drastic action

“Many multinational companies have been facing rising cost pressure throughout 2008 and in recent months have been managing compensation costs and workforce levels aggressively while working to keep employees engaged and productive,” says Patricia A. Milligan, Mercer’s chief markets officer. “But our survey shows that—at least as a group—most of these companies have refrained from taking severe and broad-based steps. Such drastic actions may include very deep workforce cuts, across-the board salary freezes, reductions in defined contribution plan contributions, or elimination of certain health benefit programs.”

Retirement investment concerns are the most worrisome for organizations. Fifty-four percent of HR professional respondents said that employees expressed a significant level of concern about the impact of economic turmoil on their retirement investments, compared to 37 percent who said that employees were concerned with the overall health of the company and 34 percent who were concerned with job security. Companies plan on focusing on communicating with employees to quell such anxieties as the economy continues to be tumultuous.

CEO turnover fell in the third quarter of 2008, with 125 CEOs stepping down or getting forced out, compared to 134 CEOs who left their companies during the second quarter of this year.

So far in 2008, 448 CEOs stepped down or were removed at U.S. public companies, compared to 637 for all of 2007, according to data from Liberum Research, which tracks changes in C-suite executives.

Despite the recent firings of high-profile chief executives at some large financial institutions, the revolving door to the corner office has slowed. “The numbers have been very surprising,” says Richard Jacovitz, senior vice president of Liberum Research. He believes that some companies are hesitant to make a change at the top as they deal with uncertainty in the economy. “Our take is that companies have been focusing on cutting expenses and maintaining top management to help execute cuts,” he says.

Executives down the hall from the CEO are also more likely to keep their jobs than they have been in the past. Only 653 C-suite executives—including CFOs, CMOs, COOs, and others—left their companies during the third quarter in 2008, compared to 904 who either resigned, were promoted, or fired, during the second quarter.

However, don’t start planning that office makeover just yet. Jacovitz expects executive turnover to pick up again in the new year: “As the financial crisis begins to bite and ultimately turn into a real recession, I do expect we will see executive turnover jump precipitously.”

The Council of Institutional Investors released a statement voicing their discontent with the “perverse incentives that rewarded executives for driving up business with cant regard for the soundness and long-term benefit of those transactions.”

CII also noted that it strongly opposes companies that are compensating for lower executive pay by adjusting undervalued stock options, granting more stock or lowering targets for performance-based compensation.

“Investors across the board have taken a huge financial hit,” said Joe Dear, chair of the Council of Institutional Investors and executive director of the Washington State Investment Board. “At a time when the retirement assets of millions of ordinary Americans are becoming ever more skeletal, boards should not be fattening the pay packets of executives.”

CII believes that executive compensation is a critical and visible aspect of a company’s governance and pay decisions are one of the most effective decision shareholders can have a voice in. As companies continue to be bailed out by the U.S. government, taxpayers also are included in the mix.

CII has endorsed a set of best practices for executive pay policies and disclosures:

• Companies should provide full disclosure of the performance goals used to determine annual and long-term incentive compensation. Such disclosure helps market participants evaluate whether pay practices encourage or mitigate against excessive risk-taking.

• Executives should own a meaningful amount of the company’s common stock. A significant portion of their pay should be equity-based and they should be required to hold it for a period beyond their tenure.

• Companies should provide shareowners an annual, advisory vote on the compensation of senior executives. Such a vote would give boards fast, useful feedback about investors’ views of the company’s compensation practices. It might also deter against over-the-top pay plans at underperforming companies.

• Executives who leave a company as a result of poor performance—whether they are terminated, resign under pressure or the board fails to renew their contract—should not be entitled to severance payments.

• Companies should have clawback provisions for recapturing unearned bonus and incentive payments to senior executives.

• Compensation advisors and firms retained by the board should be independent of the client company, its executives and directors.

“These principles do not in any way undermine or negate further discussion, debate, and development of governance practices. We hope that the agreed principles will encourage boards, managers, and shareholders to eschew a check-the-box approach in favor of thoughtful governance, tailored by boards themselves to their particular circumstances and embraced by all stakeholders,” wrote NACD president and CEO Kenneth Daly in an introductory letter.

The principles, drafted pro bono by Ira Millstein and Holly Gregory and colleagues at Weil, Gotshal & Manges, are as follows:

1. Board responsibility for governance: Governance structures and practices should be designed by the board to position the board to fulfill its duties effectively and efficiently.

2. Corporate governance transparency: Governance structures and practices should be transparent— and transparency is more important than strictly following any particular set of best practice recommendations.

3. Director competency and commitment: Governance structures and practices should be designed to ensure the competency and commitment of directors.

4. Board accountability and objectivity: Governance structures and practices should be designed to ensure the accountability of the board to shareholders and the objectivity of board decisions.

5. Independent board leadership: Governance structures and practices should be designed to provide some form of leadership for the board distinct from management.

6. Integrity, ethics and responsibility: Governance structures and practices should be designed to promote an appropriate corporate culture of integrity, ethics, and corporate social responsibility.

7. Attention to information, agenda and strategy: Governance structures and practices should be designed to support the board in determining its own priorities, resultant agenda, and information needs and to assist the board in focusing on strategy (and associated risks).

8. Protection against board entrenchment: Governance structures and practices should encourage the board to refresh itself.

9. Shareholder input in director selection: Governance structures and practices should be designed to encourage meaningful shareholder involvement in the selection of directors.

10. Shareholder communications: Governance structures and practices should be designed to encourage communication with shareholders.

For a PDF of the NACD document, click here.

The project will run tandem to a commission the CII agreed to form with the CFA Institute. Expect leading CII funds to advocate for at least three market-wide changes: easier shareowner rights to nominate corporate directors (”access”), say-on-pay votes to align CEO pay with performance, and a swift end to broker voting, which can skew ballot outcomes, according to GPW.

The voice of the shareowner hasn’t been heard much in the scrum over how to rescue U.S. financial markets. That’s partly because investors as a group hve never developed heavyweight political clout. It’s also because the CII,, the chief shareowner group in the U.S., is a jigsaw of corporate, labor, and civil pension funds that don’t always agree with each other. But the crisis has galvanized the CII into action.

At its semi-annual meeting in Chicago, some council members also proposed issuing an urgent collective letter on the financial bailout to ensure that the shareowner perspective forms part of political and regulatory agendas in Washington.

Large funds such as the California Public Employees’ Retirement System (CalPERS) are planning to coordinate its own separate efforts.

The CII also took its first major steps to globalize. Its international committee decided in Chicago to build website profiles of issues, groups, and contacts in major markets as a resource for CII meetings. And it is considering a formal liaison with the International Corporate Governance Network, which the CII helped to create 14 years ago.

Eventually, the CII may engage individual companies in other markets on governance failures, as it does at home. The international panel is headed by Florida State Board of Administration Mike McCauley and Sara Lee general counsel Margaret “Peggy” Foran.

Morgan Stanley announced on Monday that it had completed its previously announced deal to raise capital from the Mitsubishi UFJ Financial Group. Mitsubishi will pay $9 billion for ownership of Morgan Stanley, according to The New York Times.

The two companies announced a strategic alliance, focusing on corporate and investment banking. Mitsubishi’s rescue of Morgan Stanley came as Morgan Stanley’s share price plummeted. Mitsubishi has $1.1 trillion in bank deposits, reassuring Morgan’s investors that the deal has firm footing.

Last week, Morgan received permission from the Federal Reserve to convert itself into a bank holding company. As a result, Morgan will have stricter capital and leverage rules and permanent oversight from the Federal Reserve, according to NYT.

Morgan Stanley and Goldman Sachs remain the only two former investment banks standing after the tumultuous past two months.

While lawmakers debate the proposed $700 billion plan to rescue the financial system, Warren Buffet, a powerful investor influence is optimistic. He told CNBC yesterday that passing a bailout bill was “the right thing” for Congress to do, calling the current crisis an “economic Pearl Harbor.”

Despite the anger emanating from various investors and taxpayers, Buffet believes that the economy is “everybody’s problem,” according to The New York Times.

Buffett said that in the long-run, the government could make money on the transaction.

Buffet’s comments came shortly after he announced he would invest $5 billion in Goldman Sachs. This move indicates that Buffett holds confidence in the struggling economy.

He noted that he never would have made the investment if he didn’t think lawmakers would pass a bailout bill. As to whether his investment was an attempt to convince Congress to favor the bailout, Buffett said that he simply thought Goldman was a sound investment.

“I’m not brave enough to try to influence the Congress,” he said.