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In that era, Duke's average SAT score was close to How often is the source of the funds -- the pockets of shareholders -- even mentioned? Yet given that she chairs the BofA board's committee on asset quality, which is ground zero of the company's implosion, might the institution not have been better served if she had focused on this one thing? Raines, according to a person close to the discussions, was for him to announce a retirement effective at some later date, which would have created the appearance that he wasn't to blame for the accounting fiasco. For me though I think this is the way to go right now. He said he had only had three social dinners with Mr. Two of the first directors named to the firm's board last summer are members of Mr.
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With the financial shenanigans at Enron, WorldCom, Global Crossing, Tyco, Adelphia, Lucent, Xerox, Qwest, Ahold NV, Peregrine and other public companies permeating the news, many are seeking ways to improve corporate governance and, in particular, Director accountability to Shareholders. Solutions involving better disclosure and stiffer penalties miss the big picture. Tweaking rules and regulations at the margins will only minimally improve the quality of corporate governance.
The powers-that-be will vigorously seek to maintain the status quo. Almost everyone who has previously enjoyed an advantage and is suddenly forced onto a level playing field will feel cheated, treated unfairly, singled out for undeserved punishment. The real problem with corporate governance is the lack of an effective procedure by which Directors can be held personally accountable for their actions, e. Shareholders the true owners of Corporate America should have the legal right to nominate truly independent Director-candidates and cause the names of those candidates to appear on the Company's ballot.
Shareholders put their faith in and entrust their money to directors to manage the company and counter a chief executive if need be.
But when things get tough, boards become captive of executives or bankers or they simply leave. The recent case of Dynegy illustrates this. Rather than stay to fix the mess the directors created, the entire Dynegy board resigned when shareholders rejected its efforts to sell the company. The reasons are interrelated. Too often directors don't have enough skin in the game to push the company in a strong direction.
They do not own substantial stock in their companies and face no risk if things go wrong. Even if directors are given incentives to take strong action, the corporate board is not set up for this type of decision-making. Directors work part time to manage the company. It's tough getting any group to agree on anything, let alone to challenge chief executives. Boards thus naturally tend to rely on the top executives and advisers.
Board collegiality and friendships among directors and with the chief executive often also mean that no director takes a disruptive stance. All these factors work to prevent directors from taking charge of a company or forging their own vision, a sobering thought for those who advocate greater board power.
Too often, in my experience, boardrooms are full of directors that still don't understand that they have a fiduciary duty to shareholders at large. I think we have too much in boardrooms today a feeling that you have kind of a divine right to continue on the Board without anybody challenging that assumption. They think they deserve their steep payouts even when their performance has been far from stellar.
Yet, because CEOs have influence over who gets on the board -- the only board slate offered to shareholders is the one proposed by management -- directors are careful not to offend them. Call it the fear factor: If directors knew they stood a good chance of losing their board seats -- and the prestige and valuable business connections these provide -- unless they aligned themselves with shareholders, they might stop forking over so much and narrow the gap between what CEOs and their managers and employees get.
To get there requires changing corporate laws and practices. As a first step … shareholders gain the power to place director candidates on corporate ballots and to initiate and adopt changes in corporate charters. Under current rules, shareholders can only pass nonbinding resolutions and must wage costly proxy fights to nominate a dissident director slate.
If they can't elect the directors who represent their interests, what can they do? Moreover, strong oversight by shareholders should reduce the need for regulatory oversight. Directors are very much beholden to Management and fellow Directors, as opposed to Shareholders! At a minimum, the breakdown of board accountability has resulted in stock losses for investors. At worst, it has contributed to corporate wrongdoing.
The problem is that beholden and consensual Directors engage in "groupthink" and do not make the best decisions on behalf of Shareholders. Each member of the group tailors his or her view to fit the consensus. Signs of groupthink include the ignoring of expert opinion, selective use of evidence and the illusion of omnipotence.
The price of groupthink is that, at some point, reality intrudes. More critical eyes help root out potential problems and facilitate solutions. Janis, the Yale psychologist, explained how panels of experts could make colossal mistakes. People on these panels, he said, are forever worrying about their personal relevance and effectiveness, and feel that if they deviate too far from the consensus, they will not be given a serious role.
They self-censor personal doubts about the emerging group consensus if they cannot express these doubts in a formal way that conforms with apparent assumptions held by the group. From my own experience on expert panels, I know firsthand the pressures that people — might I say mavericks? I felt the need to use restraint. I did so very gently, and felt vulnerable expressing such quirky views. Deviating too far from consensus leaves one feeling potentially ostracized from the group, with the risk that one may be terminated.
I feared criticism for gratuitous alarmism. And indeed, such criticism came. The notion that people are making huge errors in judgment is not appealing. In addition, it seems that concerns about professional stature may blind us to what We all want to associate ourselves with dignified people and dignified ideas. People compete for stature, and the ideas often just tag along. In the past two years, however, CEO firings have become commonplace.
And it has happened in a stunningly short period of time. Just a few years ago, CEOs still handpicked most members of their boards, and most boards gave their CEOs a long leash -- or no leash at all. Today's boards look very different. Directors are picked by a nominating committee, not by the CEO. And increasingly, shareholders and their advocates have some say in that selection…. Boards are much less beholden to their CEOs, and much more susceptible to outside pressure, than ever before.
However, since Directors control the proxy machinery and, thus, are not nominated or truly elected by Shareholders, they remain effectively unaccountable. There are over 14, corporations with publicly traded securities. Events at a few does not a sea change make. In order to mask details of the secretive process, news releases may vaguely state that the persons were "appoint ed," "joined," "brought on," "called," "chosen," "hired," "interviewed," "recommended" or "recruited.
Even if Shareholders know the details and do not approve of the process by which board members are selected, for all practical purposes, there is currently nothing Shareholders can do to change it.
Those Directors are very much more beholden to the person who brought them to the dance than to Shareholders! Typically, one director alone along with the C.
The nominating committee merely vetted. That, as they say, is life. That's Life " What action, if any, did Mr. Johnson take when he observed that corporate nominating committees were being bypassed? Teslik [former Executive Director, Council of Institutional Investors] cites how difficult it is for shareholders to elect a director other than those handpicked by management even though the directors, in theory, represent the shareholders.
Directors know the score. Yet, while dependent on Management and their fellow Directors for their longevity, Directors still have a fiduciary duty to ALL Shareholders to monitor Management's actions. We were role-playing a board meeting Apparently he liked my answer. He asked me onto the Tyco board. He used "hard-nosed salesmanship" to dispose of the former Directors.
One can only wonder what that euphemism really means. But the process required hard-nosed salesmanship. In effect, the entire BOD abandoned the ship. Tyco's stock price has subsequently increased, but does the end justify the means with every member of the new BOD beholden to Breen?
Clarke, chief operating officer of Computer Associates International Inc. Lenzmeier, a Best Buy Co. Scrushy invited him to join its board because they casually knew each other from serving Several months before Mr.
Rodek … has hired one new director and is looking for another. Webster … had until recently headed the auditing committee of a company that was facing fraud accusations….
At the center of the investigation and the suits … is … the company's chairman and chief executive, who recruited Mr. Webster and other prominent Washington figures to serve on its board The board members included George Mitchell , the former Senate majority leader, and Beth Dozoretz , the former finance chairwoman of the Democratic National Committee.
When a friend or longtime associate asks you to serve on a board , it's sometimes difficult to ask probing questions. How Directors Can Shield Themselves" Note that it was "asks you to serve" as opposed to "asks you to apply. The idea that an election by Shareholders is only a mere formality is very ingrained into the mindset of the corporate and news media. Mack began his effort to recruit and promote new talent at Morgan Stanley , he did not have to stray too far a field — or off the fairway, for that matter.
Two of the first directors named to the firm's board last summer are members of Mr. Mack's own club, the Golf Club of Purchase in Westchester County … [W]ith chief executives under increasing pressure to have independent boards, that old temptation to have a few golf pals on the board and in the executive suite might be less acute. Yet the practice appears to be alive and well, if not as visible. Mack has recruited other directors, as well as executives, who are diverse in makeup and background, and share no recreational ties with the chairman.
Ethical handicaps seem to extend beyond the fairways. The Boardroom has become the new 19 th hole for good cheer and fellowship.
The word to Shareholders is: Miles … is one of a number of Purcell allies who have left or are expected to leave the board following Mr. John Mack, who succeeded Mr. Purcell on June 30, brought in three new directors last month. Miles helped cement Mr. Purcell's hold on the CEO job…. Miles is the third Purcell ally to leave the board since the resignation. It might have been instructive had the meaning and background facts of "brought in" and "stepped down" been explored in detail.
Miles, a Morgan Stanley director with close ties to the former chief executive, Philip J. Purcell, has resigned from the board, the bank said yesterday. The move, which was expected, is the latest signal that the new chief executive, John J. Mack, intends to reorganize a board that during the battle over Mr. Purcell's leadership became a lightning rod for criticism and remains the target of several shareholder lawsuits.
Miles was an architect of a board that included several former chief executives, many of whom lived in the Chicago suburbs, who defended Mr. Purcell in the years after the Dean Witter Morgan Stanley merger. And, if they are not compliant, the Directors could expect that the BOD would be "reorganized" again. Purcell; and John Madigan, former chief executive of Tribune Co. Mack, a North Carolina native, has recast the board, bringing in four outside directors, two of whom have North Carolina ties as well.
Roy Bostock, an advertising executive, like Mr. Mack graduated from Duke University and has served as a trustee. Erskine Bowles is president-elect of the University of North Carolina. Three former Purcell-era directors left the board in September. With yesterday's resignations, only four remain from the group of 10 outside directors elected at the annual meeting in March. Madigan and Miles L. Marsh … are the latest sign of a fundamental reshaping of the board by the firm's new chief executive, John J.
The departure … is an open acknowledgment that all the control levers at Morgan Stanley are now firmly in Mr. Mack has moved quickly to repopulate the board with executives more in his own image. The government-sponsored provider of funding for home loans said Dennis Beresford, an accounting professor at the University of Georgia , Athens , is joining the board and taking over as chairman of the board's audit committee.
A Fannie spokesman declined to comment on whether the expected report from the company's main regulator, the Office of Federal Housing Enterprise Oversight, or Ofheo, was a factor in the board changes. Ofheo's report, recently sent to Fannie's management, is due to be made public Tuesday. The report is expected to blame the board and senior executives for failing to ensure that Fannie complied with accounting rules.
He also is a director of Kimberly-Clark Corp. None of the directors would comment on that. On the other hand, was personal greed the trump card? There is not the barest pretext that Shareholders are involved in the process, except to rubber stamp those "picked" by the CEO the person supposedly supervised by the BOD.
Frank Zarb left Nasdaq in , Mr. Greenberg asked his friend to join AIG's board, a plum directorship at one of the nation's leading companies.
Two Financiers' Long Alliance". Daum, who leads the board practice at the executive search firm Spencer Stuart in New York. The firm says her practice conducts about 60 percent of all board member searches in the United States. Following are excerpts from a recent conversation: So the notion that directors are just captives of C. I think boards also are very cognizant now of having anything that can be perceived as a conflict. If you and I serve on a board together, it probably means that neither of us should serve on another board with each other.
Boards are very conscious of the concept of interlocking boards. It used to be that's where the ideas for candidates came from. You knew somebody from another board and you'd recommend them. What is an example of a company where the independence of directors has been questioned? Home Depot is a good example. The relationships among directors, those were not situations where someone was getting compensated by the other.
But they were serving on the boards of other organizations. I could be your next-door neighbor and best friend, but I qualify as independent because we don't have a business relationship.
I'm not serving on your board. You're not setting my compensation. We're not doing consulting work together. We would meet the stock exchanges' criteria for independence, but obviously we have a less-than-independent relationship.
That's what you can't quantify. Duke had Joel Fleishman , 72 years old, a wine connoisseur who sits on boards of companies run by Duke donors and the parents of Duke students.
Fleishman's friendships with Duke donors gave him a valuable entrée into businesses far a field from academia. Take, for example, Ralph Lauren. Two of the famed designer's children, David and Dylan, graduated from Dalton School in Manhattan in and respectively and enrolled at Duke while Mr. Fleishman ran the fund-raising campaign. Dylan had better grades and SATs in the s. In that era, Duke's average SAT score was close to Fleishman became a director of Polo Ralph Lauren Inc.
He also owned or held options to buy 37, shares of Ralph Lauren stock, worth at least half a million dollars, public filings show. Fleishman also sits on the board of Boston Scientific Corp. His three children graduated from the university. Fleishman sits on more corporate boards "than a lot of people, especially nonpresidents," says J.
David Ross, a former vice president at Duke. Ross says he believes the directorships weren't payback for admissions. Schmidt was elected Tuesday…. Some analysts interpreted the appointment … as an event that could help Apple…. How could mere mortals, e. Stanley O'Neal 's board at Merrill Lynch is largely handpicked. He has recruited people like John D. Finnegan , the chief executive of Chubb and a friend for more than 20 years. The two men worked together in the General Motors treasury department.
O'Neal is also close to another director, Alberto Cribiore, a private equity executive who runs his own firm, Brera Capital.
In the late s, Mr. Cribiore came close to persuading Mr. O'Neal to join his nascent private equity firm. Directors also should recognize that their previous hands-off approach didn't work. O'Neal's ruthless response to anyone who challenged his authority might have made sense as he consolidated his position. Still, it left him holding the firm's top four positions for a time: The directors now have to put one of their own in charge as interim nonexecutive chairman.
The nonexecutive chairman post is something they should consider keeping. That might put off some potential CEO candidates. But Merrill's travails stem from inadequate oversight, and a CEO who insists on all the leeway granted Mr. O'Neal might not be the right choice. The presence of a nonexecutive chairman could reassure investors the board is back on the case. O'Neal, and he was reportedly someone who resisted constructive criticism and stifled genuine debate.
In this, he resembles plenty of chief executives, and there's nothing in Sarbanes-Oxley to prevent it. But it's not good governance or effective leadership. As a result, Mr. O'Neal and his board may have failed to engage in the kind of debate that would have prevented this tragedy.
To be specific, what was Merrill's board asking Mr. O'Neal when Merrill was earning record profits on the outsize success of its huge investment in subprime mortgages and related collateralized debt and loan obligations? I know it's hard to ask tough questions in the face of success. It's not a strategy for winning popularity contests.
But it's essential in the worlds of business and investing. You can't earn massive returns without assuming tremendous risk. We now know that was true for Merrill. Amid the big gains in its fixed-income operations, it was assuming far more risk than anyone there apparently realized. Stephen Gordon , named chairman and chief executive in November, brought in five new directors One person close to the company described him as 'a safe choice,' because he was one of the few GM directors who had run a major industrial company.
The decision by President Barack Obama's auto task force to replace most GM directors came amid some pressure by company bondholders and other industry experts who had advised the task force in recent weeks During one meeting, the board was described as 'a collection of failed CEOs,' and the group was blamed for not prompting GM management to move faster in restructuring the company.
Some governance experts consider GM's board fairly weak because it lacks individuals with auto-industry expertise and includes several retirees without recent corporate-management experience. It may be easier to remove directors than to replace them, however. The government may encourage GM to add directors with more automotive or industrial know-how, some observers believe. The more things change, the more they stay the same. Now, the US Calvary is galloping to the rescue. However, the US Calvary, with sabers held high, may lack pertinent experience.
Those companies include Citigroup Inc. Kresa has a deep base of contacts after several years on GM's board, a tenure as chief executive of Northrop Grumman Corp.
He had planned to rely on his professional network to conduct the search. Kresa choose Spencer Stuart for GM's board search, telling him that the search firm 'can do it quickly,' said a person close to the matter.
Kresa he would be contacted by Tom Neff, head of the firm's U. Neff with marching orders? Gone in the past 10 months are Chairwoman to Its Board" No one explains what "was named" means or by whom she "was named. Should the BOD motto be "Go along and get along or get out before we throw you out"? Chief executives tended to dominate the choice The way we govern now".
Mom-and-pop investors could buy shares in celebrity businessman Donald Trump ' s first public company, Trump Hotels and Casino Resorts. Their investments were quickly depleted. None of the original directors responded to requests for comment. One later director was close to Trump: Ivanka Trump was named to the board of directors in , when she was 26 and had been working for two years at her father ' s private company, the Trump Organization.
Representatives for Ivanka Trump declined to comment. Ivanka and Donald Trump both resigned from the company in , after Trump declared in a statement that he strongly disagreed with bondholders who had been pushing the company to file again for bankruptcy. How much were they compensated for their stellar BOD service? It will only be different when the BOD ' s personal assets are on the line.
Countries headed by "imperial CEOs" are known as kleptocracies. Eisner 's harsher board critics vehemently objected and accused the chairman of orchestrating her removal … Directors said the names of the four leaving the board were submitted by the nominating committee, which was acting on the recommendation from Eisner. Stewart , that Mr. Van de Kamp, 'You're a terrible director.
You are so loyal to Stanley P. Gold , it's like you've carried his babies. Van de Kamp, who was not reinstated to the board in a vote of 12 to 4, with 2 abstentions. Minnie is especially fond of him. Disney critical of Mr. Eisner's management style either left or saw their influence diminished. Gold , who was once very influential on the board, was stripped of crucial posts because of his status as the investment adviser to Mr.
Eisner has proved himself a skilled corporate politician who has been shrewd about using the idea of better corporate governance as a shield against critics who threaten his reign. Gold's letter criticized the other directors for serving as a rubber stamp for management, saying that they enacted policies that muzzled dissenters and shielded Mr. Eisner from 'criticism and accountability. Let is start all over again. In a new report, Institutional Shareholder Services Inc.
Iger chairman—and criticized it for doing so— without seeking shareholder input. The report also raised concerns about his compensation. The board's decision to grant Mr. Iger the dual roles is 'an about-face from governance reforms adopted following a highly public 'vote no' campaign at Disney in ,' the report said. The company subsequently adopted corporate-governance guidelines calling for an independent chairman, 'unless the board concludes that the best interest of shareholders would be otherwise better served.
Chief Operating Officer Sheryl Sandberg. The report also questioned Mr. Dolan replaced three directors with four of his friends this week, corporate governance experts, legal experts and investors cringed.
Analysts said it behooved those new directors to take a hard look. Tenet Chairman Edward A. Kangas and two other directors counter that Mr. Nakasone resigned after he was asked to leave because he was disruptive and wasted the board's time. Repeated efforts to revisit decisions and even 'to argue about the minutes' distracted the board, hurt its efficiency and explains 'why we asked him to step off the board,' Mr. Did Tenet issue a misleading explanation for the resignation?
What is inherently wrong about revisiting past decisions? Should it not be for the Shareholders to decide whether a Director's efforts to protect their interests are "disruptive and wasted the board's time"? Scrushy with 'massive' accounting fraud…. May … and told the director he was going to 'fire' him …. May's efforts to replace certain longtime board members Summers III , a retired president of Coca-Cola of the Southwest, notes he was asked to resign in after 'Jud Alfred "Jud" Schroede r, major shareholder and Chairman of Lancer and I reached an agreement that I wasn't good for the board because I was too independent.
The indictment charged that through 'fraud and outright intimidation, Mr. Lake devised a scheme to loot the company of tens of millions of dollars,' It further contends that the two men forced out board members who objected to executive compensation plans She also complained that management failed to supply board members with sufficient information to make decisions. Wittig, a Kansan who rose to stardom as an investment banker on Wall Street before returning nearly a decade ago with multinational ambitions for Westar.
Wittig's lawyer, said he expected to win the case since most of Mr. Wittig's actions as chief executive were approved by Westar's board. In , it tapped Wittig to head corporate strategy. Wittig resigned at the end of , after a grand jury had subpoenaed corporate records. He demanded tens of millions in unpaid compensation. Westar balked, commissioning a page internal report that detailed much of the alleged wrongdoing in the indictment. Perhaps, BODs, if they feared any sting of accountability, would adopt the mantra of "trust, but verify" when dealing with the hired help.
Chief Executive Officer David Wittig and another executive guilty of looting the electric utility of millions of dollars. Wittig and Lake have denied the charges, saying that their actions were legal, approved by the company's directors, and disclosed in corporate filings.
The three-judge panel ruled that prosecutors presented insufficient evidence to support convictions of former chief executive David Wittig and former executive vice president Douglas Lake , on charges of wire fraud, money laundering, conspiracy and circumvention of internal financial controls. In reversing the convictions, the appellate court ruled that all the counts hinged on the government's ability to prove that Messrs. Wittig and Lake tried to hide from the Securities and Exchange Commission their personal use of corporate aircraft.
However, the panel said, SEC regulations only require the reporting of such activity when it costs the company an amount above a certain threshold. Because 'the government offered no evidence that the additional cost to Westar of either defendant's personal travel ever exceeded this threshold.
The court ruled that the defendants could not be retried on the fraud or money laundering charges, but that they could be retried on the lesser charges of circumvention of internal controls and conspiracy. The court refused to give the instruction. There was no evidence that the value of personal travel ever exceeded the reporting threshold. With hindsight, one could observe that the prosecutors really blew it!
Grasso had the authority to select those who served on the Compensation Committee. He also regulated most of them. This conflict allowed Grasso to influence directors who might have wanted to pay him less, and to reward directors who would pay him more. For example, one former Compensation Committee member was confronted by Grasso after he had privately expressed concern to Ashen about a component of Grasso's proposed compensation in The director testified that 'he was a little taken [a]back that there was an ear to the committees And when he's kind of indirectly your supervisor or your regulator, you have to be careful.
Grasso , et al. Shapiro tapped Reed to serve on the Monsanto board and Reed, in turn, asked Shapiro to the board of Citicorp, the bank where Reed was chief executive.
Reed said, he impulsively offered the chief executive job to Mr. Reed walked up to Mr. Train, whom he knew as a fellow trustee of the Massachusetts Institute of Technology Thain would have the power to veto other prospective chairmen.
Elson, who teaches corporate governance at the University of Delaware's business school, said. To Sue or Not to Sue? Did the "handpicked" BOD later ratify Reed's impulsive act by its silence? Thain went on to become CEO of Merrill Lynch and, when the bumbling herd stumbled over a cliff into the arms of Bank of America, was terminated. A former telecom executive, he was pushed out of Covad Communication Group shortly after Carly Fiorina named him to the board.
At the time, his allegiance seemed inclined far too much to Fiorina, rather than to HP's investors. If she left tomorrow, I'd resign tomorrow. Some BODs may be so beholden to the CEO that regulators have to put a gun to their collective heads to get them to do what is in Shareholders' best interests.
In a securities filing yesterday, Fannie said its financial statements from through the third quarter 'no longer should be relied upon' because they were prepared with practices that didn't comply with generally accepted accounting principles. Raines , who had carefully cultivated personal relationships with the directors over many years … taking them to dinner at a Four Seasons hotel in Washington on the eve of board meetings. The directors came to no conclusions about Mr.
Raines's fate Thursday, but agreed to hold a formal meeting on Sunday. Directors … still didn't come to a conclusion on whether to force Mr. One idea advanced by Mr. Raines, according to a person close to the discussions, was for him to announce a retirement effective at some later date, which would have created the appearance that he wasn't to blame for the accounting fiasco. A final decision didn't come until Tuesday, when Mr.
Fannie was subsequently placed into a conservatorship where it was forbidden to continue to make political contributions and to conduct lobbying efforts. If you dissent on this board, we'll nail you.
If company officials think I violated the law, they can call the cops. Spy on Him ". The report, which relied in part on private telephone records, fingered George Keyworth , a longtime director and former science adviser to President Reagan, as the source of many of the leaks about board deliberations.
A boardroom showdown ensued, during which the board voted to ask Mr. Keyworth to resign, and he refused, saying he was elected by the shareholders. Venture capitalist Tom Perkins , a friend of Mr. Keyworth, quit the board on the spot in anger. Keyworth will not be nominated for re-election to the board at its annual meeting next March.
Dunn said she regularly informed the board of the investigation, but provided few details, at the investigators' request. Keyworth to leave, Mr. Dunn, saying, 'Pattie, you betrayed me. You and I had an agreement we would handle this offline without disclosing the name of the leaker. Dunn says she never had such an agreement. Counsel was explicit the matter needed to go before the full board,' she says. Perkins rose from his seat, slammed his briefcase shut, and said, 'I quit and I'm leaving.
The law requires that when a director resigns, the company has to disclose whether it was the result of a fundamental disagreement. I don't want people to speculate about my health. Perkins had no disagreement with the company, only with Ms. Therefore they decided they had no obligation to file details with the SEC. Instead, the board issued a statement on May 19 that simply said Mr.
Perkins had resigned, effective immediately. Perkins was concerned with the way his resignation was portrayed by the company, however, and subsequently contacted the SEC with his concerns, according to people familiar with the situation. Perkins has also been critical of the investigation, which he suggested involved illegal surveillance.
Board members acknowledge some discomfort with the methods used by the private investigator who obtained the phone records, but H-P says it was assured by the investigators that the methods were legal. Assuming that the BOD provided any hearing of the allegations against George, he could have defended against his removal on the ground that the BOD had acted with "unclean hands" in acquiring its alleged proof. What is the value of the private investigator's assurances?
Would anyone expect an admission of illegal activities? The other message is that Directors are under pressure to conform and keep quiet, or else…. Or, does it mean that he regrets abandoning his friend and fellow Director in in his time of need?
Perkins sent a letter to Hewlett-Packard wherein he set forth his version of the events surrounding his resignation, his follow-up efforts and various allegations of misconduct. Pretexting, or posing as a person in order to obtain private phone or other information about them, is illegal in California. He added that H-P didn't know pretexting would be involved. H-P declined to disclose the name of the private-investigation firm it retained or the 'pretexting' firm that firm employed as a subcontractor.
Keyworth for another term as director. The company is scheduled to hold its next board elections in March The law firm had concluded that the methods used were legal, these board members say. But the law firm says it made no such conclusion on its own; it simply reported that the private-investigation firm involved and that firm's lawyers claimed their methods were legal. Larry Sonsini, the attorney for H-P's board, yesterday declined to comment.
When does a high-powered law firm reasonably rely, in matter crucial to its client, upon the favorable legal opinion of other and, likely, lesser powered law firm of their client's investigator? For what has the BOD paid?
A major issue remains whether and to what extent there is a semblance of due process in the board room before the death penalty is imposed upon a member who is invited, but refuses, to resign. Sonsini's firm has grown strained. Perkins of discussing internal Hewlett-Packard deliberations with others last month. The lawyer went on to demand that he name those he spoke to and what documents he gave them. Perkins's response was just as rough. Dinh … accused the law firm of conflicts of interest.
He accused the company of 'sanitizing' the minutes of the board meeting in which Mr. He told the company that Mr. Perkins was a victim of possible fraud, identity theft and misappropriation of personal records. Sometimes, CEOs make consensual Directors disappear. Hollinger International … did that late last year. Shareholders like president of hedge fund Providence Capital, Herbert Denton … wanted three of the firms' directors to step down.
ACS Chairman Darwin Deason , a flamboyant entrepreneur who built the company, teamed up with Cerberus Capital Management LP during the buyout frenzy earlier this year to take the company private. But such a bid never materialized, and earlier this week Cerberus pulled its offer, citing turmoil in credit markets.
ACS management along with some of its biggest shareholders, including Oppenheimer Funds, blamed the independent directors for allowing the deal to slip out of their hands -- by refusing to set a vote on the bid before pursuing alternatives.
The directors say they had a duty to look for other potential bidders, given that Cerberus's proposed deal included the participation of ACS's chief insider: The dispute is all the more extraordinary given the close, even cozy, relations Mr. Deason once enjoyed with a number of the independent directors -- Robert B. Livingston Kosberg, Frank A. Several of them enjoyed business or personal ties with Mr. Deason in past years. The confrontation began Tuesday during a six-hour board meeting, when Mr.
Deason demanded the directors resign immediately. He threatened to nominate a new slate of independent directors for election at the next shareholder meeting, in May, if they refused He also said he would issue a news release accusing them of neglecting their duties if they didn't comply by yesterday, these people said.
The directors responded in their own sharply worded letter: Late yesterday, the independent directors filed a lawsuit against Mr. Deason and other ACS executives in Delaware Chancery Court asking for a declaratory judgment that they haven't breached their fiduciary duties.
The resignations came during a closed-door session in which the bloc sought to replace Chief Executive Alan Armstrong , who they felt was ill-suited to lead an independent Williams as it sets out a new course, the people said.
Chairman Frank MacInnis was among those who resigned, as were a pair of activist hedge-fund investors, Keith Meister and Eric Mandelblatt , who joined the member board following a public campaign in , the people said. All three had championed the merger with Energy Transfer, which Mr. Armstrong had opposed and continued to oppose even after it was agreed. The discussion turned to whether Mr. Armstrong was the best person to remain at the helm.
The directors not including Mr. Armstrong were split evenly, with six supporting Mr. Armstrong and six opposed. MacInnis, who had been Williams ' s chairman since , was opposed to Mr. Armstrong remaining as CEO, but resigned largely for personal reasons…. All three had been supportive of the merger. Did the newly departed leave with some benefits? Does one hand wash the other? Do CEOs and Directors say to one another, in substance, "I won't tell on you to Shareholders , if you don't tell on me"?
A conflict of interests arises when Directors set their own compensation, e. It is just another conflict of interest for which there is no real accountability. Corporate governance watchdogs fret that CEOs use lucrative pay packages to co-opt board members.
Still, that's not bad for a part-time job that requires attending a handful of meetings a year. And because boards seem reluctant to rein in compensation, some critics conclude that the system is irreparably broken.
Sinegal of Costco Wholesale pay package seems a throwback to another era, especially when compared with the lavish compensation of Henry R. Sinegal's compensation is skinny, then corpulent is the word that comes to mind when considering the pay bestowed on Mr. Silverman, the chairman and chief executive of Cendant, the travel, real estate and direct marketing concern.
The fear, of course, is that corporate executives, who have oodles to gain from mergers, have too much say about the terms, structure and consummation of the transactions. When management is at the controls, as often seems to be the case, directors are asked mostly to rubber-stamp the deals. Melican , president of Proxy Governance. Melican, an executive vice president at International Paper from to , was involved in many of that company's mergers.
And because there are going to be shareholder lawsuits, you can pretty much assume you'll be in depositions for many years. Melican said, when executives of the acquired company are promised high-ranking jobs at the combined entity, postmerger. Melican says, boards have to get in early. But hey, that's what being a fiduciary means. Anyone Tell the Board? Where there is a will, there is a way! CalPERS is "concerned by the timing of a decision in May by PacificCare 's board to boost payout that executives would get if the company was sold.
Typically a board would know whether high-level merger talks had been occurring for months Upon what need for change was it based? What are the odds that the BOD's decision was based upon a "fairness" or consultant's opinion, which issued by someone who was well-paid by Management? Steven Milloy … claimed that Goldman's policies are … designed to advance Mr. He objected to Goldman's gift of , acres in Chile to the Wildlife Conservation Society , calling it a conflict of interest because Mr.
Paulson is chairman of the Nature Conservancy, which works with the society, and has a daughter, Merritt, who sits on the society's board of advisors. Paulson batted away the charges with a simple defense: The board did it, not me. He was not even part of the discussions of the Chilean land deal. Paulson's involvement with the conservancy or his advocacy of environmental causes. No one who makes it into the board room of a place like Goldman is unfamiliar with the time-honored strategy of gaining influence by showing interest in the CEO's interests, be they golf or global warming.
Why wouldn't directors rubber-stamp Mr. There are no studies to prove this, of course. But the society pages hold a clue: It's the CEO who is toasted at benefits and photographed for posterity. How often is the source of the funds -- the pockets of shareholders -- even mentioned?
The Free Enterprise Action Fund , a tiny mutual fund with a conservative political bent, says the gift hasn't benefited Chile or Goldman shareholders. The fund petitioned the Wall Street firm on Friday to have its board review the gift as part of a broader study of Goldman projects supporting environmental causes, and seeks a shareholder vote on the proposal. Treasury Secretary, defended the donation at Goldman's annual meeting on March 31, saying it was something 'Goldman Sachs wanted to do.
Paulson's son, Henry Merritt Paulson. At the meeting, Mr. Paulson said he knew of the deal but recused himself from the decision, leaving it to the board. Paulson's underlying assumption is that whatever Goldman wants is proper.
Now the country's most important court for corporate law has raised questions about some deals. I n recent back-to-back opinions, the Delaware Court of Chancery criticized two publicly listed companies that have agreed to sell themselves to private investors. The rulings expressed concern that Topps Co. The author of both opinions, year-old Vice Chancellor Leo E. Strine faulted the company's board for letting Chief Executive Robert E.
Rossiter negotiate the deal with Mr. Icahn on his own. The Delaware court's increased scrutiny of possible conflicts comes amid rising complaints, and more lawsuits, criticizing buyout deals for allegedly enriching corporate executives at the expense of the shareholders. In the current buyout craze, many buyout firms retain the management by offering rich pay packages and a stake in the newly private entity.
These deals are being challenged in the courts by shareholders who allege that they are getting a meager payout for the company. They say boards are accepting deals based on factors other than the best-available price.
In addition, shareholders are accusing boards of running into the friendly arms of private-equity buyers to escape activist hedge funds, who are trying to oust them through proxy battles. In the case of Topps, the New York producer of trading cards, collectibles and candy, shareholders have accused the board of breaching its duties to get the highest price for the company Strine warned in his Topps opinion.
Not only do CEOs get theirs, but , when they do wrong, Shareholders foot the bill. Once again, shareholders are shouldering the costs of unethical behavior they had nothing to do with. Hill and Richard W. Painter, professors at the University of Minnesota Law School. In 'Better Bankers, Better Banks,' they argue for making financial executives personally liable for a portion of any fines and fraud-based judgments a bank enters into, including legal settlements.
Hill said in an interview. If that's the case, bad CEOs are able to hang on to their jobs long after they should be driven out. In a new study titled Pay for Failure: Few of the plans, for example, required that the company's performance be measured against its industry peers.
It's a matter of mutual back-scratching, as another recent study confirmed. The authors are John K. They found that companies paying CEOs excessive amounts also pay directors excessive amounts. Companies that pay too much also tend to perform worse than their peers. Kozlowski was exceptionally extravagant with company money, Mr. Campriello showed jurors an expense report Mr. John Fort submitted for his attendance at a single three-day board meeting. Campriello asked 'This is the way we traveled,' Mr.
Permitting extravagant expenses is the morale equivalent of bribery. Raines received salary, bonus and other compensation last year However, Fannie Mae is not a person. The Broadcom Corporation … shareholders are being asked to vote on a company proposal to increase by 12 million the number of shares authorized for grants under its stock incentive plan.
In addition, a 'yes' vote will expand the types of stock awards that the company can offer executives and employees, as well as grant the compensation committee the right to reprice underwater options at any time. This objectionable repricing practice removes the risk for executives and employees that outside shareholders incur when their stock falls.
Had the proposed plan been in place last year, it would have cost shareholders an amount equal to about 75 percent of the company's revenue, the firm said. Berman had until 29 February been affiliated with a law firm that served as outside counsel to the Company and had since 1 March been engaged by the Company to render legal, regulatory and other professional services. Berman was a director of Tyco until December 5, From March 1, through July 31, , Mr. Berman was engaged to render legal and other services.
During this period, Tyco compensated Mr. Berman with health benefits, secretarial assistance, a cell phone and electronic security services for his homes. Weingarten said the two clashed over several issues, including the amount of Tyco business sent to Kramer Levin for which Berman received referral fees.
Dennis Kozlowski , Tyco's former chief executive, and were not approved by the board or disclosed in filings with the United States Securities and Exchange Commission. He also has drawn fire from critics for having business ties to Disney in the past while sitting on the board. Those payments ended two years ago amid an outcry from corporate governance experts. Independence of new chairman, who had sided with Eisner, is called into question. Mitchell, 70, … who has little business experience, said … yesterday that he had no desire to play the corporate strategist, as many chairmen do.
Instead, he sees his main job as negotiating among factions of unhappy investors, other board members and Michael D. Eisner, the chief executive who lost the chairman's title in the wake of a resounding no-confidence vote at the company's shareholder meeting on Wednesday.
I have been on NS for about 5 days and I really can't complain about anything yet. Haven't had any problems with the food at all.
I actually have alot more energy and feel better than when I started. I have tried WW before Didn't really do anything for me. I am doing this for a couple of months, possibly 3 because I want to lose about 35 lbs. I believe it is teaching portion size by eating the meals. I do know what I have to do once I get there to keep from gaining it back. I am going to the gym everyday which I have always done anyway but plan to keep up with for the rest of my life. I just need a jump start because believe me I have tried everything.
I think spending the money also gives me more of a incentive to really keep going. I won't screw up and waste my money. I haven't had any digestive problems as of yet so keeping my fingers crossed. I will post about my progress as time goes on. Thanks again for the input I will keep that in mind!! Last edited by mod-anon; at Please use the Quick Reply button instead of Quote Reply.
Well I have to say that I have been on NS for a week now and I really am feeling quite good about it! I like the food so far and haven't had any issues. I want to lose 40 lbs and I weighed in Monday and I lost 7!!
It is so easy to do this plan I only wish I would have done it sooner. I know some of the weight is probably water but I'll take it! I have been working out about x week drinking lots of water, eating my meals, lots of fruits and veggies. Feeling really good overall. This is really teaching me portion control. I was def eating way to big portions before. I will keep you posted on next weeks weigh in!
Ok, here's my input: I have tried every diet out there-seriously. Nutrisystem was horrible for me. I didn't like the food I rememeber one soup smelled exactly like dog food.
I stuck to it for 2 weeks tho and didn't lose anything. I knew that I could not rely on pre-packaged foods and the only way I would be happy and get my healthy foods in would be WW.
It has the highest success rate for people losing and keeping it off, plus it's one that doctors will always recommend. I started in January and down 35lbs already. I can eat and drink what I want-which is the reality of life anyway, not eating pre-packaged foods! My opinion is if you try WW and it does nothing for you, then you din't follow the program exactly how you are supposed to.
Lastly, to lose healthy you should lose no more than 2 lbs a week. Slow but steady winds the race! You can lose fast other ways but it WILL come back. I have lost 7 lbs so far.
I did a typo in my previous message of I am happy with this program. I like the idea of no measuring food out.
I know exactly what to eat to get my calories in. I really think this program teaches you portion control so when you do go back to eating the regular foods you know how much you should eat. I have been eating very healthy I also feel very good. I have tried WW before and it didn't work for me. Not to say other people wouldn't have success For me though I think this is the way to go right now. I am doing it for 3 months and then going on maintenenance. Actually NS has lots of recipes and stuff for when you do maintenance to keep you within the calorie limits also.
So far this is the only thing I have tried where I actually am losing every week and at a healthy loss of about 2 lbs a week!
Good luck to you! Last edited by lam; at Iam, I'm not surprised that you're happy with NutriSystem. What's not to be happy about? It's something new and exciting and you're losing weight! It's probably like a vacation too, from having to fix a meal from scratch. Here comes the big however. The truly important thing is the long term result. I remember when Oprah Winfrey was on NutriSystem. It was played up as the greatest thing going. After being on it for a long time, she came out on stage one day looking really great thin waistline etc.
But what does she look like today? I no longer watch TV but from magazine pictures she appears to be quite large again. In my opinion, it falls under the heading of "fad diet" and fad diets don't work in the long run. That doesn't mean that you shouldn't enjoy it for the time being. Just be cautious in what you expect for the long run. Your post caught my eye. I have been on Nutrisystem for almost three weeks and have lost a little over 5 pounds. I am only planning on being on the plan for 28 days with a goal of losing a total of 10 pounds.
It has taught me to look at portion sizes in a whole new light. I have become a fan of sugerfree gelatin and drink mixes. The big thing for me is the mixing of protein, fruit and vegetables in a certain order.