Obama's say on pay

The Obama administration is to work with the US Securities and Exchange Commission to get new rules requiring shareholder say on executive pay.

 

The administration also suggested principles on which the pay of executives in public companies should be based.

 

Treasury Secretary Geithner acknowledged that while the financial crisis stemmed from multiple causes, executive pay was a contributing factor.

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Shell shareholders demand board gives back bonuses

In the weekend drama, investors also demanded the resignation of the chairman of the company's remuneration committee.

 

The investors' anger arises from the fact that bonuses were paid even though performance targets were not reached.

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FSA fines Morgan Stanley £1.4m over rogue trader

The UK regulator's action related to the concealment by a senior trader, Matthew Sebastian Piper, of £120 million ($180 million) in losses.

 

Mr Piper himself received a fine of £105,000 and a ban from working in the UK financial sector.

 

According to the Times of London, the FSA held that Morgan Stanley:

 

"failed to operate its controls properly, failed to supervise Mr Piper's books and failed to detect the problem as quickly as it should have done".

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Ken Lewis ousted as Bank of America chairman

Shareholders in Bank of America voted to split the chairman and CEO role and to appoint an independent as chairman.

 

Lewis is particularly criticized for his role in the acquisition of the failing investment bank Merrill Bank of America failed to disclose Merrill's fourth quarter loss last year before shareholders voted on the buy.

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Recovery will also have to mean accountability

Penny Shepherd at the UKSIF blog hopes that financial market reform will heed calls for addressing the system as a whole.

 

Ms Shepherd cites a recent paper by David Pitt-Watson arguing that an economy is like a political system. Views polarised between regulation and market ignore the need for the following:

• That the entities in it are responsible for their actions.
• They will be responsible if they are accountable.
• Those who call them to account will need relevant information.
• That information must be independently prepared.
• And just as a healthy political system hinges on the scrutiny of vigilant citizens, a successful financial system will need the oversight of vigilant market participants."

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Investor group calls for worker reps on company boards

The head of Pirc, which advises pension funds responsible for assets worth £1.5tn, has called for German-style inclusion of workers on UK boards.

 

Alan MacDougall argues that such a move would provide corporate boards with a counterweight to entrenched interests.

 

Pirc also recommended that the voluntary corporate governance codes in place in the UK be replaced by rules enforceable by the Financial Services Authority.

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Australia, too, to curb executives doing a runner

Australia is to introduce new laws to curb excessive executive pay, the country's finance minister announced.

 

Treasurer Wayne Swan has said that "shareholder approval will be required for termination payouts of more than one year's base pay", according to a report in the Sydney Morning Herald.

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Analysis: the crisis gives corporate governance lessons

The OECD has released a new report on the corporate governance lessons that can be gleaned from the financial crisis.

The OECD's Mats Isaksson summarised the findings and his views can be read in full at the Harvard Law School Corporate Governance Blog linked to here, which also has a link to the full report.

The risk responsibilities of the board (policy setting, accountability, approvals) come in for as much flak as the computer models, along with risk disclosures, accounting standards and, of course, remuneration policies out of line with the longer term corporate strategy and appetite for risk.

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Facebook practises community relations jujitsu

A privacy crisis caused last week by changes to Facebook's terms of service has been recovered by a stunning move to open up the company's governance.

From CNET:

"The thrust of the new plan is that future changes in the Facebook agreements with users will be put up for open debate in a process of "notice and comment." The forum will be open to all Facebook users. If Facebook proposes a modification to a term of service that is uncontroversial or has limited feedback, it will get incorporated into the user agreement after a stated period of time. But if there's argument or division over a proposed change, users will be able to debate them and ultimately vote on updates to the Facebook agreements.

Zuckerberg called this new scheme the "governing document" of Facebook going forward. "Openness and transparency," he said, "isn't an end state. It's a process to get there."

Facebook will form a "user council" to discuss policies closely with Facebook. For the first council, Facebook said it would, "invite the authors of the most insightful and constructive comments on the draft documents to serve as founding members of the group."(A truly open council would include members selected by the Facebook community itself, so perhaps we'll have elected Facebook representatives at some point.)"

The effect, then, is to put in place something that looks like a stakeholder governance model, but for the fundamental caveat that the representatives on the user council are chosen by Facebook rather than by the user community.

It is perhaps not surprising that an early adopter of such a governance approach should be a major social networking site whose worth depends entirely on its relationships with the community it helps cultivate and serves. Even so, the situation with which the company was faced is simply an extreme version of the potential revocation of the "social license to operate" that every company faces.

A great recovery.

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SA: Draft King 3 corporate governance code released

Another groundbreaking revision of the South African corporate governance code has been produced by the committee run by Mervyn King.

The second King report attracted international attention for its requirement that companies produce sustainability reports in line with recognised benchmarks such as the Global Reporting Initiative.

The new report takes the corporate responsibility agenda even further. It is no longer good enough simply to report on sustainability performance. Now sustainability is pushed as a principle so central to business operation that the report refers throughout to "integrated sustainability performance and reporting" i.e. the integration of sustainability into decision making and the annual report to shareholders.

The draft King 3 places South Africa back in the forefront of 21st century business thinking.

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