Sense on Cents

I strongly believe the failures in our economy are often the result of failed management. Who is charged with overseeing management? The board of directors. If management has failed, then certainly the boards have also failed.

I addressed this point in my commentary this morning, “Sarkozy Ups the Ante on Banker Compensation.” I wrote:

I am definitely not for strict government control of private enterprise compensation; however, if the boards of these private enterprises are not performing to protect the industry, the franchises, and the shareholders, then those boards need to be exposed. From my standpoint, the boards are a large part of the problem. Why? The boards are in the pocket of the senior executives. The senior executives have shown themselves to be excessively greedy and disinterested in protecting the industry and, in turn, our country.

How have boards become so deeply entrenched with management? Is there anything that can truly be done to address this enormous problem? Continuing on this theme of the corporate governance responsibilities of boards of directors, The Wall Street Journal addresses the topic in writing, Fight Brews as Proxy Access Nears:

The largest U.S. businesses, law firms and business groups have stepped up their challenge to the “proxy access” rule, which would let certain shareholders use a company’s board-election process to nominate directors opposed to management.

Why would management fight this? Control and power. New board members not aligned with current management will likely ask for increased exposure and transparency. What a novel concept.

The campaign has ramped into high gear in recent weeks because the measure looks like it will be passed by the Securities and Exchange Commission in November. In a last-minute bid to derail or weaken the measure, opposing groups have dispatched both Washington lobbyists and grass-roots letter-writers.

We can always count on the heavy lobbying powers to weigh in to protect the status quo. A lot of good that has done us within our financial industry as I highlighted last March in writing, “How Wall Street Bought Washington.” The WSJ continues: (more…)