CorpGov Bites

Boston Scientific Corp., which posted a $1.6 billion first-quarter loss, is on probation for concealment of safety defects in its heart defibrillators earlier in the decade and is faces charges of overpaying its CEO, is barring media from its shareholders meeting tomorrow morning. Beth Young, of the Corporate Library said,

I think it’s not the best practice to close a meeting. It sets a tone and creates a feeling of distrust and secretiveness, which is not what a company wants to do when it’s facing challenges. (Media barred from Boston Scientific meeting, The Boston Globe, 5/11/10)

To me it is a sign of management closing ranks and becoming insular, afraid of not being able to control questions that might come up from shareowners or the press.

The CalPERS focus system works so well that after negotiations with 15 companies, there are no targets left this year for the first time since 1988 when it began the public identification of companies for poor shareholder performance and corporate governance. “The whole point is not to embarrass them but to get improvements, and it worked,” said Clark McKinley, CalPERS spokesman. (CalPERS drops company focus list for 2010, P&I, 5/10/10)

From a speech by Goh Chok Tong, Senior Minister at the Singapore Corporate Awards 2010. (Singapore Encourages Better Corporate Governance, Government of Singapore, 5/10/10)

Corporate governance is not simply about complying with rules or reporting requirements. Boards of directors and senior management need to internalise the values, spirit and purpose behind the rules…

Financial institutions which experienced more significant problems during the crisis tended to apply a “mechanical” approach to risk management, without exercising expert judgement to challenge the outputs of quantitative risk models…

Boards need to take a broader and a longer-term view when setting directions for their companies, balancing the drive to generate earnings with appropriate guidance on the level of their companies’ risk appetite.

In Sweden, shareowners typically elect a nomination committee composed of leading shareowners. They, along with the company’s non-executive chair of the board then composes a slate for a vote at the annual meeting.  Investors are also free to propose other candidates from the floor. Stephen Davis and Jon Lukomnik say the Swedish model doesn’t fit the US, since “investors would have to nominate nearly 100,000 directors.” “Nomination committees may well bear the brunt of reform following the financial crisis.” Look for greater participation by investors in several different forms. (Seeking Governance Inspiration—From Sweden?, ComplianceWeek, 5/11/10)

Broc Romanek reports the Deloitte Forensic Center released a study about which executives most frequently get named in SEC enforcement actions during 2008. The results were a little surprising to me – the financial executives (ie. CFOs, chief accounting officers and controllers) collectively represented only 44% of the individuals named. In comparison, CEOs represented 24% and directors and general counsel were named 4% of the time. (Survey: Who Gets Named by SEC Enforcement in Fraud Cases,, 5/11/10)

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