Weekend Reads

There have been plenty of excellent articles on important corporate governance issues. Here are a few that caught my eye:

One Cure for Accounting Shenanigans, WSJ, 1/14/2012. Jason Zweig writes convincingly about the importance of audit rotation but don’t miss the comments where I suggest a third way that involves a free market approach that is likely to be more effective. Zweig’s post last week, Will New Tools Help Small Shareholders Topple Giants?, has attracted about 50 comments. It is great to see such interest in this topic.

Making ‘Say on Pay’ Say More to Executives, Law.com, 1/6/2012. Bruce Dravos argues say on pay is a tool for venting: nonbinding, after the fact, and doesn’t change board’s fiduciary duties. He follows with a good discussion of the UK, Cheques with Balances, which I’ve also discussed in my post CII Contract with Equilar a Positive Step But More Needed to Address Pay Issue.

Dravos concludes “the practical limit on executive pay is when it is so high as to cause directors and executives to feel shame.” Unfortunately, too many seem to have no limit at all and our society seems unready to impose even social sanctions.

Investors embrace activist role, FT.com, 1/11/2012 highlights some recent developments. Regarding proxy access, “I think it’s more democratic and ultimately allows the shareholders themselves to differentiate between effective and non-effective proxy contests,” says Charles Elson, head of the Weinberg Center for Corporate Governance at the University of Delaware. Elson has long recommended activists be reimbursed for the cost of solicitation when shareowners approve the action. I’ve always viewed that as going too far, thinking it would raise the amount of money spent on such battles. How does such a radical continue to hold such a prestigious position? I’m glad he does.

The Small-Investors’ Guide to Activist Investing, The Motley Fool, 1/10/2012 by Joe Magyer provides some good advice to retail investors about how to get involved. Good to see mention of sites like “ProxyExchangeSharegateProxyDemocracy, and MoxyVote, all of which are working to bring proxy power to the people in one form or other.” Of course, I would of liked to see CorpGov.net included. The Motley Fool is one of the only sites primarily devoted to stock picking that also regularly provides good advice to investors who want to get active.

Corporate board members should not be motivated by fees, status writes Bob Gariano, Lakeforest.Suntimes, 1/13/2012 compares this obligations we have as citizens to those we have as shareowners and makes a pitch for boards using search firms to help fill board positions.

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