CorpGov Bites

A roundup of just a few of many relevant news items worth reading.  

• Exclusive Interview: Joseph Stiglitz Sees Terrifying Future for America If We Don’t Reverse Inequality (AlterNet.org) CEOs, boards, shareowners and others in the corporate governance industrial complex must at some point tackle this issue if America is to remain a land of opportunity. Let’s hope we do it sooner rather than later.
• Fiduciary Duties to 401(k) Plans: Tussey v. ABB, Inc. from Michael Frank, partner and head of the Compensation, Benefits & ERISA practice group at Morrison & Foerster LLP. I’d love to see a future suit in this area around proxy voting practices… either voting against the interests of beneficiaries (very hard case to make) or failure to disclose voting practices.
• Say-on-Pay: Now 54 Failures, Broc Romanek @ theCorporateCounsel.net.
• More than a dozen public company boards had directors whose compensation averaged more than $500,000 in 2011. That is greater than the compensation of some S&P 500 CEOs — CEOs who work full-time while board members do not… Of the top 12 companies, six have lower stock prices compared to two years ago (as of June 4). Seven of the companies had lower profits in 2011 compared to the year earlier. Chesapeake Energy came in 12th. The 12 Companies with the Highest-Paid Boards of Directors – 24/7 Wall St. I think high board pay can lead to conflicts of interests and boards ignoring issues. That’s why I introduced a proposal at Apple this year to give shareowners a say on director pay. It failed. Want to try it at your company? Email me to get the language.
• Francesca Rheannon interviewed ICCR’s executive director, Laura Berry, to get the organization’s views on the current bumper crop of shareholder activism. Interesting read. Great discussion.
• A new study in the Journal of Personality and Social Psychology led by Richard West at James Madison University and Keith Stanovich at the University of Toronto suggests that, in many instances, smarter people are more vulnerable to thinking errors. Smarter people (at least as measured by S.A.T. scores) and those more likely to engage in deliberation were slightly more vulnerable to common mental mistakes. (Why Smart People are Stupid, The New Yorker, June 12, 2012) Takeaway: Boards should include a smattering of people like me. I’m too dumb to be fooled by the simple experiments used in the study. Janis has documented eight symptoms of groupthink:

1. Illusion of invulnerability –Creates excessive optimism that encourages taking extreme risks.
2. Collective rationalization – Members discount warnings and do not reconsider their assumptions.
3. Belief in inherent morality – Members believe in the rightness of their cause and therefore ignore the ethical or moral consequences of their decisions.
4. Stereotyped views of out-groups – Negative views of “enemy” make effective responses to conflict seem unnecessary.
5. Direct pressure on dissenters – Members are under pressure not to express arguments against any of the group’s views.
6. Self-censorship – Doubts and deviations from the perceived group consensus are not expressed.
7. Illusion of unanimity – The majority view and judgments are assumed to be unanimous.
8. Self-appointed ‘mindguards’ – Members protect the group and the leader from information that is problematic or contradictory to the group’s cohesiveness, view, and/or decisions.

• Diversified Search (Diversified), among the top ten US executive search firms and the largest US woman-founded and -owned firm, has announced the creation of a Corporate Board of Directors Advisory Group. The Advisory Group will work with Diversified’s established Board Practice area and explore the complex issues confronting Boards today, particularly in the area of diversity.
• “You don’t need to make friends with Carl Icahn,” Nell Minow said, “if you make friends with CalPERS.” Nell Minow Says Governance Has a Long Way to Go, WSJ, 6/26/2012.
• The Laurel Hill Advisory Group LLC introduced a new service designed to help companies find qualified diverse director candidates. Minority and women executives currently working in senior management positions represent a largely untapped vein of talent for corporate boards.
• How Delaware Thrives as a Corporate Tax Haven, NYTimes, 6/30/2012
• Icahn Takes Aim at Forest Lab’s Succession Plan, NYTimes, 6/29/2012. Will Icahn support the United States Proxy Exchange proposal at Forest Labs for proxy access?