THOUGHTS FROM OUR STEERING COMMITTEE
- “Most of the time management’s attitude toward shareholders is ‘If you don’t like the way we run things, sell your stock.’ That’s like the gardener telling the estate owner, ‘If you don’t like the way I take care of your property, sell it and move out.’ That’s not the way the real world works.” Boone Pickens
- “Executive compensation has gotten out of hand. It’s way too high. They don’t have to pay that much to get good executives. They just found a way, with stock options and the other perks, to pay out unbelievable amounts of money. And they scratch each other’s back. Most of the big directors are on mutual boards, and they all do the same thing. They’re not stockholders. None of the executives with major companies, except maybe Bill Gates and Warren Buffett, own much of their own stock. Worth is a relative thing, but when a guy can go to work for one company for two or three years and leave with $40 million or $50 million or $160 million, it’s outrageous.” Harold Simmons as quoted in the Dallas Business Journal, August 22-27, 2006.
WHAT YOU CAN DO ABOUT LAX, COMPLIANT OR INCOMPETENT BOARDS
- Tell your fund manager how you want your shares voted.
- Spread the word.
- Join our e-mail list.
- Make a contribution.
- Call and register your views (anonymous and confidential calls are welcome) 1-800-581-3783
Visit Our Blog and Share Your Views
Frederick Rowe: Fighting For Director Accountability
Corporate boards have long found themselves in the crosshairs of shareholder activists and large institutional investors. What happens, though, when some of their strongest allies(and often fellow board members) rise up to demand change in how directors oversee management? The new Investors for Director Accountability Foundation (IDA) is just such a governance insurgency group. The group includes such heavy-hitters as Vanguard founder John C. Bogle, portfolio manager Christopher C. Davis, Morningstar's Don Phillips, takeover wizard T. Boone Pickens, billionaire investor Harold C. Simmons and corporate governance pioneer Robert A.G. Monks. The IDA is led by Frederick "Shad" Rowe, a long-time investment banker, and chair of the Texas Pension Review Board.
The Corporate Board: How did your involvment in launching the Investors for Director Accountability come about?
Frederick Rowe: I'm chair of the Texas review board that oversees public pensions, and I began to get concerned that the [stock] market had done essentially nothing for six years. The actuarial returns for our plans were causing a number of participants to voluntarily reduce benefits. So I looked into the corporations, and saw what was happening with executive compensations. It was going up dramatically, while the underlying company results were either doing nothing - or going the other way. There appeared to be a real disconnect. I talked with various other people here in Texas, including Boone Pickens. Boone started the United Shareholders of America group 15 years ago. He in turn put me in touch with Bob Monks.
TCB: Shareholder activism covers a wide range of agendas. What makes the Investors for Director Accountability different?
Rowe: We actually prize brilliant, driven, value-building CEOs. They can be imperial, they can be anything they want. But we want directors to preserve the value they create for shareholders. Obviously, directors are the direct legal representatives of the shareholders, but they often lose sight of that because they're friends of the CEO. That makes it hard to say no.
TCB: What will be your next move?
Rowe: We have to figure out how to get major institutions to rise above their conflicts, and vote in the interest of their people. And of course, we want directors to represent shareholders. If they vote, we'd like them to represent the interest of people who ultimately own the stock, and not so beholden to the chief executive. Our options are moral suasion, and then getting grassroots investors active. Some are trying to get regulation and legislation on pay issues. but we have to worry about uninteded consequences if we have more regulation.
President Bush talks about our transition to an ownership society - well, we're already there, but the owners don't know it yet.
The Corporate Board July/August 2006
