In this podcast, I discuss a recent article that appeared in Yale Alumni Magazine recommending six ways to give shareholders greater rights. Some of these suggestions are great, but others (such as term limits for independent directors) I wouldn’t recommend.
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In this podcast, I address Eliot Spitzer’s recent article in Slate about how technology can help stockholders take control of the corporations they own . I believe that technology can be a minor enabler of information sharing and capture, but as long as ’shareholder value’ is the predominant philosophy, in the end stockholders just aren’t interested in governance.
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Last week I gave the following presentation with Paul Moore and Dominic Carter at the RiskMinds conference. It highlights the results of an anonymous survey of risk professionals we conducted, looking at the causes and implications of the 2008 banking crisis.
Our findings include

that executives are to blame
that it was a cultural problem at banks, NOT a regulatory problem (the cost to benefit of risk taking is not weighted correctly)
that remuneration was too high and that culture does not encourage effective change management
that executives should have a right to tell their side of the story

We’ll post our full report when it’s released in January.
Risk Minds 2009: Risk Survey Presentation
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The Walker report is a lowest common denominator response to addressing corporate governance at UK banks. We need a deep overhaul of the financial system: much better regulation, longer-term thinking, and a break up of the investment banking mindsets which led to the financial crisis.
Giving non-executive directors more powers, scrutinising how they are appointed, or increasing regulation alone will make absolutely no difference.  Non-executive directors already have the powers; it’s the culture of investment banking globally which must change.
Non-executive directors must spend more time understanding the bank on whose board they sit.  They have to understand the culture, get to know the key managers in the bank, and spend more time in the bank appreciating the way business is done there.  Banks also need to spend the resources to ensure their non-executives become familiar [...]

Last week I gave a presentation at the EABIS Colloquium in Barcelona entitled ‘Corporate Governance: Global Issues for the Future’. Here are the slides:
Corporate Governance: Global Issues for the Future
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Following on the heels of the MP expenses scandal, the issue of expenses at another public body, the BBC, has recently been in the news . I was hired by the BBC for some particular tasks. Then their major issue was cutting their costs, and the issue continues to remain unaddressed today. Well, not entirely unaddressed—a number of directors general have tried to reduce the cost base of the BBC over the years, and the message from within the BBC is that costs have partly been reduced, but there are a lot more still to take out.
In the press, current director general Mark Thompson has defended his ‘high for a public servant’ salary as entirely justified as it’s only one third of what a private sector executive in his position would get. I’m not sure if this is a fair position, but I do know [...]

Executive pay is clearly out of touch with executive performance.
In the past 30 years or so, while real growth has been difficult to come by in mature markets, executive performance has become short-term transactional (i.e. through the buying and selling of businesses at inflated prices). These transactions have been executed in order to bolster a company’s share price in the short term. For a long time these transactional results seemed positive, and executive pay correspondingly grew. [...]

The idea of stakeholder capitalism, that the interests of all major stakeholders (i.e. investors and workers) should be treated equally in corporations, has been implied as the way of the future in this recent blog post from the editors of the Harvard Business Review, and I think this idea is absolutely right. Movement in this general direction is not just coming up as a response to the recession—though you could say our recessionary times have made us aware of the growing importance of stakeholder capitalism in the first place. [...]

Let’s take a look at the corporate strategy of the large financial institutions that played an instrumental role in bringing on the financial crisis. The chief executives at these companies tended to favor an aggressive leadership style, which for a long time led them to aggressive growth; as they acquired companies, the largest companies became ‘financial supermarkets’ with a whole range of services. These financial institutions grew and grew, but eventually reached a point around 2004 where their growth stopped. The leadership of many of these companies started to be criticized for not integrating their acquisitions well. And so chief executives responded by making their companies more governance-oriented, with new constraints for things being signed off by teams. These new protocols and procedures made the financial institutions stabilize and stop growing, but they didn’t prevent the financial crisis, and the whole sector is now suffering as banks (and [...]

Once again it’s that dreaded time of year for Americans: tax time. And the issue of tax havens has reared its ugly head quite a bit recently, both on a global level at the recent G20 summit, where world leaders agreed to name and shame countries that haven’t agreed to international reporting standards, and in the UK, where Barclays was in the news for attempting to keep details of its tax havens secret from The Guardian.
Tax havens are a major political issue. European countries particularly would like to see them more stringently regulated, but I don’t think any new international agreements will do much good. The reason? Tax havens cannot be dealt with on an international basis until they are resolved on a national basis. One only needs to look so far as the United States to see why – there are major tax havens in [...]