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 [...]

Banker remuneration has been in the news a great deal lately–Fred Goodwin, the former chief executive of the Royal Bank of Scotland Group has been trying to keep his £703,000 pension despite leading the bank to its decline and subsequent need to be bailed out by the UK government. Merrill Lynch distributed bonuses early last year, and the company is now being investigated to determine whether the early payments encouraged Merrill traders to mark down their portfolios so they could report gains in January. And government bailout money, meant to keep banks solvent, has been used to pay out bonuses–Dresdner Kleinwort in Germany is one example . [...]

When I’m trying to explain the differences between the CEO and the Chairman of an organization, I like to use this analogy: It’s like the two of them are driving a car.
The CEO must be allowed to operate the throttle and steer the car. The chairman sits in the passenger seat. He’s there to stamp on the brakes or grab the wheel if required. The chairman and the board should be consulted on the destination, but they must not interfere while the CEO is driving, and they should leave the actual route to the executive team.

Conventional wisdom is that new CEOs need to boost earnings per share in two years or they’re out. However recent findings from Booz & Company’s latest CEO Turnover report seem to suggest otherwise. Dismissals are happening, but they’re more often caused by board infighting rather than poor CEO performance. Using ten years of data they had collected, researchers Per-Ola Karlsson, Gary L. Neilson, and Juan Carlos Webster found:
For all CEOs, the likelihood of being dismissed for poor performance in a given year is only 2.1 percent. Given this data, it is not surprising that the correlation between stock performance and dismissal is generally not significant. Indeed, the very worst-performing chief executives – those in the bottom decile, whose companies’ two-year stock price had fallen by 25 percent in absolute terms and whose companies had under­performed their regional industry peers by 45 percent – [...]

Scott Adams, the Dilbert cartoonist,  compared two studies . One said that happy workers are more successful, and the other said that sad workers are more productive. His conclusion:
Now, if you were to describe the job of a CEO versus the job of a lower level worker, I think you might say the CEO needs to be successful (as opposed to productive) whereas the lower level worker needs to be productive (as opposed to successful). Ideally, everyone should be both successful and productive, but in terms of importance, you would prefer a successful CEO over one who has more meetings, or however else you would measure “productivity” in that job. And a factory worker, for example, needs to be productive more than he needs to “succeed,” if success even has meaning in that sort of job.
So it follows from the science that [...]

Speaking of Pascal Levensohn, he’s also written a very good guide for founders of startups who have new responsibilities and boards to look after. The guide is called “A Simple Guide to the Basic Responsibilities of VC-Backed Company Directors.”
During the early stages of a company’s founding, it’s especially important for leaders to get everyone on the same page so that all stakeholders share the same vision.

In January the CEO of Bear Sterns was ‘demoted’ from CEO to Chairman of the Board.   Companies can defined these roles however they like, though I don’t think this was a very good idea. I agree with venture capitalist Pascal Levensohn, who said :
Keeping former CEOs on the board of your company is generally contra-indicated for several obvious reasons:
First, most former CEOs have strongly held continuing views and core beliefs as to how the company should continue to be run;
Second, it is emotionally very difficult for former CEOs to let go of such strongly held convictions; and
Third, people have a natural tendency to second-guess other people.

The chairman leads the board; the CEO doesn’t just report to him, the chairman hires or fires the CEO. The chairman is ultimately responsible for what the firm [...]

Earlier this month Carl Icahn started a blog  to discuss issues facing boards. Icahn has strong opinions and he doesn’t mince words:
“It is the board’s responsibility to hold a CEO accountable, and remove the CEO if he or she is not producing results. But exacting such a measure requires effort and strategic consideration, and boards are often too lazy and/or passive to rock the boat, especially since the company will continue to pay and pamper and even indemnify them under almost any circumstances. Board members receive expensive tickets to important sporting events, the theatre, and are also treated to use of the company’s fleet. Worst of all, the board itself is not made accountable because corporate board elections are generally a joke.”
Is it the board’s responsibility to hold a CEO accountable? I’d say in many cases it comes down to the [...]