Tag Archive for ‘Corporate Governance’
With the increasing activism of the public generally and institutional investors specifically it is more important than ever for the leaders of companies to take a proactive and honest effort to understand how public audiences view the operations and management of the organization.
Across the globe, the trend toward corporate governance reform continues in response to the global financial crisis and to the opening of markets in developing economies. But consultants for the executive search firm Spencer Stuart think some of that may be overdone. “Governance regulation plays a valuable role,” they write, “but those who elevate its standing to that of corporate savior are exaggerating its power.”
Corporate governance activist Robert AG Monks argues that American corporations today are like the great European monarchies of long ago. “Corporations have effectively captured the United States: its judiciary, its political system, and its national wealth, without assuming any of the responsibilities of dominion,” he writes. “Evidence is everywhere.”
Many corporate responsibility advocates think large institutional investors should serve as “stewards” of the companies in which they invest, helping them achieve long-term sustainable value. But do those investors have the capacity to perform the role now expected of them? Two prominent governance experts are not so sure – and think much more research and analysis is needed before the question can be answered.
Corporate governance expert Paul Strebel says there’s need for a “fundamental change” in the way board directors are nominated, with members of the nominating committee drawn from a more diverse group of stakeholders than has been the case. “To improve public trust in business, the search for board directors has to extend beyond the world of top executives,” he says.
Stanford University professor David Larcker says context is critical in the choices that organizations make in designing governance systems and the impact those choices have on executive decision-making and the organization’s performance. “There is no question to us that ‘governance matters,’” he writes. “The fundamental challenge is to understand when and how it matters.”
Even as political regimes in Tunisia, Egypt, Bahrain and Libya deal with ongoing pressure to change or adapt how they rule, a new study reports that a “second wave” of corporate governance appears to be forming among financial markets in the Middle East and North Africa.
Reporter James Hyatt says that depending on whom you ask, when it comes to shareholder activism and corporate governance issues this year’s proxy season is a glass half full, a glass half empty, or a glass completely shattered.
A New York Stock Exchange commission concluded that “failures of corporate governance were not the sole reason for the financial crisis of 2008” and that most public companies “are well governed, with hard-working and ethical boards and shareholders.” The panel also called for new standards for proxy advisory firms.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, widely considered to be one of the most comprehensive reforms of the U.S. financial industry in years, was signed into law on Wednesday. While many provisions of the Act relate primarily to banks and the financial regulatory system, the new legislation will also have a significant impact on corporate governance and executive compensation practices for public companies in general.