More major issues for shareholders
Situations like these are why shareholder-friendly policies are important, and the issue goes deeper than the compensation issues most of the public seems to focus on.
Shareholders should also vote in favor of strong corporate governance policies such as majority voting, which allows a simple majority vote to elect directors, and proxy access, which allows shareholders to nominate their own directors to boards.
Coming up in February, Apple Inc. (NASDAQ:AAPL) shareholders will be able to exercise their privileges to vote on a proposal to change the company’s articles of incorporation to allow for majority voting after CalPERS’ successful majority voting campaign last year. James McRitchie has also submitted a shareholder proposal requiring Apple management to hold significant shareholdings until retirement age, and John Harrington is pushing for a human rights proposal to address controversies like Foxconn labor problems.
Another controversial but much-needed corporate governance policy is proxy access. Basically, such a provision allows shareholders with a minimum percentage of shares and a specific long-term holding period to nominate directors. However, some headway is being made. For example, The Walt Disney Company (NYSE:DIS)‘s recent efforts to block a proxy access proposal didn’t pass muster with the SEC, so that proposal will go to a shareholder vote this year. (A proxy access mandate has been a battleground at the SEC for years, with corporations pushing back hard, and has since fallen by the wayside.)
Putting accountability back into the boardroom
While it’s nice to hear that some corporate managers are at least taking some hits to paychecks (see high-profile executive like JPMorgan Chase & Co. (NYSE:JPM)‘s Jamie Dimon, who’s taking some accountability for the London Whale trading debacle), it won’t really be enough until financial punishments really hurt, such as is the case with clawbacks.
The Chesapeake situation is just one more example of why business as usual isn’t good business. Stronger corporate governance policies will ensure that managements and boards are truly held accountable, and investors shouldn’t rest until their companies have adopted policies with real teeth. Policies like “clawbacks” — and some real firings, not arguments in semantics — would help build better companies for the long haul.
Check back atFool.comfor more of Alyce Lomax’s columns on environmental, social, and governance issues.
The article Putting Real Teeth and Claws Into Corporate Governance originally appeared on Fool.com and is written by Alyce Lomax.
Alyce Lomax has no position in any stocks mentioned. The Motley Fool recommends American International (NYSE:AIG) Group, Apple, and Walt Disney (NYSE:DIS). The Motley Fool owns shares of American International Group, Apple, JPMorgan Chase & Co., and Walt Disney and has the following options: Long Jan 2014 $25 Calls on American International Group, Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy.
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