Corporategovernance
We continue to learn from the collapse of Jon Corzine’s MF Global. A recent article at NYT’s Dealbook highlights another lesson: ignore your chief risk or compliance officer at your own peril. While we agree that in this case it might have led to different and better decisions, such officers are still prone to all the talent, behavioral and incentives-driven traps and pitfalls. That said, the simple governance, hierarchical and process improvements the author suggests do help, and he also has the merit of recognizing that “Leadership has the right to challenge, disagree or even reject that advice.” Remember: “Culture eats Strategy for breakfast”.
“A catalogue of disastrous decisions”: that’s the title of a story today in the Financial Times about the many failures in the downfall of the Royal Bank of Scotland. More specifically, the author recommends the chapter on “Management, governance and culture” in the FSA’s report about that bank’s failure. In the face of it, the board looked knowledgeable and transparent, and the CEO didn’t look too dominant. And yet the company went bust despite the fact that the “checklist” seemingly gave the “right” answers…
Two stories in the “Social Media IPO Candidates” realm got us thinking that corporate governance might be under fire. Zynga is reportedly creating a triple-class share structure and Groupon has apparently engaged – voluntarily or not doesn’t matter – in pre-IPO marketing during its quiet period. “Buyer beware” indeed.
Sure there must be incentives for Directors to act on their fiduciary duties, and one possible line to follow is to increase the liability, as argued in this Deal Professor article – but then again “Directors and Officers Liability insurance” is usually part of the benefits package. The larger issue is that this is very hard to judge and there are no rules to ensure a good Board of Directors. Getting to understand the “people” aspect of a company is a case-by-case, long, investigative effort and there’s no substitute for time/experience and hard work.
Quick note: interesting video by the Wall Street Journal highlighting executives’ personal use of corporate jets. That said, if it’s part of the compensation package and duly disclosed in Proxy Statements, so be it.
We wanted to highlight the improvements in the local ownership culture/ corporate governance in Brazil. While not all Novo Mercado companies have behaved the same way, owners like Odontoprev’s Randal Zanetti are the best thing that could have happened to the Brazilian capital markets in the last 5-10 years. There have always been owners and manager-owners such as those of Saraiva, Lojas Renner and others, but it’s always important to remember these more recent cases.
Bankstocks.com has a review of Jamie Dimon’s Letter to Investors in the 2010 J.P. Morgan annual report. It’s a gem, a great piece to understand financial services/ banking in general, now and in the long term. Always nice to hear candid remarks clearly written by the company’s leader to its ultimate owners. It’s a benchmark for companies in all sectors and countries.
Much has been said and written in the days since the Dave Sokol story broke – most of it noise, speculation, personal attacks and so on. But there are some valid criticisms, questions and at least one new piece of relevant information in Andrew Ross Sorkin’s story today in NYT’s Dealbook. The new info seems serious: apparently Mr. Sokol bought shares one day “after he told Citigroup to indicate Berkshire’s interest in buying the company”.
Dave Sokol, CEO of MidAmerican and Netjets (both Berkshire Hathaway businesses) and heir apparent to Buffett’s CEO role, has left Berkshire and one of the reasons doesn’t smell too good. Reading the letter from Buffett discussing the resignation, it’s clear that he had to go: the mere appearance of a Berkshire “luminary” practically “front-running” Buffett and Berkshire would be unacceptable (we don’t like it but can’t call it, and we’d discount any strong opinion emanating from anyone other than Buffett or Sokol).
NYT’s Dealbook linked yesterday to a CNBC interview with Bill Ackman of Pershing Square. A little more digging revealed other sections with him – it was a “Harvard Business School special” of sorts, and as such featured other high-profile alumni and professors such as Michael Porter. While each video has back-and-forth interaction with all participants, we highlight a few of Mr. Ackman’s “moments” inside.
