Category Archives: Inform shareholders

Duty of Directos

One of my common themes is the duty of directors.  They get paid a lot of money to act as fiduciaries for the company’s shareholders.

“Warren Keeps Pressure on Wells,” The Wall Street Journal, June 20, 2017 B10.  Senator Elizabeth Warren (D. Mass.) is leaning on the Federal Reserve (arguably an independent body) to remove 12 directors who served on Wells Fargo’s Board when the account- cramming scandal was going on.  Other problems have emerged at Wells Fargo since then.

The shareholders didn’t/couldn’t vote them out in April, and so far (as I know) the directors haven’t been held personally liable for negligent oversight.  So it’s nice that someone is still pursuing the people in charge at the time that (some of the) bad things were happening.

Some executives got fired or their bonuses were docked.  The shareholders lost a bundle in fines and penalties paid by the company.  It would be nice if the directors were held responsible and accountable — not just to penalize them, but to put other directors on notice of what they are getting paid to do, and for whom.

Would be nice to have a poster child for the director’s duty.

Leave a comment

Filed under Board, Compliance, Compliance, Compliance Verification, Controls, Culture, Directors, Duty, Duty of Care, Governance, Inform shareholders, Internal controls, Oversight, Oversight, Protect assets, Risk Assessment, Risk assessment, Supervision

What questions should a director ask?

Directors are a fundamental part of corporate governance, standing between ownership (the shareholders) and management. and owing fiduciary duties of care and loyalty to the shareholders.  It’s not an honorary role.

But what if they are willfully or negligently blind when major problems arise, and don’t even know enough to ask management about them?

“Theranos Directors Missed Red Flags,” The Wall Street Journal, May 31, 2017 B1. Retired Admiral Gary Roughead and former Secretary of State George Shultz apparently failed to ask key questions, or any questions at all.  Hard to claim protection of the business judgment rule when you don’t make a judgment.

I thought all I had to do was show up and cash the checks.  You mean I needed to understand what the business did?  I have no background in this business.  What do you mean the insurance may not cover me?

Leave a comment

Filed under Board, Controls, Culture, Directors, Duty, Duty of Care, Governance, Inform shareholders, Internal controls, Oversight, Oversight

Digging out

I was otherwise engaged last week and missed posting.  Here are some catch-ups.

Leave a comment

Filed under Accuracy, Board, Communications, Compliance, Compliance, Content, Controls, Corporation, Directors, Discovery, Duty, Employees, Governance, Government, Inform market, Inform shareholders, Internal controls, Investor relations, Oversight, Privacy, Protect assets, Protect information assets

Torn

I was torn between four different pieces in the WSJ today:

“Big Pay Day for Mylan Chairman,” The Wall Street Journal, May 3, 2017 B3.  What does it say when the company that charges $600 for a two-pack of a delivery mechanism for $1.25 worth of epinephrine pay its chairman $100 million?  Guess what that culture’s like.

“Molina Healthcare Replaces Top 2 Executives,” The Wall Street Journal, May 3, 2017 B3.  Company removes two family members after poor financial returns (but they’ll stay on the Board).  Guess charity doesn’t begin at home.  Removing someone for poor performance is one thing; next they’ll remove people for violating the law, or company policy.  But Thanksgiving’s going to be a bear.

“Beijing Places Curbs On Online New Portals,” The Wall Street Journal, May 3, 2017 B4.  Managing information includes denying access to it.  So much for net neutrality.

But I decided to go with “Berkshire Faces Pressure Over Political Disclosure,” The Wall Street Journal, May 3, 2017 B5. Vote on whether the company should disclose the amount of political contributions it makes, and to whom.  Were I a shareholder, I might ask whether those expenditures were for the benefit of the company or for the benefit of incumbent management.  But shouldn’t shareholders be able to ask the question and get the answer?  Citizens United is fine, but disclosure to the shareholders makes sense, so they can decide whether to stay invested.

 

Leave a comment

Filed under Access, Board, Controls, Corporation, Culture, Culture, Duty, Employees, Governance, Inform shareholders, Internal controls, Investor relations, Ownership, To report

Nearly governance

The shareholders at Wells Fargo almost exercised “governance” over the Board of Directors.

“Wells Fargo Directors Face Shareholders’ Ire,” The Wall Street Journal, April 26, 2017 A1.  Several directors were nearly voted out at the annual meeting on Tuesday, following the Board’s failure to provide sufficient oversight to prevent or even discover the account cramming scandal that persisted over several years.

Directors have a duty of oversight; they are fiduciaries, after all.  If they breach that duty, the shareholders can either bring a derivative suit and try to impose individual liability (or reach the insurance), or vote the rascals out of office, thereby besmirching their reputation.  But neither remedy is easy.  Shareholders face several hurdles to impose governance on the Board.

At least it’s a shot across the bow.

Leave a comment

Filed under Board, Compliance, Compliance, Compliance Verification, Controls, Directors, Duty, Duty of Care, Governance, Inform shareholders, Investor relations, Oversight, Oversight, Supervision

TMI

Can you get too much information?  Yes.

“KPMG Fires Partners Over Leak,” The Wall Street Journal, April 12, 2017 B1. KPMG fired 5 partners, including the head of the audit practice and the national managing partner for audit quality and professional practice(and the vice chairman of audit, after information from the PCAOB (a regulatory oversight agency) was leaked by a now-former PCAOB employee. (BTW, they also audited Wells Fargo when the account cramming was going on, among others).

Unusual to learn of the firing of partners, and the details.  One might surmise KPMG indeed has zero tolerance, at least when there’s no apparent defense.

Another in the long line of crises around information mismanagement.

Leave a comment

Filed under Board, Compliance, Compliance, Controls, Corporation, Culture, Duty, Employees, Governance, Government, Inform market, Inform shareholders, Internal controls, Investor relations, Oversight, Oversight, Supervision

What you don’t say

If a corporation fails to raise “‘known trends or uncertainties'” in securities filings, has it committed fraud against third parties?

Maybe.

“High Court To Weigh Corporate Omissions,” The Wall Street Journal, March 28, 2017 A2.  Supreme Court to hear a case involving suit by investors against company for omissions in public filings, otherwise the purview of the SEC.

So, does this mean that unspoken information is “information” subject to government regulation or third-party litigation?

Leave a comment

Filed under Accuracy, Board, Communications, Corporation, Definition, Duty, Governance, Inform market, Inform shareholders, Information, Oversight