Harvey Weinstein is also a jerk. That alone should have gotten him fired. – The Washington Post

Emily Yoffe writes about the corporate governance failure at The Weinstein Company. She says even in the almost unthinkable case that the board and executives did not know about his constant sexual harassment and abuse (reportedly, his employment contract explicitly recognized it), they did know enough about his public inappropriate behavior to recognize that, as the company’s public presence, he was a huge potential liability.

What is undeniably true is that Harvey Weinstein’s abhorrent public behavior, toward men and women, in front of witnesses, should have forced his business partners to take serious action against him years ago. If they had, it’s possible that many people would have been saved from his attacks, including the women he assaulted in private — and the spectacular dissolution of the Weinstein Company wouldn’t be a business school case study in how ignoring the bad acts of a key employee can wipe out the whole operation.

Source: Harvey Weinstein is also a jerk. That alone should have gotten him fired. – The Washington Post

The Finger-Pointing at the Finance Firm TIAA – The New York Times

TIAA’s image as a benevolent provider of investment advice is in question. Several legal filings — including a lawsuit by TIAA employees with money under the company’s management, and a whistle-blower complaint by a group of former workers — say it pushes customers into products that do not add value and may not be suitable but that generate higher fees. Such practices would violate the legal standard that applies to retirement accounts and securities laws governing investment advisers.

And while TIAA contends that its operations are untainted by conflicts because its 855 financial advisers and consultants do not receive sales commissions, former employees, in interviews and in lawsuits, disagree. They say the company rewards its sales personnel with bonuses when they steer customers into more expensive in-house products and services.

In the New York Times, Gretchen Morgenson continues by describing a confidential whistleblower complaint that:

contends that TIAA began conducting a fraudulent scheme in 2011 to convert “unsuspecting retirement plan clients from low-fee, self-managed accounts to TIAA-CREF-managed accounts” that were more costly. Advisers were pushed to sell proprietary mutual funds to clients as well, the complaint says. The more complex a product, the more an employee earned selling it.

‘Poison pill’ stops the presses on boardroom coup attempt at Johnston Press

A discredited US-created management entrenchment provision is being used in the UK.

An attempted boardroom coup at Johnston Press has been thwarted by a controversial “poison pill” defence that could hand control of the newspaper publisher to its lenders.

Christen Ager-Hanssen, the activist shareholder plotting to oust chairman Camilla Rhodes and the company’s senior management, has been forced to delay a call for an Extraordinary General Meeting after advisers discovered the tripwire in bond documents.

This weekend Mr Ager-Hanssen was in talks with lawyers at the City firm Mishcon de Reya on how to circumvent the mechanism, known as a “dead hand proxy put,” in preparation for a new attack.

Johnston Press inserted the dead hand proxy put into its bondholder agreements when it last refinanced its £220m debt pile three years ago. Such terms can secure lower interest rates but can also trigger a default if shareholders step in to appoint new directors.

In the US, the Fried, Frank law firm says about these provisions:

Judicial concern about proxy puts in debt is based on their inherent potential entrenchment effect, because a triggering of the put could make a change in control of the board more costly—as the debt (and, through cross-acceleration provisions, possibly all of the
company’s debt) could be required to be refinanced if the put were triggered. Proxy puts with a dead hand feature are more inherently entrenching than non-dead hand proxy puts as they disable a board
from approving a dissident slate to avoid the put being triggered.

Source: ‘Poison pill’ stops the presses on boardroom coup attempt at Johnston Press

The truth about Jeff Immelt and General Electric’s corporate jets

VEA Vice Chair Nell Minow was asked to comment on reports that former GE CEO Jeff Immelt not only flew in a corporate jet but on some trips had a second GE jet follow with no passengers in case he needed a back-up.

Corporate governance hawk Nell Minow told CNBC it is difficult to know how many global companies use similar practices.Many companies have shifted to using fractured ownership of private jets, which makes oversight more difficult.

“Whatever benefit General Electric saved or extra layer of security they achieved, it was not worth the hit to their reputation,” Minow said.

Source: The truth about Jeff Immelt and General Electric’s corporate jets

Harvey Weinstein’s contract ‘protected him from sexual harassment allegations’

Reminiscent of the notorious Dennis Kozlowski contract at Tyco that provided that the only reason Mr. Kozlowski could be fired for cause was if he was convicted “of a felony that is materially and demonstrably injurious to the company or any of its subsidiaries or affiliates, monetarily or otherwise,”

Harvey Weinstein had a contract drawn up in 2015, in which the board of his film company could not terminate his employment over sexual harassment claims if he paid off women to silence them – as long as he paid out the money himself, according to reports. 

This is per se malpractice by the board and any director who agreed to it should be barred from ever serving on a board again and liable for damages as an accessory to abuse.

Source: Harvey Weinstein’s contract ‘protected him from sexual harassment allegations’

Investors Object to Virtual-Only Annual Meetings

Some companies are hoping to avoid in-person challenges at the annual meeting by scheduling virtual-only online session. The Council of Institutional Investors, whose members have $3 trillion in assets under management, has also spoken out strongly opposing virtual only meetings and the pension funds of New York City are voting against directors serving on board Governance Committees of companies moving to virtual-only meetings. Of course, in-person meetings enhanced by virtual participation for those who cannot otherwise attend is entirely different and should be encouraged.

The Sisters of Saint Francis of Philadelphia have taken the lead in challenging these decisions with shareholder resolutions at ConocoPhillips and Comcast. The Conoco resolution has already been cofiled by the Church of the Brethren Benefit Trust and the Needmor Fund, a Walden client. The Sisters have also filed a similar resolution with Comcast.

Walden’s Tim Smith stated, “The decision to move an annual meeting to cyberspace has moved far beyond a minor internal management decision and become an important governance matter for companies. Imagine if companies facing major controversies had decided to forgo physical meetings. If a company faces debate on their comp package or its climate change position or has votes on shareholder resolutions it is also a problem to have a disembodied discussion on line for a stockholder meeting.“

Fighting Short-Termism with Worker Power – Roosevelt Institute

In a new paper, Susan R. Holmberg asks:

“Can Germany’s co-determination system fix American corporate governance?” Prioritizing immediate increases in share price and payouts at the expense of long-term business investment and growth—a behavior we refer to as short-termism—has driven the inequality crisis in America and weakened our economy. By comparing the German stakeholder system of co-determination to corporate governance in the U.S., we find that emboldening workers with legitimate stakeholder power can help hold back the forces of short-termism.

Workers especially, who are investing in companies with their own labor on a daily basis, have a legitimate claim as corporate stakeholders, and it will serve companies, and society more broadly, if we—on the left at least—felt empowered enough to stake this claim.

Source: Fighting Short-Termism with Worker Power – Roosevelt Institute

PWC: Climate Change of More Concern to Investors than to Corporate Directors | HuffPost

VEA Vice Chair Nell Minow interviewed PwC’s Paula Loop for the Huffington Post:

A report released on October 17, 2017 from PwC finds that on some subjects there is a wide disparity between the directors who oversee corporate strategy and the investors to whom they owe the legal duties of care and loyalty. These findings are reflected in the title of the report, issued by PwC’s Governance Insights Center, The governance divide: Boards and investors in a shifting world.

The report concludes that “directors are clearly out of step with investor priorities in some critical areas,” especially with regard to climate change and sustainability and board composition. “I definitely think there is a gap,” said Paula Loop, who leads the Governance Insights Center. “There are some areas where we made some improvements, where we’ve done some bridging of the gaps but there are some areas where the gap has widened as well.”

The report revealed some surprising dissatisfaction by board members with their fellow directors. There is a significant increase with now 46 percent of the more than 800 corporate directors who responded to the survey admitting that at least one of their fellow directors should not be on the board. The reasons for dissatisfaction were evenly divided between five different categories: overstepping boundaries with management, lack of appropriate skills/expertise, ability diminished by age, reluctance to challenge management, and an “interaction style” that “negatively affects board dynamics.” Loop said, “It gets back to having a board assessment process and to really think about refreshment of the boards. We try to do the follow up discussion: How do you provide feedback to board members? Why haven’t you addressed this issue? Why is it that your board can’t do the right thing to make sure you have the right people on the board or provide coaching to the people on the board that you don’t think are doing a good job? It really gets back to board leadership.”

She noted that board quality is also a significant priority for shareholders. “Something that institutional investors have been talking quite a bit about is board composition, making sure you have the right people in the boardroom. Investors want to understand what your skills matrix is, what are the different things these individuals bring to the room and whether or not you are doing some kind of an assessment process.” She pointed to the New York City Comptroller’s Board Accountability 2.0 project, with Scott Stringer and the $192 billion New York City Pension funds asking for better board diversity, independence, and climate expertise.

But while institutional investors like pension funds raise concerns about board diversity, 24 percent of directors said that they didn’t think that racial diversity was a priority in board composition. Loop said, “We asked whether or not they thought that age diversity was important in the boardroom and 37 percent of them told us that they thought that age diversity was very important. Interestingly enough, 52 percent said they already have it. But in the S&P 500 only four percent of the directors are under the age of 50. So you do wonder, what’s their definition of age diversity?” The report’s findings on gender diversity show little progress. “All but six companies in the S&P 500 have at least one woman on their board, and 76 percent of those have at least two women. But only 25 percent have more than two women, and gender parity is rare. Only 23 companies in the Russell 3000 have boards comprised of 50 percent or more women.” Unsurprisingly, the report found that women directors thought efforts for diversity were moving too slowly, while the male directors thought there was too much focus on diversity.

For me, the most surprising finding was the overwhelming majority of directors who said their board did not need sustainability or climate change expertise. The core priority directors should have is sustainable growth, and it is impossible to do that without directors who are familiar with all aspects of sustainability, from the supply chain to the company’s reputation, technology, and product development. But investors and directors in agreement on the importance of cybersecurity expertise as a board priority. Loop said that many directors acknowledged this as an area where they need to spend more time and get more expert guidance. Only 19 percent said they had enough already.

And on the ever-popular topic of CEO pay, the report found that 70 percent of directors believe that executives are generally overpaid, although they are themselves responsible for it. Perhaps that is the most telling finding of all.

Source: PWC: Climate Change of More Concern to Investors than to Corporate Directors | HuffPost

Silicon Valley Vs. Wall Street: Can the New Long-Term Stock Exchange Disrupt Capitalism? – WSJ

Silicon Valley’s high-tech denizens complain the public stock markets are marred by a narrow focus on short-term earnings and profits.Now they are actually doing something about it, by launching a new framework for corporate governance, investing and trading called the Long-Term Stock Exchange. Backed by top Valley figures such as venture capitalist Marc Andreessen and LinkedIn co-founder Reid Hoffman, the LTSE says it plans to seek regulatory approval by the end of this year to become the newest U.S. stock exchange….Its key feature: a system in which the voting power of shares increases the longer investors own them. Firms listed on the exchange would need to use such a structure, often called “tenure voting,” while abiding by numerous other rules, such as a ban on tying executive pay to the company’s short-term financial performance.

Source: Silicon Valley Vs. Wall Street: Can the New Long-Term Stock Exchange Disrupt Capitalism? – WSJ

A Buy-Side Perspective on Stock Ownership Guidelines – Nasdaq MarketInsite

The lion’s share of large-cap companies in the United States now require named executive officers (NEOs) and board members to attain a certain level of stock ownership within a defined time period, and then to maintain that ownership during the course of their tenures.

The rationale for stock ownership guidelines (SOGs) is that when officers and directors have actual “skin in the game,” their interests will be more aligned with shareholders, and they will have more incentive to focus on long-term value creation.

It’s not just large-cap companies that are adopting SOGs though. According to the National Association of Corporate Directors, 46 percent of public companies with revenue between $50 million and $500 million now have some form of SOGs for board members (up more than 25 percent from 2012)…Most institutional investors draw a sharp distinction between shareholders and option holders. Since public companies are operated and governed for the benefit of shareholders, there’s an inherent rub from the perspective of many fund managers when those who are doing the operating and governing aren’t, themselves, shareholders.

Source: A Buy-Side Perspective on Stock Ownership Guidelines – Nasdaq MarketInsite