‘Corporate Governance’ Archive

New Ways of Cheating

Wednesday, June 12th, 2013

Once again we see the familiar problem with regulating the financial industry: so many companies will cheat if they can. It’s seldom the “outright lying” sort of cheating, but rather the “maybe we can hide this little bent rule” sort. They’ll take a little more risk than they’re allowed to, hoping to get a little more profit than they would have, but setting themselves up for a failure and loss that will seem to come out of nowhere.

Even as the Dodd-Frank regulations are being delayed and neutered by the industry, some companies are trying to sneak around long-established rules. When they do that, they risk devastating their general-public customers, or getting another taxpayer bailout, or both.

Here’s an interesting post by Mary Williams Walsh in the New York Times’ Dealbook blog:

Insurers Inflating Books, New York Regulator Says



How Investors Push Sustainability

Saturday, February 18th, 2012

Corporate managers act as if they’ve forgotten sometimes, but shareholders are the owners of companies. As owners, they directly select the the Boards of Directors who hire and oversee management. Shareholders may want to give management orders about corporate behavior. In practice, shareholders are a diffuse power, with indirect control, and management usually follows their own agenda.

Shareholder resolutions provide a way for a group of shareholders (owners) to put a directive to a vote by all the shareholders.
Among other uses, this is one of the ways that Socially Responsible Investors push management to make the companies behave more responsibly.

Ceres leads a national coalition of investors, environmental organizations and other public interest groups working with companies to address sustainability challenges. Part of their effort is to organize shareholder resolutions. Some pass, some don’t, but they all send a message to management about shareholders’ desires.

Graph of Ceres shareholder resolutions by year


Click here to read the article:
Ceres Shines a Light on the Power of Shareholder Proxy Votes


Throw Granny to the wolves. Or the Vultures.

Thursday, January 19th, 2012

Today another classic old company, Kodak, has filed for bankruptcy.テつ Among its first statements, “the company cited the burden of retiree benefits”.

There’s no doubt that Kodak’s management made big mistakes, completely botching the transition to digital photography.

Why, though, should retirees who worked for the company during its good times get robbed “relieved” of their pensions?

Retirees, and current workers with long service to the company, are in a terribly vulnerable position.テつ They have no bargaining power.テつ They can’t take back the work they did, for which they were promised payment that included a pension.テつ They can’t go back in time and work for someone more trustworthy.テつ Many of the older retirees physically can’t go back to work at all.テつ Their only protection is the law, and the law isn’t helping.

There’s no other supplier to Kodak in a position to get screwed out of decades of payments.テつ The companies that sold Kodak plastic or silver or chemicals got paid long ago.テつ If they hadn’t, they’d have had the opportunity to drop Kodak, long ago.テつ Only the employees, suppliers of labor, were paid partially in a long-term promise.テつ That promise is now being violated.

During all those years of work, Kodak was NOT setting aside enough money to fund the promises they were making to their employees.テつ The pensions were called “unfunded liabilities” by the accountants, meaning that the money was owed, but there was nothing set aside to pay.テつ Implicitly, Kodak was saying that they would pay for the pensions out of future earnings.

And this is key:テつ in the meanwhile, Kodak was able to claim higher profits, raising their share price and bringing bonuses to management.テつ The accumulated debt to employees was not counted as a cost.

Kodak was not breaking the law, or accounting standards.テつ For other types of expenses, companies are required to treat money that’s owed as an expense, reducing profit, whether it is paid or not.テつ Pensions are treated differently.

Those laws and accounting standards need to be changed.テつ Companies must be forced to set aside– really aside, in a trust where they can’t touch it– the pension money that they’re promising they’ll pay.テつ They need to be forced to recognize the expense as it is incurred.テつ That’s more honest accounting, but most important:テつ that protects the workers from getting robbed.

The managers long ago got their bonuses, the shareholders of long ago saw the share price rise, champagne was popped and toasts were raised… long ago.テつ The workers from long ago paid for that illusory “success”, but did not taste the champagne.

Those workers are now faced with the remainder of their lives tasting lower living standards, possibly even bitter poverty.

That stinks.テつテつ S-T-I-N-K-S.テつ

We need to change the law to protect those workers, and all the others like them, from being robbed.


Wealth and Politics: A History

Monday, November 21st, 2011

This is not simply a partisan slap, it is history.テつ How did we get to the current US government stalemate and social turmoil?

“The staggering economic inequality that has led Americans across the country to take to the streets in protest is no accident.テつ It has been fueled to a large extent by the GOP’s all-out war on behalf of the rich.テつ Since Republicans rededicated themselves to slashing taxes for the wealthy in 1997, the average annual income of the 400 richest Americans has more than tripled, to $345 million テ「竄ャ窶 while their share of the tax burden has plunged by 40 percent.テつ Today, a billionaire in the top 400 pays less than 17 percent of his income in taxes テ「竄ャ窶 five percentage points less than a bus driver earning $26,000 a year.テつ “Most Americans got none of the growth of the preceding dozen years,” says Joseph Stiglitz, the Nobel Prize-winning economist. “テつ All the gains went to the top percentage points.” “

How the GOP Became the Party of the Rich

The inside story of how the Republicans abandoned the poor and the middle class to pursue their relentless agenda of tax cuts for the wealthiest one percent

by Tim Dickinson
The 400 Richest:  Income and Taxes