Archive for April, 2013

IBM board of directors does not compute

April 26, 2013

It’s proxy voting season in America, when the shareholders, the real owners of corporations, get to have their say on how their businesses are run by electing the board of directors. Corporate magnates whine about the added regulatory burden they face since their ilk torpedoed the world economy five years ago, but reforms in recent years still leave shareholders powerless to influence the companies they own.

IBM, holding its annual shareholder meeting on Tuesday, is one of America’s great companies and one of my shareholdings. It’s also a poster child for how far reform has fallen short.

Shareholders elect boards of directors that have a legal duty to oversee management in the interest of shareholders. One of the worst abuses of the system is having one person serve as both Chairman of the Board of Directors and Chief Executive Officer. The very existence of a Chairman/CEO corrupts the idea of the board of directors effectively supervising management in the interest of shareholders. No one can supervise themselves objectively, and supervisors can’t be led by the person they’re supervising.

Management also routinely packs boards with likeminded executives that see the world (and appropriate pay levels) the way they do, through a Soviet-style system where nomination by management is tantamount to election. Because executives control the nomination process for lucrative and prestigious director positions, there are strong, if unspoken, disincentives for director dissident, Rather than watchdogs for shareholder interests, corporate boards of directors become lap dogs for management whims.

Corporate management has successfully beaten back proposals for fair elections to choose directors. Enabling shareholders to nominate candidates to the board of directors on an equal basis would break management’s stranglehold on board members and enable real oversight of management in the interest of shareholders. So management spent millions of dollars (that belong to shareholder) to stop democratic voting.

Among the more ludicrous arguments against fair elections was management’s claim it could lead to “special interests” gaining seats on the board. Of IBM’s 13 director nominees (all incumbents) this year, 10 are current or former Chairman/CEOs, including IBM’s own Virginia Rometty. Two more directors have served as university presidents, a different style of corporate potentate. No one questions whose interests they are serving; perhaps it’s obvious when you see that IBM has paid occupants of the Chairman/CEO post $116 million over the past three years.

As an IBM shareholder, I praise the company for decades of outstanding performance. But we’ll never know how much better its results could be with meaningful supervision of management by a board of directors that takes its legal responsibility to defend shareholder interests more seriously.

Totally globalized native New Yorker and former broadcast news producer Muhammad Cohen is author of Hong Kong On Air, a novel set in his adopted hometown during the 1997 handover about television news, love, betrayal, high finance, and cheap lingerie. See his bio, online archive and more at www.muhammadcohen.com; follow him on Facebook and Twitter @MuhammadCohen.

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Unhappy Earth Day, Mom

April 21, 2013

Since the first Earth Day on April 22, 1970, there has been precious little progress toward creating a greener planet. Mounting instances of severe weather across the globe underscore the importance confronting climate change and its causes.

But efforts to limit environmental damage have disappointed this true believer again and again and again.

There’s plenty of blame to distribute for this futility now in its fifth decade, including industry, government and consumers. But I reserve special scorn for environmental advocacy organization that have repeatedly proven themselves no friends of the earth. As I wrote in Asia Times in 2009:

Environmental groups are most skilled at failure. Mother Earth faces the same issues it did when the first Earth Day was declared in 1970. The biggest development over these decades is that we’ve discovered in global warming a deadly new effect of the unabated pollution and profligacy that these groups so ineffectually opposed over all these decades.

For most environmental NGOs, “corporation” remains a dirty word, as do “America” and “wealth”. Deeply confident of their own righteousness, they reject compromise with friends and foes as scornful deception. They simply expect developed countries to accede to demands, not negotiate.

To borrow a phrase from the 1970s, environmental groups have to decide if they want to be part of the solution or remain part of the problem.

Totally globalized native New Yorker and former broadcast news producer Muhammad Cohen is author of Hong Kong On Air, a novel set in his adopted hometown during the 1997 handover about television news, love, betrayal, high finance, and cheap lingerie. See his bio, online archive and more at www.muhammadcohen.com; follow him on Facebook and Twitter @MuhammadCohen.

Stepping up to the political plate

April 7, 2013

Season’s greetings. As a lifelong (Met) fan and reforming sportswriter, the start of the baseball season is always a reason for optimism and excitement. Every baseball game brings some unexpected pleasure, whether it’s an improbable hero, an unlikely play, or, at the very least, verdant candy for the mind and eyes. Every season unfolds in unexpected ways, such as last year’s turnaround of the Baltimore Orioles, after years of losing and alienating a wonderful baseball town, and the championship trophy for their fellow wearers of the black and orange, the San Francisco Giants, for the second time in three years.

The Giants and Orioles are also among the heavy hitters when it comes to political contributions by their owners and employees. It’s not surprising that baseball teams make political pitches. Nearly all of them play in publicly funded stadiums (the Giants are a welcome exception) and derive a host of other benefits from government – who do you think pays for those exit ramps into the parking lot?

Five teams’ associates contributed more than a $1 million during the 2011-12 political cycle, according the Sunlight Foundation, with baseball’s total political giving topping $24 million. Only one team eschewed political contributions altogether, the Toronto Blue Jays, which play in a different political league. Donations skew more than three to one toward Republicans, not surprising since rich people own teams (as well as play for them).

The Chicago Cubs haven’t won a World Series in more than a century, but they took the championship for 2012 political donations. With billionaire chairman Joe Ricketts leading the way, the Cubs were tied to $13.9 million in contributions, more than the rest of the teams and Major League Baseball’s headquarters combined.

An investment banker whose father founded discount broker Ameritrade, Ricketts created the Ending Spending Action fund and reportedly authored The Defeat of Barack Hussein Obama: The Ricketts Plan to End His Spending for Good. Ricketts later abandoned the plan, but kept on giving to Republicans.

To his credit, Ricketts is sticking to his political principles in efforts to renovate Wrigley Field, the Cubs’ home ballpark that turns 100 next year. His $300 million plan doesn’t ask for a dime of public money. In fact, continuing a long tradition of what could look to outsiders like shakedowns, local politicians and community groups expect the Cubs to fork over close to $1 million to compensate Wrigley’s neighbors for the annoyances and inconveniences a baseball team can cause.

Ricketts’ plan also envisions goring a few holy cows (none of Harry Caray’s, of course), including limiting the once quaint, now thoroughly commercialized practice of watching the Cubs from the roof of houses across the street by adding a state of the art video screen behind the bleacher seats. He also wants permission for more night games – until 1988 the Cubs played all day games at home, having scrapped plans to install lights and donating the steel to the US war effort after the 1941 attack on Pearl Harbor.

According to media reports, the Cubs and Chicago are close to a $500 million renovation plan that will also include a parking garage, without a cent of public money. When the deal is finalized, Ricketts will likely share the stage for the announcement with Mayor Rahm Emanuel, former chief of staff to the US president Ricketts tried so hard to oust. Perhaps Ricketts will eventually yield on one principle and gives some money to a Democratic politician. Baseball makes strange bedfellows.

Totally globalized native New Yorker and former broadcast news producer Muhammad Cohen is author of Hong Kong On Air, a novel set in his adopted hometown during the 1997 handover about television news, love, betrayal, high finance, and cheap lingerie. See his bio, online archive and more at www.muhammadcohen.com; follow him on Facebook and Twitter @MuhammadCohen.


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