IBM board still does not compute

Computing behemoth IBM has renominated its entire board of directors this year, featuring 10 out of 13 candidates that have held chairman/CEO positions at publicly traded companies and two that have served as private university presidents. While they bray about increased burdens of regulation, corporate inmates continue to run the asylum and pay themselves millions of shareholder dollars for their disservice to common sense and disrespect to the true owners of the company. Corporate reform, my bottom line.

Totally globalized native New Yorker and former broadcast news producer Muhammad Cohen is a blogger for Forbes and 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.

IBM board of directors does not compute

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.

Fix corporations to fix campaign finance

The US Supreme Court’s wrongheaded decision on corporate campaign contributions raises the specter of billions of corporate dollars flooding the electoral process. But the core issue goes beyond campaign financing. It’s time to restore corporate sanity, as I wrote in The Guardian. From spending millions on lobbyists to paying eight-figure bonuses to self-proclaimed masters of the financial universe that collapsed the global economy, corporations have gone crazy. The problem is simple – shareholders that own companies have lost their rightful power to supervise the executives who manage them, so can’t prevent them from acting recklessly and spending investors’ money foolishly; the inmates are running the asylum. The solution is also simple – fair corporate elections that give investors a legitimate chance to elect boards of directors that will, as the law requires, protect shareholders’ investments. Until corporations fix their own elections, they shouldn’t meddle in others.

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, financial crisis, and cheap lingerie.