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A Breakthrough Month in Governance June 21, 2008

Posted by davidzweig in Uncategorized.

This week I had the distinct pleasure of spending a few hours with Nell Minow, the co-founder of The Corporate Library, and a Principal of Lens, a $100-million investment firm that took positions in underperforming companies and used shareholder activism to increase their value. BusinessWeek Online called her the “queen of Good Corporate Governance.”

Thus qualified, now know that she said that two things happened in governance this spring that will be seen as “monumental, absolutely seismic in the history of corporate governance.

First, a Washington Mutual director, Mary Pugh, resigned summarily after an angry shareholders’ meeting in April. The head of the board’s finance committee, Pugh stood accused of “fail[ing] to recognize and act in a timely manner on the risks to shareholder value presented by the housing bubble”, according to activist investor CtW, of insulating executive compensation from the impacts of the bank’s bad fortunes, and of questionable independence given the bank’s business relationship with her money management firm.

“There was always this thought that withholding a vote was a symbolic gesture,” Nell said. “AIG should have done this. I have been arguing for some time that Directors & Officers’ insurance premiums should be adjusted for directors who lose votes at shareholders’ meetings. It would reinforce activists and the silent majority who are told that their votes do not matter.”

The second event was the resignation of Jim Johnson from the Obama VP selection committee. As has been widely reported, “[Johnson] had received what may have been reduced rates on loans from Countrywide Financial Corp., a mortgage lender with business ties to Fannie Mae.”

The LA Times added: “He also has been criticized for compensation and other perks he received as an official of mortgage giant Fannie Mae and for compensation decisions made while he was a board member of United HealthCare, one of the nation’s biggest medical insurers.”

In this instance, however, she said bad corporate governance is “a Zoe Baird-nanny issue.” It was very significant to that a corporate governance issue could rapidly summarily derail a prominent government position.

Finally, a plug. While Nell says governance is great, her real passion is movies. Visit her site, Movie Mom at Beliefnet.



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