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Money for Nothing: How the Failure of Corporate Boards Is Ruining American Business and Costing Us Trillions Audio CD – Audiobook, CD, Unabridged
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"Both thoughtful and lively, this is a fascinating discussion of a little-seen force in corporate America." ---Publishers Weekly
About the Author
John Gillespie worked as an investment banker with Lehman Brothers, Morgan Stanley, and Bear Stearns for eighteen years.
David Zweig cofounded Salon.com and currently consults on improving the performance of executive groups.
Mel Foster, an audiobook narrator since 2002, won an Audie Award for Finding God in Unexpected Places by Philip Yancey. He has also won several AudioFile Earphones Awards. Best known for mysteries, Mel has also narrated classic authors such as Thoreau, Nabokov, and Whitman.
Most Helpful Customer Reviews on Amazon.com (beta)
They discuss how companies spend enormous sums of shareholder money to fight off reforms, either directly or through organizations like the US Chamber of Commerce or the Business Roundtable. According to the authors, "corporate boards remain the weakest link in our free enterprise system."
A brief overview is provided on how we got here and what it means for shareowners and society. Much of the book is given over to example after example of conflicts of interest, overlapping boards, and a world driven by the greed and status needs of CEOs. Studies have shown that 80% of acquisitions fail to deliver and many fail outright. Too often they are driven by incentives that reward empire building over the generation of profits.
Jennifer Lerner, the only psychologist on the faculty of Harvard's Kennedy School of Government, finds that "Americans tend to exhibit anger more readily than those in many other cultures, and the effects of being in power closely resemble those of being angry." CEOs and other executives, it turns out, have substantially larger appetites for risk and are more optimistic about outcomes. Changing the context can improve outcomes, especially where the environment demands "predecisional accountability to an audience with unknown views." In the case of corporations, that would be a diverse independent board, not predictable lapdogs of management.
Later chapters review "The Myth of Shareholders' Rights" and other issues, including proxy mechanics that allow moving shares to be voted multiple times based on the "day of record," when large blocks of stocks may be most likely to have several different owners. They document that not only do shareowners have little power, the gatekeepers and guardians paid to protect shareowner interests are almost always conflicted, leading to de facto control by management. At the same time, laws like the "business judgment rule" make it nearly impossible to hold fiduciaries accountable. Pension assets that are turned over to plan managers who provide kickbacks back to corporations earned 29% lower returns, according to a cited 2009 GAO report. The failures documented by Gillespie and Zweig cost investors and the public trillions, bringing the world economy to its knees.
It is time boards stopped being the CEOs friend and instead took on the role of the CEO's boss. After a thorough examination of the issues, documented with an abundance of real-life examples, Gillespie and Zweig close with a list of recommendations that could go far in changing the culture of the boardroom, strengthening accountability, reducing conflicts of interest, and getting shareowners involved. In a very abbreviated form:
- Create a new class of public directors and a training consortium
- Insist of gender, ethnic, and perceptual diversity
- Limit directors to three or fewer boards and require substantial "skin in the game"
- Initiate more communication between directors and shareowners
- Split chair/CEO roles & learn lessons from nonprofits
- Allow 10% of shareowners to call an extraordinary general meeting
- Add clout to say-on-pay, reform executive compensation, and shareholder approval of golden parachutes
- Ban staggered boards and require majority votes elections
- Proxy access for shareowners, daylight nominating & election processes, & require real board evaluations
- Require board risk committees & empower boards to gather independent information
- End conflict of interest in mutual fund voting by allowing third party voters per Investor Suffrage Movement
- Reform voting mechanics to end manipulation by management
- Reform auditor business model & Fix "up the ladder" provision of SOX
- Reform rating agency model, fully disclose lobbyist expenses, provide real funding for SEC enforcement
- Federalize corporate law
- Better coverage of governance issues by the financial media
- Better financial education, including how corporate governance works
Gillespie and Zweig hit all the bases for a solid home run. They tell us how the game is fixed and how the rules can be changed to play fair. After all, shareowners own the "ball" and all the other equipment. Will we listen? Even more importantly, will we act? The authors have even set up a website at [...]. Take a look; give it a read; ACT!!
Thus without even legislating the separations of the Chairman role from that of President from that of the CEO, we may achieve that automatically, since few will be willing to take all these roles for "only" 250K a year. And overall the public would be better off, since few, even highly capable and ethical people can juggle major roles in major corporations well, even if they commit themselves to the jobs for 70-80-90 hours a week (plus working incessantly is unhealthy for anyone's judgement or wellbeing).
Busy CEOs will be also less inclined to serve on many boards, if 90% of their stipend goes to taxes. Thus a simple tax code change can elegantly substitute dozens of messy regulations.
With these changes, regulating agencies, like SEC, would be able now to attract top talent much easily, since while they can conceivably pay up to 250K a year to match the would be going rate of the most CEOs, no government agency can afford paying millions to anyone, no matter how talented they are (especially giving the political consequences of such a salary) .
There could be of course some exemptions to tax law when it comes to the small businesses, that are formed as partnerships and LTDs, as opposed to corporations. And there could be a few exemptions that allows bonuses taxed at a lesser rate, when the executives of corporations show exceptional results and leadership over the long run. The overall effect, though, should lead to a much smaller corporate inequality, when compared to what an entry worker earns to the pay of a CEO, and not incidentally to a much greater corporate governance !
I have personal experience with Boards, and they are earning money for nothing!
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