I’ve never been one to let the paint dry on something before playing with it and today is no exception. The object of my attention today is the Financial Reform bill passed by the Senate yesterday. What has me picking at the corners of this freshly painted piece of legislation are three provisions addressing corporate governance reform: Proxy Access, majority voting standards for uncontested director elections and Say-on-Pay.
What I am most interested in here are two things. Read more »
New evidence has been uncovered to show that Dexia, a major Belgian-French bank, is still financing Israeli settlements in the occupied Palestinian territories despite official assurances that such loans have ceased. IPS reports that shareholders confronted company management at its AGM in Brussels this week and caught company executives off guard.
This Franco-Belgian bank is a leader in municipal finance in Europe, with the majority of the market in Belgium and almost half in France. Subsidiary Dexia Crediop is a prominent local government finance company in Italy. Dexia Group also offers retail banking through nearly 1,100 branches in Belgium and Luxembourg and provides asset management, insurance and fund administration services.
As noted by the Israeli NGO, Who Profits? ” the bank announced in June 2009 that financing Israeli settlements is contrary to the bank’s code of ethics, and that it would stop providing new loans to West Bank settlements.”
I once asked a fellow law school graduate how he did in school. He replied with great enthusiasm, “I graduated in the top 90% of my class!”
A Massey Energy spokesman who announced that its three directors standing for election had won by a landslide reminds me of that retort when I read the announcement. Directors Gabrys, Moore and Phillips won their respective reelections by votes of 55.36%, 55.09% and 57.83& respectively.
A landslide? Surely Massey officials jest. Read more »
A series of posts on Race to the Bottom this week has made much about the likely prospect of “Say on Pay” becoming the law of the land if the Dodd bill addressing financial reform passes in the coming weeks, which it is likely to do. However, the practical effect of this provision of the Dodd bill on executive pay seems negligible.
For those unfamiliar with “Say on Pay,” this is a concept first put forth by shareholders that calls on companies to submit all executive pay decisions to a vote of the company’s shareholders prior to going into effect. Like the provision in the Dodd bill, this shareholder approval ritual is advisory. Thus, directors can ignore the wishes of shareholders if they so choose.
In the short-term, it is unlikely that this provision will have any impact on the vast majority of public companies. Race to the Bottom notes that only a few companies that have submitted pay plans to shareholder approval have experienced any blow back from their investors. Citing the situation at Occidental Petroleum, shareholders voted down a compensation plan for the company’s CEO Ray Irani, a perennially overpaid executive who has been a lightening rod for investors for many years. Undoubtedly, when Say on Pay becomes the law of the land, there will be a few more of these votes getting majority status.
While shareholder approval of executive compensation is a good thing for some obvious as well as less obvious reasons, as a practical matter, very little will change in the short-term. What remains unchanged is the fact that institutional investors largely give companies a pass when it comes to pay practices. Despite the railing of pitchfork capitalists that things must change, those major investors “pulling the lever” at proxy voting time have no incentives to change their voting practices. There are several reasons for this.
First, a substantial percentage of institutional investors – investment managers, corporate pension funds, insurance companies and some pension funds – have policies when it comes to executive pay that I would characterize as “but for the grace of God go I.” By tackling the executive pay head-on as large investors, these institutions risk impacting their very own pay practices. While most of these investors would not admit to this practice, as a practical matter, this is the consequence
Second, institutional investors defer to their professional proxy voting advisors – ISS/Risk Metrics, Glass Lewis, et al. – in order to untangle the complicated mess that is designed to obfuscate the executive pay setting process. A quick glance at any company proxy statement will confirm the fact that 60 to 80 percent of proxy statements are devoted to executive pay discussions.
The proxy advisors have responded in an equally complicated fashion both to analyze these complicated pay setting processes as well as justify their own existence to their paying clients by demonstrating their intellectual prowess on the subject. For instance, ISS/Risk Metrics employs multiple regression analysis and a two stage assessment of just one aspect of company executive pay setting. While this approach gets the job done, the entire process from both the issuer and investor perspectives only obscures the problem.
The good news in all of this is that the question of executive pay will now be addressed head on by shareholders. A procedural barrier preventing meaningful discussion about pay practices has been removed. What now must be done is to address excessive corporate pay practices and their underlying causes in a meaningful manner. This will require a better informed corporate electorate that can decipher the the arcane data that currently obscures greater understanding of the matter.
The 2011 proxy season should be an interesting test of shareholder mettle on this subject. While some executives may fear a firing squad of sorts from shareholders, as a practical matter, their investors will most likely miss their targets. However, in time, investors may become better shots.
Recently, a number of web sites I have developed came under a severe hacker attack. Starting last October, several sites were “vandalized” with the site’s home pages replaced with new ones proclaiming that the site had been hacked. A little research into the servers and I thought the problems had been solved.
I was mistaken.
The attacks continued for some months, escalating into a full-blown battle for control of my sites. DDoS, SQL injetion viruses, brute force attacks and god knows what else was thrown at my sites. Eventually, Google forced the site offline by proclaiming that my sites had become predator sites and that anyone visiting the sites should go elsewhere. Several months later, things are returning to normal. Considerable expense and hundreds of man hours were spent fixing the problems and, quite frankly, I am not entirely certain that it won’t happen again.
Questions remain. How did my sites get hacked, who did it and why was it done?
After considerable research into the subject, I discovered that these are the great unknown questions. Answers to these questions can at best be inferred. An acquaintance in the cyber-policy community heard my story and said “Iran and China. Look there for answers.” After further prodding, he referred me to a recent report issued by a Canadian organization, SecDev Group, which recently issued its report,”Tracking Ghostnet: Investigating a Cyber-espionage network.” This is a frightening exposé of a world around us that most of us, certainly myself, are totally unaware of but should pay close attention to. What I learned from this report was troubling given the risk that we all face from cyber-criminals, cyber-terrorists and nation states bent on asserting themselves on the world stage.
The report details hackers from China (PRC) who waged an attack on the Indian government and the offices of the Dalai Lama. These hackers were able to successfully intrude with impunity into the computers of these organizations, stealing secret information, identities and use those computers to wreck havoc elsewhere.
The pattern was a familiar one to me based on my experience. However, what happened next was even more striking.
As I was putting new security precautions in place on my servers, I found that I could track visitors to my sites. What I found was alarming to say the least. In the time I installed the intrusion tracking software (I am speaking about a couple of minutes), a single intruder had tried to enter the site 288 times.
I now know a new technology term: “IP address blocker.”
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