A new assault on management.The battle for control of the American corporation is by no means over. The movement to introduce more "shareholder democracy" into the boardroom seems to be gaining. (See story, page 44.) The idea, which has received an apparently sympathetic hearing from Securities and Exchange Commission Chairman William Donaldson
Charles William Donaldson (January 4, 1935 - June 22, 2005) was an English satirist, writer, rake and playboy, author of The Henry Root Letters. , is that shareholders ought to be able to directly elect directors to the board, in effect, bypassing the existing board of directors, the nominating committee A nominating committee is a group formed usually from inside the membership of an organization for the purpose of nominating candidates for office within the organization. It works similarly to an electoral college, the main difference being that the available candidates, either and the CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . This is just plain dangerous and must be stopped. The addition of more independent directors to boards, as mandated by Sarbanes-Oxley and the stock exchanges, was unnecessary and expensive. In fact, there's little empirical evidence that it actually improves a company's performance. But it's been manageable because boards and CEOs have been involved in the recruiting and selection of these new directors. Existing directors and CEOs perceive that they can work with these new directors, who can be required to bring certain qualifications and expertise. As a result, companies can maintain the proper balance between a CEO who runs a company and a board that has broad oversight and advisory responsibilities. But giving shareholders direct access to a company's proxy to nominate nom·i·nate tr.v. nom·i·nat·ed, nom·i·nat·ing, nom·i·nates 1. To propose by name as a candidate, especially for election. 2. To designate or appoint to an office, responsibility, or honor. their own directors threatens to upset the applecart. A hoard that includes directors who have no relationship with a CEO or other directors, who may lack critical competencies and who may perceive themselves as working at cross-purposes with management would be simply unworkable. Decision-making could grind to a halt Verb 1. grind to a halt - be unable to move further; "The car bogged down in the sand" get stuck, mire, bog down stand still - remain in place; hold still; remain fixed or immobile; "Traffic stood still when the funeral procession passed by" . The core issue here is who should be the "fulcrum fulcrum: see lever. " of decision-making? Who should make the crucial decisions about capital and technology and people? We at Chief Executive believe that a CEO and his or her team are the ones who have to make those judgments. They can't be made by a contentious committee process. Shareholders have the right to reap the rewards created by corporate leadership, but not to sit in on managing the business. The Business Roundtable Business Roundtable (BRT), an association consisting of the chief executive officers of major U.S. corporations that was founded in 1972 through the merger of the three preexisting business organizations. has written to Donaldson to stop the shareholder democracy nonsense. We urge our readers to follow suit. |
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