Bob Monks: Question #2 for the Angelides Commission

Here is question two in Bob's series of questions for the Angelides Commission (Financial Crisis Inquiry Commission. We have, as of yet, heard little about the investigation but Chairman Phil Angelides has that he's not necessarily pursuing prosecutions in this inquiry. Bob has created a list of questions that he would like to see the Commission ask and we're posting them on Wednesdays. Question #2 is a question for both Timothy Geithner and Ben Bernanke:


Can you identify certain "unintended consequences" arising out of decisions and actions of the Fed (or the Treasury) relating to the financial crisis since the spring of 2008?


One has to wonder whether anybody intended the current hegemony of Goldman Sachs, Morgan and Morgan Stanley among financial institutions. If so, it would be interesting to pursue why it was felt that the existence of huge institutions, whose continued health was indisputably a systemic risk, is preferred over a more diversified landscape.

Bob Monks: Questions for the Angelides Commission

The Financial Crisis Inquiry Commission was formed this past summer and charged with investigating the causes of the economic crisis. Also known as the Angelides Commission or New Pecora Commission, the ten-member bipartisan panel has just gotten work underway by naming senior staff and meeting with Geithner and Bernanke. A report is due to Congress in December of 2010 so next year should be an interesting one for the investigation.

In light of the work before Commission, Bob has created a series of questions that he would like to see the panel ask. We'll post a question each Wednesday for the next few weeks so check back here for more.

Question #1 for the Angelides Commission:
(To ask both Timothy Geithner and Ben Bernanke) With whom do you consult regularly who disagrees with the economic and financial policies of the administration (or, for Bernanke, of the Federal Reserve System)? Who has input into the decision-making and investigative process?


As a postscript, here are two additional articles about the FCIC by Eliot Spitzer and William Greider.

Bob Monks speaks at Harvard Law School

Bob recently spoke at Harvard Law School about the state of corporate governance and his view of the future. The talk was recorded and you can view it here (transcript coming soon).

Bob Monks thoughts on Jones v. Harris

Bob was in Washington last week and while there he visited the Supreme Court to observe deliberation in the case of Jones v. Harris. He writes,

The Supreme Court heard of the most important “governance” cases in recent years. The Jones v. Harris issue is whether an investment manager was justified in charging “captive mutual funds” up to 200% of the fees charged to competitively secured institutional clients. The justices probed persistently and purposefully, and several questions emerged:

1. What does the word “fiduciary” mean within the relevant statute. Is it the same as under common law?

2. What is the appropriate comparator metric?
a. other mutual funds
b. other institutional funds under managements

3. “Apples and Oranges” – Justice Sotamayor required that comparison be made between the services provided the different classes of client so that comparative prices would be appropriate.

4. Did the court have to go further than consider the appropriateness of the process to determine the appropriateness of the price?

5. An unasked question was - does the customer not always have the opportunity to redeem his shares at any time he disapproves of the investment/ If so so, is that not a satisfactory remedy?

The justices and the government agreed that the decision of the Circuit Court was erroneous. The interesting question is – what will be the remedy. Justice Breyer has a Freudian slip and mention “reversal” – other justices talked of “remanding”. All in all, a fine hearing providing pride and optimism in the function of the Supreme Court.

Bob Monks speaks on Kozlowski's bid to get out of prison

Bob recently spoke at the University of Delaware on the lessons of the Tyco scandal. Bob (with Nell Minow) has written extensively on the case in the textbook, Corporate Governance. He points to the joint chairman/ceo position and the resulting lack of executive oversight as a major factor in the case. In summarizing the message of his recent speech, Bob writes,


Dennis Kozlowski has filed a writ of Habeas Corpus, requiring the State of New York to justify his continued imprisonment. He has alleged that he has wrongfully been denied access to the formal statements of Tyco directors regarding compensation filed prior to his indictment. I was a director of Tyco for nine years, albeit it some five years previous to the matters in contest, and I have written in my textbook CORPORATE GOVERNANCE, all four editions, my dissatisfaction with the functioning of the Tyco board particularly with reference to compensation. This had to do with faulty procedures and record keeping. Based on my experience, Dennis was entitled to have the statements of the individuals directors presented to the jury. Otherwise, he was denied a fair trial and his Habeas Corpus petition should be granted.

Bob Monks to speak to Shareholder Activism Class at Harvard Law School

Bob will be visiting Harvard next week to speak to Professor Lucian Bebchuk's class. This is a class on shareholder activism and is offered through the Program on Corporate Governance at Harvard Law School. Read Bob's speech.

Minow says Feinberg cuts are appropriate

Have you seen the Nell Minow interview on Bloomberg? She and John Cornell discuss Ken Feinberg's executive compensation plan. See it here.

And, like everyone else, Bob has been following all of the regulatory restructuring and lobby influence in Washington, along with the Financial Crisis Inquiry Commission. The stream of news is never ending but here are just a few things from Bob's recent reading.

Commission Impossible. Eliot Spitzer looks at the Angelides Commission.

Speculation Economy: How Finance Triumped Over Industry. By Lawrence E. Mitchell, 2008.

Wall Street Steps up Political Donations. Corporate influence continues... from the WSJ.

Solving "Too Big to Fail." From the Wall Street Journal today.

Too Big To Save: How to Fix the U.S. Financial System. By Robert Pozen and coming out November 9.

Same old news...

We're working on Bob's archives here and organizing material from over thirty years of his career. All kinds of interesting things are surfacing but this 1992 article from Time magazine really stuck out today since executive pay is very much in the news. Bob commented in the piece saying,

"Pay masks a much bigger problem," says Robert Monks. "The real problem is the lack of accountability. CEOs are today's absolute monarchs and their boards are the House of Lords, and they feel they can thumb their noses at us ...without fear of being held accountable."

And here we are still talking about over-the-top compensation (WSJ article today). The entire Time article is online here.

In the news

A couple of interesting new items out there that mention Bob.

An article in Corporate Board Member by Steven Flax about Shad Roe and efforts to enforce accountability and counter oversize compensation. Bob is mentioned along with other members of Investors for Director Accountability.

Robert Shapiro has a piece about Goldman Sachs on his blog, The Point. In "Who Will Really Pay For Goldman Sachs' $23 Billion in New Bonuses?" he zeroes in on pay issues that are very much in the news these days. He also mention the New Yorker article on pay that features Nell Minow.

And speaking of Nell, she had an article in a recent edition of the Financial Times called, "Impresarios on the board are a bad sign."