Exxon to Invest Millions to Make Fuel From Algae

Exxon to partner with Synthetic Genomics and explore fuels made from algae according to a NYT article.


“This is good news of the highest order. Exxon people have been looking for leadership in alternative energy investment. Craig Venter is probably the single human being whose genius one would most like to have entrained in this effort–Hurrah for Exxon, courage Craig!”

--Bob Monks

Comments on the shareholder rights bill

Last week Bob gave me an opinion piece that he'd clipped from the Financial Times. In "Protect industry from predatory speculators," Lawrence Mitchell warns that Senator Schumer's shareholder rights bill is a misguided and dangerous action that could "[choke] the engine of economic production." Instead, Mitchell advocates for strong management with rules in place to check dishonesty or negligence. "Shareholder rights," he writes, "are simply wrong."

When Bob handed me the clipping he said, see the proposals that Allen Sykes and I laid out in Capitialism without Owners. Indeed, there are four proposals in the last section meant to be explicit recommendations for reform. So, as an alternative to Mitchell's thoughts, we offer this from the archives:

• Government should affirms in support of the principle that there should be no power without accountability, that creating an effective shareholder presence in all companies is in the national interest -- and that it is public policy to encourage effective shareholder involvement in the governance of publicly-owned corporations. A national-level Council should be created to ensure that this policy is applied by all executive and judicial branch agencies, competition authorities, stock exchanges and other entities.
  
• All pension fund trustees and other fiduciaries (insurance companies, mutual funds) holding shares must act solely in the long term interest of their beneficiaries, and for the exclusive purpose of providing them with benefits.
• To give full effect to the first two proposals, institutional shareholders should be made accountable for exercising their votes in an informed and sensible manner above some sensibly determined minimum holding (US$15m/L10m). Votes are an asset; accordingly, they should be used to further beneficiaries' interests at all times. In effect, the voting of all institutionally-held shares would be virtually compulsory.
• To reinforce the other three proposals, shareholderes should have the exclusive right and obligation to nominate at least three non executive directors per major quoted company.
  

The authors go on to lay out proposals for monitoring these regulations and for standardizing shareholder responsibilities.

Capitalism Without Owners Will Fail: A Policy Makers Guide to Reform was written by Robert Monks and Allen Sykes, and published by CSFI in 2002. Get your copy here.

The Future of Corporate Reform conference speakers: Ben Stein

Bob put a lot of thought and effort into choosing speakers for The Future of Corporate Reform conference to be hosted by The Corporate Library in September. I've asked him for some thoughts on each of the speakers and will be posting them here in the coming weeks.

Ben Stein is an economist, attorney and Hollywood personality (bio). Bob writes, "Ben Stein is a well educated polymath -- with splendidly irreverent views on matters dear to the pompous."

Mr. Stein is speaking on The Future of Investing -- Things We Know and Things We Don't. Join the conference LinkedIn group and read his most recent New York Times opinion piece here.

The Future of Corporate Reform
Tuesday September 8 through Thursday September 10
Hotel Coronoado in San Diego.

The Future of Corporate Reform conference speakers: Lucien Bebchuk

Bob put a lot of thought and effort into choosing speakers for The Future of Corporate Reform conference to be hosted by The Corporate Library in September. I've asked him for some thoughts on each of the speakers and will be posting them here in the coming weeks.

Lucien Bebchuk, Professor Harvard Law School (bio). Bob writes, Bebchuk is a home run; first he is a world class economist; second he is probably the outstanding legal corporate governance scholar; third he is the moving energy behind the Harvard Law School Governance Blog - a major information source in the governance world; and, fourth - a personal opinion – he is free from the kinds of ambition that poison much scholarship, he is honestly committed to his own sense of the truth.

Professor Bebchuk is speaking on The Future of Policy -- The "Watchful Eye."

The Future of Corporate Reform
Tuesday September 8 through Thursday September 10
Hotel Coronoado in San Diego.

Are Boards Responsible? Looking back to Monks & Sykes

A recent NPR story about corporate boards asked whether or not directors bear some responsibility for the financial crisis. The piece, part of a series called The Future of Capitalism, offered little new information but one speaker did offer this interesting idea: that after Enron most boards learned from that fiasco and “self-corrected.” Is this true? Did boards change after Enron?



Bob wrote Capitalism Without Owners Will Fail with Allen Sykes in 2002. In a section specifically about this issue called “A Window on the Enron Board,” the authors addressed the issue of board responsibility.



“These individuals are the flower of America’s director culture. They each had served for seventeen years; they chaired the most important committees – executive, finance, compensation and audit; three had earned doctorates; all were paid a minimum of US$350,000 a year. They appeared voluntarily and at substantial personal inconvenience and legal hazard in order to articulate plainly and repeatedly that, individually and collectively as members of a board, they were not responsible in any way for the collapse of Enron or the loss of investments, pensions and jobs. … The details revealed by the Enron hearings are essential to understand the often fragile defenses to corporate excess and misbehavior in American boards. Perhaps non-executives are not able to discharge their responsibilities; if so the investing public has been mightily misled.”



Have things changed?



Capitalism Without Owners Will Fail: A Policy Makers Guide to Reform was written by Robert Monks and Allen Sykes, and published by CSFI in 2002. Get your copy here.

The Future of Corporate Reform

Tuesday, September 8, 2009 – Thursday, September 10, 2009
Hotel del Coronado • San Diego, California

The Corporate Library, the leading source for independent corporate governance information and analysis, is pleased to announce “The Future of Corporate Reform,” a conference designed to give public fund managers and trustees the knowledge and tools to create long-term value, shape corporate reform, and repair the markets.

Join institutional investors and leading academic and political thinkers at this exclusive conference, as we provide solutions through changes in investment strategy, litigation and public policy to restructure the public corporation and ensure that it delivers on the promise of wealth creation for shareholders and society.

Speakers include: President Bill Clinton, Nell Minow, Robert Monks, John C. Bogle, Knut Kjaer, Lucien Bebchuk and others.

For information and to register see the TCL website.

Speech: How do you accomodate private power and public good?

Bob recently attended the London Colloquium on Corporate Governance that convened about 75 of the leading governmental, private sector business and investors in Britain to consider the problems caused by failures of corporate governance. He gave the key note address at the opening night dinner. Bob's speech was provocative -- in it he contended that government intervention is necessary and that reforms must go beyond minor tweaks to the system of governance and accountability. He also reiterated his common message that government regulation must be enforced. But then he went even further and left the audience with the idea that if "the involvement of informed owners is in the interest of society...then it follows that the corporation itself should finance effective shareholder activism." Read the speech.

Bob is traveling again today but sent me this press release from the Center for Political Accountability this morning.

--Washington, DC - The Center for Political Accountability warned today that the U.S. Supreme Court's decision on June 29, 2009 ordering a new hearing of Citizens United v. Federal Election Commission threatened a tidal wave of undisclosed, unaccounted for money in federal and state elections. The CPA is leading a nationwide effort to bring transparency and accountability to corporate political spending.

"If long-standing restrictions on corporate political expenditures are overturned, companies coul tap their treasuries and spend billions of dollars of new money on elections," warned Bruce F. Free, the Center's executive director. "Much of this money would be undisclosed and could pose serious risks to companies and their shareholders." Read the entire press release.

In recent days, Bob has expressed a great interest in the issue of corporate political spending and lobbying -- and he's spending a lot of time reading in this area. This press release hits squarely on that issue and is well worth reading.

Tomorrow’s Problems and Yesterday’s Solutions

Bob is traveling this week but he sent this post ...

I do not know sometimes whether I am particularly paranoid or whether others are stupid or, perhaps a bit of both. Either choice is unpleasant. And yet, most of the suggestions by “corporate governance reformers” are either so cleverly conceived by those who wish to preserve the status quo or so insensibly focused on yesterday’s problems that one is left in wonder.

#1 – Executive Pay

“Say on Pay” is offered as a solution, notwithstanding the unmistakable evidence from the UK that it simply has no positive effect. Consider the recent case of Royal Dutch Shell when the Compensation Committee overruled its own criteria to award bonuses and earned over 65% condemnation by shareholders, only to find out that the money has already been paid. And so forth.

#2 – Proxy Access for shareholder nomination of directors

I wish that more people had shared my experience of running as the shareholder nominated candidate for the Board of Sears Roebuck. The problems of trying to assemble a consortium of institutions – all with their own risk averse trustees, all with their own beneficiaries with distinct value systems – to agree on a single nominee are so apparent that one is appalled at the continuing vitality of this proposal. Also, who will pay the costs, who will chose the nominee. In the case of Sears, I nominated myself and paid the $500,000 cost. It will be virtually impossible to replicate this act of self indulgence.

#3 – Splitting board chairman and CEO

This is simply a commitment that a company actually believes in having a board of directors independent of the power of the CEO. It confers no particular rights on shareholders. As I trudge to Exxon Mobil Annual Meetings with this proposal, I whisper to myself – it’s better than nothing, but not much!!

#4 – Requirement for majority votes for a director to be elected.

This would have some relevance if every corporation had Roy Disney and Stanley Gold ready to spend $25 million simply to rid themselves of a personal and professional nuisance. Otherwise, who is going to put up the money to secure such vote withholdings?

The problem which needs to be addressed is the reality of the accountability of directors to shareholders. In every country of the OECD world except the 50 United States, there is provided an adequate and simple solution;

#5 – 10% of the shareholders may call a Special Meeting at which any or all of the directors may be removed with or without cause.

This provides a simple – shareholders only have to share dissatisfaction – and fair – majority vote is required – method for shareholders to maintain a creative tension with the board. If shareholders do not like board nominees, it is within their power to replace them. This gives creates a dialogue between shareholders and boards resulting in mutual agreeable board members.