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deesy58
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Re: Little Known Secrets


MacMcK1957 wrote:

For quite a while, boards have been appointed by the CEO, who usually also chairs the board.  That board then appoints the next CEO.  The shareholders very rarely revolt, or even assert any control at all, and usually not until it's too late.

 

Yes, the board is supposed to work for the shareholders, but they rarely remember that fact.


Hmm.  As a former CEO, and as the organizer of several corporations, I seem to recall that the Board of Directors must be elected by shareholders, and that it is the Board that appoints all officers, including the CEO and COO.  In fact, I believe that this process is a matter of the corporate laws in most, if not all, states.  Perhaps I missed some sort of change in the laws. 

 

Could you cite some specific examples of CEOs appointing members to the Board?  Who might hire the CEO if not the Board? 

 

 

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MacMcK1957
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Re: Little Known Secrets

In the overwhelming majority of modern companies, the shareholders vote up or down on a slate put forward by the board.  Cases where the shareholders put up independent board candidates are exceptionally rare.  In most major companies these days, the chair of the board is the CEO, which makes the CEO's accountability to the board problematic at best.

 

Yes, technically, the shareholders elect them.  Rarely is that vote meaningful.

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patgolfneb
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Re: Little Known Secrets

I think the ideal Deesy cites is a rarity for large public corporations. Smaller corporations tend to have boards drawn ftom large shareholders, bankers, other insiders. Laws exist to discourage boards that fail to fullfill their responsibilities, but the focus is on direct acts of an illegal nature, insider trading, theft etc. Neglect is rarely pursued. Bottom like the sports analogy is an apt one. Insiders with so so records but who other insiders are comfortable with are more likely to be rehabilitated, perhaps after a stint the govt or non profit sectors, and recycled than someone, outsider, women, visionary etc that makes insiders and pension and fund investors nervous, despite the very real need for some fresh thinking.
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deesy58
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Re: Little Known Secrets

I guess I'm still baffled by the assertions in this thread.  I regularly attended meetings in the Board Room of a Fortune 500 company, of which my corporation was an operating subsidiary.  My title was "President and CEO" of my subsidiary corporation.  The Chairman of my corporate Board of Directors (five members, including me) was the President and Chief Operating Officer of the parent corporation.  He was a member of the parent corporation's Board, but was not the CEO of that corporation.  He was not active in the management of my subsidiary corporation.

 

The Vice Chairman of my Board was a Group Vice President in the parent corporation, and the Secretary/Treasurer was the CFO of that corporation.  None of them was active in the day-to-day management of my subsidiary. 

 

We filed consolidated financial statements with the SEC, so I was required, as CEO, to sign all 10-K and 10-Q forms on a regular basis. 

 

When the Chairman and CEO of the parent company retired, the President and COO became the CEO of that corporation, but did not immediately become the new Chairman.  Often, the Chairman of a Board of Directors does not hold a CEO or COO title, and might even hold the title of "Chairman Emeritus." 

 

In my experience, the Board of Directors was always elected by shareholders with each outstanding share of common (voting) stock receiving one vote.  Preferred stock did not usually receive voting rights.  The current Board might select a slate of candidates for a new Board to be elected at or before the corporate Annual Meeting, but Board members are always elected by shareholders, and Board members then select corporate officers.  Sometimes, other shareholders reject the slate of candidates selected by the current Board, and a "proxy fight" ensues.  Typically, officers are members of the board, but not always (banks, for example).  Board members are also often officers of other corporations or non-profit organizations, and the Board is composed of "inside" Directors and "outside" Directors. 

 

I have never heard of officers selecting member of a Board of Directors, and I do not believe that it would be legal under the corporation laws of any state with which I am acquainted. 

 

Can you cite some specific examples of publicly-held US corporations in which the officers choose the Board of Directors, and not the other way around? 

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deesy58
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Re: Little Known Secrets


patgolfneb wrote:
I think the ideal Deesy cites is a rarity for large public corporations. Smaller corporations tend to have boards drawn ftom large shareholders, bankers, other insiders. Laws exist to discourage boards that fail to fullfill their responsibilities, but the focus is on direct acts of an illegal nature, insider trading, theft etc. Neglect is rarely pursued. Bottom like the sports analogy is an apt one. Insiders with so so records but who other insiders are comfortable with are more likely to be rehabilitated, perhaps after a stint the govt or non profit sectors, and recycled than someone, outsider, women, visionary etc that makes insiders and pension and fund investors nervous, despite the very real need for some fresh thinking.

I think it might be a bit more complex than you describe.  There are numerous other factors that can come into play, especially in public corporations with a "float" of less than 50%.  Nevertheless, it is only shareholders voting their shares who can elect members to the Board of Directors. 

 

When a Board fails to uphold its fiduciary responsibilities, it becomes subject to civil suits from shareholders. 

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patgolfneb
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Re: Little Known Secrets

Deesy, how are the board members at large corporations identified and nominated? How often is an slate of directors nominated and elected in it's entirety. Look up the board members of major corporations. The majority come from other corporations, banking and investment firms. Often say a large pension investor, say California teachers fund etc will place a member. One or two members may come from politics or major universities, someone with celebrity, in Nebraska Tom Osborne would fit the bill. He is asked frequently I am sure. Current board members, management, or a few large stockholders provide the candidates. It is the ultimate insiders club. I am amazed you think it is otherwise.
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MacMcK1957
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Re: Little Known Secrets

I have never heard of officers selecting member of a Board of Directors, and I do not believe that it would be legal under the corporation laws of any state with which I am acquainted. 

 

Truly?  The corporation you worked for had Directors independently chosen by the shareholders, rather than proposed by the existing management and board, and then ratified by the shareholder vote?

 

Yes, as I said before, technically the shareholders vote for the board.  Also, as I said before, in the overwhelming majority of companies they are effectively voting to confirm a slate that was handed to them.  Proxy fights can happen, but are exceedingly rare.

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deesy58
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Re: Little Known Secrets


patgolfneb wrote:
Deesy, how are the board members at large corporations identified and nominated? How often is an slate of directors nominated and elected in it's entirety. Look up the board members of major corporations. The majority come from other corporations, banking and investment firms. Often say a large pension investor, say California teachers fund etc will place a member. One or two members may come from politics or major universities, someone with celebrity, in Nebraska Tom Osborne would fit the bill. He is asked frequently I am sure. Current board members, management, or a few large stockholders provide the candidates. It is the ultimate insiders club. I am amazed you think it is otherwise.

" ... how are board members at large corporations identified and nominated?" 

 

Well, at all of those with which I am familiar, the current Board forms a nominating committee that selects a slate of prospective Board members and presents that slate to shareholders to be voted on at the Annual Meeting (or thereabouts). 

 

Prospective directors are often people who have demonstrated abilities in leadership, finance or management.  It should surprise nobody that "The majority come from other corporations, banking and investment firms" or that "One or two members may come from politics or major universities, someone with celebrity,"  Why not these people instead of you or me?  Become a successful business or non-profit leader, or a successful politician and you will be offered positions on many boards of directors -- more than you could probably server on.  If you are just another citizen, however, don't hold your breath. 

 

Major shareholders sometimes control a sufficient number of voting shares to ensure they will hold one seat on the Board.  Any shareholder or group of shareholders is free to reject the recommended slate of candidates put forth by the nominating committee and launch a proxy fight to elect their own director or directors. 

 

The process is a democracy, plain and simple.  It is not a conspiracy.  The people who own the corporation ultimately control the corporation. 

 

I am amazed you were not aware of this. 

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deesy58
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Re: Little Known Secrets


MacMcK1957 wrote:

I have never heard of officers selecting member of a Board of Directors, and I do not believe that it would be legal under the corporation laws of any state with which I am acquainted. 

 

Truly?  The corporation you worked for had Directors independently chosen by the shareholders, rather than proposed by the existing management and board, and then ratified by the shareholder vote?

 

Yes, as I said before, technically the shareholders vote for the board.  Also, as I said before, in the overwhelming majority of companies they are effectively voting to confirm a slate that was handed to them.  Proxy fights can happen, but are exceedingly rare.


Well, if you have an issue with this process, then you have an issue with democracy.  What is it that you find so sinister about the owners of a corporation being able to vote for the men and women they wish to lead and manage that corporation? 

 

You have still failed to supply the specific examples which I have requested twice.  Is this just another conspiracy theory?  Do you own stock?  Have you ever served on a corporate Board of Directors?  Have you served as an officer of any US corporation?  Are you familiar with the corporation laws of any state?  Have you ever formed a corporation?  What is it, specifically, on which you base your assertions? 

 

I think if you make these kinds of allegations you have an obligation to provide some evidence to support your theories. 

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MacMcK1957
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Re: Little Known Secrets

You have deliberately and repeatedly (as usual) chosen to distort and ignore the actual points I have made. Every time I waste my time trying to respond to you I end up regretting it. I will try to avoid the temptation to repeat the mistake in the future.
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deesy58
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Inspired Bibliophile
deesy58
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Re: Little Known Secrets


MacMcK1957 wrote:
You have deliberately and repeatedly (as usual) chosen to distort and ignore the actual points I have made. Every time I waste my time trying to respond to you I end up regretting it. I will try to avoid the temptation to repeat the mistake in the future.

If you can't attack the message, attack the messenger?   :smileytongue:

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patgolfneb
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Re: Little Known Secrets

Deesy, it would be nice if you responded to the point being made, which is an observation that elites know each other, choose others from their known circle. Recruiting people known to them, with similar views, people in their comfort zone, is a well established social and anthropological principle. Voting each other excessive compensation packages is a social norm, you scratch my back etc. No one stated a conspiracy existed. The point is that this elites tend to reinforce their belief in their own superiority and entitlement t huge rewards. At the same time criticizing others for entitlement behavior. Interestingly high level executives have been shown to include sociopathic individuals at much higher than the general population, depending on your source perhaps ten times as often.
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deesy58
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Re: Little Known Secrets


patgolfneb wrote:
Deesy, it would be nice if you responded to the point being made, which is an observation that elites know each other, choose others from their known circle. Recruiting people known to them, with similar views, people in their comfort zone, is a well established social and anthropological principle. Voting each other excessive compensation packages is a social norm, you scratch my back etc. No one stated a conspiracy existed. The point is that this elites tend to reinforce their belief in their own superiority and entitlement t huge rewards. At the same time criticizing others for entitlement behavior. Interestingly high level executives have been shown to include sociopathic individuals at much higher than the general population, depending on your source perhaps ten times as often.

I don't think I missed anything, Pat. I read these words:

 

"MacMcK1957 wrote:

For quite a while, boards have been appointed by the CEO, who usually also chairs the board.  That board then appoints the next CEO.  The shareholders very rarely revolt, or even assert any control at all, and usually not until it's too late."

 

That's pretty clear, and it's just wrong.  Look at some of the examples (among the many thousands) to be found with a simple Internet search for CEOs being fired by their Boards of Directors.

 

BTW, I did not directly contradict you.  I merely pointed out that the issue might be a bit more complex than described.

 

Corporate cultures reflect our nation's political system, which operates in much the same way.  Except for those directors chosen from the ranks of non-profit and educational leadership, the nominees are almost always known to the nominating committee, and are frequently officers of other large corporations.  Why would a responsible Nominating Committee ever gamble with the trust of shareholders by nominating an unknown quantity?

 

My question to you is this:  How would you do it differently?  How would you change corporation laws in the various states to prevent this type of cronyism?  And if the owners (shareholders) of the corporations in question are satisfied with the current system, who are we to tell them that it should be changed?  Do you believe that you (or we) can change human nature?

 

Now, the political system is a different matter.  Cronyism is as rampant in Washington DC and the various statehouses as in any American corporation.  But it doesn't just affect some shareholders, it affects all of us.  Before we worry about corporate Boardrooms, perhaps we should clean up the Congress.  After all, it is not necessary to purchase corporate stock in order to vote in our country's elections. 

 

Just a thought.  :smileyfrustrated:

 

Oh, I am also curious to know why US corporate shareholders might prefer to elect sociopaths to their leadership and management.  I'm not disputing your assertion, but it does lead to the question: "Why?". 

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patgolfneb
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Re: Little Known Secrets

There journal articles I  read on this attributed the tendency of sociopaths to be master manipulators, able to lie effectively, unconcerned about negative impacts on others of their actions and since they are unconcerned about others, their opinions or needs they are unstressed by anything except as it impacts them.  The downside is that they often evaluate risk poorly and of course what is good for them may be bad for investors and employees.  Less talented people with these traits are often among the most dangerous criminals. 

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deesy58
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Re: Little Known Secrets


patgolfneb wrote:

There journal articles I  read on this attributed the tendency of sociopaths to be master manipulators, able to lie effectively, unconcerned about negative impacts on others of their actions and since they are unconcerned about others, their opinions or needs they are unstressed by anything except as it impacts them.  The downside is that they often evaluate risk poorly and of course what is good for them may be bad for investors and employees.  Less talented people with these traits are often among the most dangerous criminals. 


They sound a lot like politicians to me.  But this still doesn't explain why American voters, and corporate shareholders, choose sociopaths to represent them. 

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patgolfneb
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Re: Little Known Secrets

I don't think they are easily spotted. A significant number of sociopaths are con men or super salesmen.  I indicated they are more common,  that still means most businesses leaders at least 90 percent at are not. Even psychiatrist have trouble spotting them without testing. They can be very charming and their behavior doesn't always catch up to them. That a higher percentage of this personality defect appears among executives is not really an explanation for business and government failures. It's more of a warning that we need to be more aware of what traits we seek and reward in executives. 

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deesy58
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Re: Little Known Secrets


patgolfneb wrote:

 

. . .

 

It's more of a warning that we need to be more aware of what traits we seek and reward in executives. 


Agree.  But we also need to be more aware of what traits we seek and reward in our political leaders.  To me, that is a much more important issue. 

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5ivedom
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Re: Little Known Secrets

It's almost impossible.

 

What you're talking about is almost impossible.

 

It's like all the people who think we can have world peace. Who ignore all the wars and civil wars and crime and believe that a perfectly harmonious system can exist.

 

Human beings adapt to their surroundings. In any system where there are lots of good honest people who also happen to have naive beliefs that everyone else is like them, there will always be people who evolve to exploit the system.

 

There are some very interesting books and movies about experiments (such as mock prisons) where the people in positions of power got corrupted by it and started doing things that were utterly incongruent with their behavior.

 

*****

 

So the whole 'how do we identify these traits' and 'how do we create a system where everyone is good'. It's almost impossible. It's like 'everyone living in world peace and no poverty and unicorns'.

 

Because

 

1) The Traits are a result of the Environment. It's the CEO position that is leading to the behavior - that's the #1 factor.

 

2) The more 'good and honest people filled' a system becomes the higher the incentive and reward of indulging in bad behavior.

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keriflur
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Re: Little Known Secrets

You have this backwards.  Unicorns lead to work peace and no poverty, not the other way around.