Posts Tagged ‘Robert Monks’

Citizens DisUnited

Posted by Robert A.G. Monks, Principal, Lens Governance Advisors, on Thursday April 11, 2013 at 9:27 am
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Editor’s Note: Robert Monks is the founder of Lens Governance Advisors, a law firm that advises on corporate governance in the settlement of shareholder litigation.

My newest book, Citizens DisUnited: Passive Investors, Drone CEOs and the Corporate Capture of the American Dream, has been in the works for the last year, and is really the culmination of thirty years of work in corporate governance, activism and government. It was prompted by frustrations and failures, in many ways. But it was through those frustrations that I gained clarity on the problems facing our nation. Not just problems in the boardroom but the larger issues of power that tie corporations to the power structure in Washington and how it affects our society. The specific thoughts that led to this book began almost two years ago with a speech I gave at ICGN in Paris and are further illuminated in some new research done for the book by GMIRatings’ Ric Marshall.

In the course of planning the book, I had begun to think of some corporations as “drones” – in the sense that they are untethered from reality and responsibility. We define them as corporations, “in which no single shareholder retains a principal position, defined by the SEC as 10 percent or more.” The owners aren’t at the helm — but manager-kings are. And there are no limits to prevent these CEOs from enriching themselves at the shareholder expense or from shifting the burden of externalities onto society.

Ric, in the meantime, had begun to find empirical data that showed that,

…continue reading: Citizens DisUnited

The Corporate Capture of the United States

Posted by Robert A.G. Monks, Principal, Lens Governance Advisors, on Thursday January 5, 2012 at 10:21 am
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Editor’s Note: Robert Monks is the founder of Lens Governance Advisors, a law firm that advises on corporate governance in the settlement of shareholder litigation.

American corporations today are like the great European monarchies of yore: They have the power to control the rules under which they function and to direct the allocation of public resources. This is not a prediction of what’s to come; this is a simple statement of the present state of affairs. Corporations have effectively captured the United States: its judiciary, its political system, and its national wealth, without assuming any of the responsibilities of dominion. Evidence is everywhere.

The “smoking gun” is CEO pay. Compensation is an expression of concentrated power — of enterprise power concentrated in the chief executive officer and of national power concentrated in corporations. Median US CEO pay for 2010 was up 35 percent in the midst of a lingering recession, while CEO pay over the last decade has doubled as a percentage of pre-tax corporate income. Yet there has been no justification for current levels of CEO pay based on economic value added.

When Lee Raymond retired as CEO of ExxonMobil at the end of 2005, after six years at the helm of the merged firm and another six as head of Exxon before that, he walked away with more than a quarter billion dollars in realizable equity. In his final year alone, Raymond received in excess of $70 million in total compensation — an hourly wage of about $34,500 calculated at 40 hours a week for 50 weeks. No metric can justify such a raid on the corporate treasury and shareholder equity, but Raymond is only a particularly egregious and early example of what has since become common practice. Little wonder that the driving concern of banks receiving TARP “bailout” money was to pay it back so as to escape any restriction on executive pay.

…continue reading: The Corporate Capture of the United States

Corporate Governance Redux in the Light of Citizens United

Posted by Robert A.G. Monks, Principal, Lens Governance Advisors, on Friday May 7, 2010 at 9:24 am
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Editor’s Note: Robert Monks is the founder of Lens Governance Advisors, a law firm that advises on corporate governance in the settlement of shareholder litigation. This post was the basis for a lecture that Mr. Monks recently delivered at Harvard Law School.

“Presumably in a free market economy the players require some restraints in their pursuit of society’s resources and creation of externalities, and these restraints are to be imposed by government acting in response to the preferences of individual human beings who have a much broader range of preferences than simply wealth maximization. To allow the wealth maximizing business corporation a powerful voice in determining how social resources are to be allocated by government is to give that corporation significant power in determining how the rules of the only game it is playing should be changed, rather than confining it to play under the rules preferred by human individuals.” [1]

The Corporation

A corporation is a creature of the state; it is not a natural creature created by the Almighty and entitled to the rights of flesh and blood human beings. The language of judicial supporters of corporate personhood mingles various kinds of association. In his lengthy Austin dissent, Justice Scalia referred to “that type of voluntary association known as a corporation”, “that form of association known as a for-profit corporation,” and “those private associations known as corporations.” In his Citizens United concurring opinion, Scalia refers to “associational speech”, “the right to speak in association with other individual persons”, “the speech of many individual Americans who have association in a common cause, giving the leadership of the party [Republican or Democrat] to right to speak on their behalf. The association of individuals in a business corporation is no different – or at least it cannot be denied the right to speak on the simplistic ground that it is not “an individual American.”

…continue reading: Corporate Governance Redux in the Light of Citizens United

Corporate Governance: Past, Present, & Future

Posted by Robert A.G. Monks, Principal, Lens Governance Advisors, on Thursday March 4, 2010 at 9:09 am
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Editor’s Note: Robert Monks is the founder of Lens Governance Advisors, a law firm that advises on corporate governance in the settlement of shareholder litigation.

The Vision

The modern business corporation emerged as the first institutional claimant of significant unregulated power since the nation state established its title in the sixteenth and seventeenth centuries.
—Abe Chayes [1]

Abe Chayes, a former Kennedy administration official and long-time Harvard Law professor, wrote those words at the outset of what might be thought of as America’s own “Thirty Glorious Years” — that three-decade span from the late seventies through 2008 when it seemed possible that private enterprise could operate on a global stage, free from the constraints of governmental regulation and oversight. The vision was simple and stirring, and in many ways irresistible: Corporate efficiency could co-exist with democracy.

Writing in the Stanford Law Review, another professor, David Engel, [2] precisely articulated the standards to which corporations would need to subscribe in order to legitimate this unregulated power within a democratic society:

…continue reading: Corporate Governance: Past, Present, & Future

Bob Monks Delivers Lecture on Shareholder Activism

Posted by Jim Naughton, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday November 18, 2009 at 9:20 am
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Robert Monks, a legendary shareholder activist and founder of ISS (which was later acquired by RiskMetrics) and the Corporate Library, recently gave a talk as part of the Shareholder Activism course here at Harvard Law School about the past, the present, and the future of shareholder activism.

Mr. Monks began his talk by emphasizing the importance of shareholders. He noted that in the absence of having an informed, motivated and powerful counter force to management, the corporation will always have the problem of autocrat who is answerable to no-one. The capital markets generate tremendous wealth. The key issue is who is entitled to this wealth.

Mr. Monks discussed his past experience with Sears Roebuck, where he submitted himself as a nominee for director, and Exxon Mobil, where he filed proposals to separate the chairman and CEO roles. Throughout this discussion, he noted that the current system is in need of serious reform, in part because of the asymmetry of resources available to the company compared with the activist shareholder. Mr. Monks also discussed his proposal for a mandatory rule that gives 5% of the shareholders the right to call a special meeting at which a majority of the shareholders present can remove any or all of directors with or without cause.

The student questions covered a broad range of topics, from whether increased litigation would lead to more activism or more reliance on ISS voting guidelines, to the desirability of government versus private sector employment.

Background materials about Mr. Monks and his talk are available here. A video of the talk is available here (Quicktime .mov format).

Is the Supreme Court Determined to Expand Corporate Power?

Posted by Robert A.G. Monks, Principal, Lens Governance Advisors, on Tuesday August 25, 2009 at 10:05 am
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(Editor’s Note: This essay was written by Robert Monks and Harvard Law School Visiting Professor Peter Murray.)

One of the phrases bandied about during the confirmation hearings for Judge Sonia Sotomayor’s nomination to the United States Supreme Court is “judicial activism” – a tendency of judges to use the cases they decide to implement their own notions of public policy. Of course, all recent Supreme Court nominees have steadfastly denied any shred of judicial activism and have uniformly maintained that the proper role of a judge, even a Supreme Court Justice, is to apply existing law, whether Constitutional, statutory or precedent, to the facts of the case before him or her. No one has been more outspoken against the evils of judicial activism than Chief Justice Roberts.

Now it appears that the Chief may be undertaking a bit of judicial activism of his own. The case is Citizens United v. FEC. The conservative group that sponsored Hillary: The Movie just before the Democratic primary is seeking to avoid or roll back the 2002 McCain-Feingold campaign finance law that prohibits the use of corporate funds to influence elections. Chief Justice Roberts and his conservative Supreme Court majority are getting ready to use Citizens United as the vehicle to overrule established precedent (and overturn carefully drafted legislation) and grant business corporations a constitutional right to use their funds to participate in political debate, not only on public issues, but even in the election of candidates to office. Such a move would be judicial activism on a grand scale!

1. Freedom of Speech for Corporations

Business corporations and their owners have participated in political life in many ways for many years. Corporate lobbying, campaign contributions by business leaders, “soft money campaign support” by businesses, the “revolving door” of businessmen and public servants: these are only a few of the many ways that corporations interact with politicians and political institutions in an effort to influence public action to their advantage. The American public has learned to live with a strong connection between business and politics.

…continue reading: Is the Supreme Court Determined to Expand Corporate Power?

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My Last ExxonMobil Annual Meeting

Posted by Robert A.G. Monks, Principal, Lens Governance Advisors, on Friday June 19, 2009 at 9:20 am
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Editor’s Note: This post is by Robert A.G. Monks of Lens Governance Advisors.

Walking to the Myerson Symphony Center past the various galleries, statues and plantings in the Arts District of downtown Dallas during the last week of May is a contemplative experience for me. As a Boston Irishman, I cannot but remember the fate of Jack Kennedy in this seemingly gentle, indeed beautiful, city. Living now year round on the coast of Maine where the leaves around my house are yet to flower, immersion in the foliage and scent of high spring are intoxicating. I am on my annual pilgrimage to the Annual Meeting of shareholders of the most profitable corporation in the history of the world – ExxonMobil. In times past, there was a subdued sense of violence. There was still the careful organization of crowd control barriers, uniformed and other police, the combination of horses and motorcycles, the almost robotic protest by the seemingly inevitable protesters, the politely insistent ticket issuers, takers and the possession examiners – resulting this year in the loss not only of my Blackberry but also of my small brief case except for the few pages I was allowed to retain when I protested that without props memory failure at my advanced age would not allow my presentation of the five motions – I waved the green tickets that proved my entitlement to have the floor for five times three minutes – without embarrassment to all.

Inside, all was a well organized exhibit of Exxon’s presence, together with an extremely lavish offering of coffees and various pastries. My long time friend Jamie Houghton was there for his last board meeting. He is very patient with me – our fathers were Harvard College Classmates and members of the Chapter of the National Cathedral – and we enjoy the exchange of views of civilized persons with diametrically opposed world views. I saw Rex Tillerson and tried to get close, with no success, but – to be honest – there was no visible precaution against our meeting.

Annual Meetings are one of the least commented upon contradictions in contemporary capitalism. Statutes advertise them as the time and place for management and owners to meet; for corporate executives to account for their stewardship of the investors resources; and for the shareholders to have the opportunity to hold these managers to account. The reality, alas, is otherwise – the preponderance of votes on all the business items have already been received by proxy and there is absolutely no chance that anything that occurs in the next several hours will affect the pre ordained results. That said, there is a certain charm to the choreographed process analogous to watching a theatrical performance embedded in our cultural memory – like Shakespeare or Corneille. The numerical result is not the object of the event. What needs to happen is that shareholders and managers have together to conjure up a myth of importance – something real is happening (Santa Claus will come tonight!). In the occasional interplay between management and questioners, a sense of the soul of the corporation is expressed. In the process by which the meeting is conducted a sense of the standards of decency are proclaimed. In the brief passages – presentations are limited to three minutes, and Exxon management for the second year in a row – notwithstanding my ignored letter of protest – will not permit human responsive discussion.

I asked Rex Tillerson, Chairman and CEO, whether I could modify the rules governing the presentation of shareholder proposals in order more clearly to explain a new development of general interest. I was the designated presenter for the first five proposals, and, therefore, entitled to fifteen minutes. Tillerson looked bewildered, conferred with corporate secretary Rosenbaum, and said: “We’ll see where you are after the first three minutes”. It was only later that I came to understand that Tillerson’s entire concern was to limit the “tax” of time that law imposed on Exxon’s top management requiring exposure to their owners and that his hesitation has nothing to do with the content of what I was saying. There was nothing I could say that would interest him in the least. It is sad that these fine engineers cannot conduct themselves so as to save participants in this meaningless meeting of any dignity. Exxon considers shareholder relations as a non cost effective demand on executive time. When a shareholder pointed out that as a New Jersey corporation, Exxon might consider holding meetings in that state, Tillerson pointed out “I like Texas” and, so it is – the CEO’s world.

Tillerson’s Exxon executives examined the New Jersey statute and instructed staff to do everything legally possible to limit the diversion of valuable CEO and director time. New Jersey requires an Annual Meeting, at which directors are elected. The SEC requires that Exxon include on its Annual Meeting proxy resolutions, deemed appropriate by the Commission. The company relentlessly challenges all resolutions before the Commission, requiring not insignificant legal expense for those wishing to advance their proposals. They induce law firms with fine names to opine to the SEC that even proposals like mine – plain vanilla in the world of corporate governance – are in violation of law and regulation. The SEC of years past will accede to Exxon’s experts unless I adduce comparable legal weight- and so, I do at a cost not far off $100,000. There is implicit in the SEC rules that proponents be allowed to present their resolutions to the meeting. Over the last several years, Exxon has massaged the choreography of the meeting so that all proposals are presented without any questions or interruptions beyond Tillerson’s mantra that “Management opposes this resolution, etc.” following each presentation. There then follows a random question period during which no exchange of views is possible. Tillerson doesn’t deign to answer questions, nor does he permit any of the board members to answer questions directed at them. A certain punctilio is always observed – all the company directors are present and non-participating, the company’s “performance puff piece” is aired for an hour, the Chairman and Secretary smirk and chat sometimes allowing speakers to talk through the red light signals.

Several of the proposals concerned the long time disagreement between Exxon and important shareholder constituencies who are concerned with the company’s policies towards climate change and alternate energy. This interest in climate culminated in the impassioned presentation of Father Mike who reminded Tillerson of the company’s commitment to the conclusion that man, and Exxon, in particular, were contributants to the problems of global warming. At this point, almost by magic, individuals were recognized who trashed all sentiment having to do with global warming or criticism of EM management. Father Mike rose again to ask Tillerson not simply to acquiesce in these public expressions of opinion that the company, on the record, opposed. He appealed to moral imperatives, to the obligations of leadership not to enable dissemination of false information. Tillerson was unmoved.

Essentially, Exxon’s view is that the shareholder meeting is an utter waste of time which they are legally compelled to endure. So, smirking and with time watch, they absolutely do not gave a tinker’s dam what anybody says, as it is all an imposition. I could feel this at the beginning when I actually tried to say something of importance to Exxon about the current state of governance – Tillerson could care less about anything any of us have to say as long as the time limits were observed. Sometimes my naïve optimism appalls me. For many years, I have felt it important to appear at these meetings as a “witness” to the atrocities of governance. I have now come to feel that one of the reasons I feel sick after these meetings is that I really am being an “enabler”. Appearing at this 2009 version of a show trial tends to legitimate it. Actually, the perfect epitaph for this experience is the ritual by which the Corporate Secretary casts votes for resolutions when no proponent is present – it is in that mode that I will be present in future years. The engineers will have saved three minutes!

The Return of the Shareholder

Posted by Robert A.G. Monks, Principal, Lens Governance Advisors, on Monday February 2, 2009 at 2:28 pm
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Editor’s Note: This post is by Robert A.G. Monks of Lens Governance Advisors.

Less than two decades after Francis Fukuyama famously enshrined market-based liberal democracy as an optimal system at “the end of history,” [1] Barack Obama used his inaugural address to warn the nation that, “without a watchful eye, the market can spin out of control.” The change in tenor from capitalist triumphalism to our current trepidation is indeed remarkable.

In these somber days, with corporate failures still grabbing headlines, the new President has inherited not only a severely weakened economy, but also executive leadership of a government that has already committed hundreds of billions of dollars recapitalizing the financial sector. With so much taxpayer money on the line, additional bailout requests piling up across the corporate landscape, and public anger still cresting, little wonder that the debate is now broadening to what kind of owner government should be. Will the large federal stake in banking, auto, and perhaps other industries prove blessing or burden? Onus or opportunity?

In fact, President Obama has signaled that he doesn’t have much taste for his government’s actively managing corporations. Immediately before his inaugural warning about the failures of unchecked capitalism, the President sounded almost Fukuyama-esque himself in declaring that there remains no question about the market’s unmatched “power to generate wealth and expand freedom.”

How then is the new administration to find a productive — but not meddlesome — federal role that neither relinquishes authority nor shirks its new responsibility as a major stakeholder? Finding such a position relies, I contend, on understanding the crucial role of corporate ownership in America’s economic system: how it should ideally function, how it has actually existed, and what can be done to encourage its more perfect realization.

My article is available here.


[1] Francis Fukuyama, Summer 1989, The National Interest – “The struggle between two opposing systems is no longer a determining tendency of the present-day era. At the modern stage, the ability to build up material wealth at an accelerated rate on the basis of front-ranking science and high-level techniques and technology, and to distribute it fairly, and through joint efforts to restore and protect the resources necessary for mankind’s survival acquires decisive importance.”
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My Resolution at ExxonMobil

Posted by Robert A.G. Monks, Principal, Lens Governance Advisors, on Friday May 30, 2008 at 10:38 am
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Editor’s Note: This post is from Robert A.G. Monks of Lens Governance Advisors.

At EXXON’S Shareholders Meeting on Wednesday, Resolution #5 received 39.5% of the vote, marginally shy of last year’s 40%. I was relieved as we early learned that the company was seriously soliciting investors to vote against our resolution. The realities of the proxy process are that an issuer has vast advantage. There are many large holders who want to provide 401(k) or other services or who have analysts who want continued favorable access. It is difficult under existing conditions for such holders to consider seriously their fiduciary obligations. Under those conditions, it is gratifying that we can – in a year in which EXXON’s recorded financial performance may be the best ever recorded – hold steady at 40%. If this is a base, we can work on expanding it.

A letter in support of the proposal by myself and members of the Rockefeller family, filed with the SEC on May 13, 2008, is availabe here. A CNBC video featuring my discussing the proposal is available here. The text of the proposal was as follows:

“RESOLVED, that the shareholders urge the Board of Directors to take the necessary steps to amend the by-laws to require that, whenever possible and subject to any presently existing contractual obligations of the Company, an independent director shall serve as Chairman of the Board of Directors, and that the Chairman of the Board of Directors shall not concurrently serve as the Chief Executive Officer.”

A summary of the 2008 proxy proposal votes is available here.

CORPOCRACY

Posted by Robert A.G. Monks, Principal, Lens Governance Advisors, on Wednesday May 21, 2008 at 1:47 pm
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Editor’s Note: This post is from Robert A.G. Monks of Lens Governance Advisors.

I have enjoyed many reviews of CORPOCRACY but none pleases me as much as the following from a teacher in Maine:

“Monks, internationally known governance guru, of the stature of Peter Drucker, author of Corpocracy is right now being quoted on NPR/MPBN (Wednesday last) on Exxon’s promotion of false science.

Please show me that you are aware of him. (I don’t know him well, but I just sent him a copy of this and you can reach him at that email.) I suggest you use it.

NOTE his sub title:

Corpocracy: How CEOs and the Business Roundtable Hijacked the World’s Greatest Wealth Machine — And How to Get It Back by Robert A. G. Monks

His book includes a sensational expose of Lewis Powell, Justice of the Supreme Court, whom he labels the “consiglieri” of the corpocracy and its “godfather”, as author of the “Powell Memo.” And he knew Powell as a lawyer whom he hired in one corporate business matter because he knew he was the best!

When are you going to get him interviewed for three hours as he deserves? HE IS SPEAKING DIRCTLY TO THE CURRENT FINANCIALIZED ECONOMIC DISASTER!
John C Bogle and he agree. As you will see, he, like Bogle, knows his business. MONKS is even more of a heavyweight and has better more far seeing recommendations.
Worth your attention. VERY MUCH SO!

Maybe Bogle would interview him for you. Or Lawrence Mitchell of GWU right down there in DC, my old haunts in your neighborhood, when I was a speechwriter for the head of SBA, Howard J Samuels.

I am teaching MONKS in my new course at Senior College in Rockland on The Corporation and the New Capitalisms. The registrants love it! “

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