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May 21, 2003
I came across this courtesy of the Mayne boy's email service. His shop front is here. The story comes from here It refers to nearly 51% of shareholders in Britain's third largest company, drug manufacturer GlaxoSmithKline, voted to reject a proposed 22 million pound golden parachute for chief executive Jean-Pierre Garnier if he loses his job.
Mayne says:
"...the British government recently made it compulsory for companies to put their pay policies to a vote each year and investors are viewing it as a warning to other big companies that excessive boardroom pay deals would no longer be tolerated....Now all we need is for the Howard Government to play catch-up on corporate governance laws and for institutional Australia to wake from their slumber and we might start voting down some of our own excessive executive pay schemes."
Do you think that Howard Government will be so courageous? They could do so in the name of mutual obligation. Or does mutual obligation only apply to welfare recipients.
Bad corporate governance is more than the scandal of corporate rogues enriching themselves at everybody's expense through mechanisms like excessive corporate payouts. It also includes things like losing billions in shareholders funds, cutting corners to improve the bottom line with shoddy services and goods and bad occupational and health practices, deceptive conduct, non-disclosure and incompetent audit practices.
When you start listing them it begins to look like standard corporate behavior. No doubt we will hear voices saying that the political pressure for regulators to have stronger laws to improve corporate governance will constrain business strategy, strong and effective management and wealth creation.
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Bingo!!! That is one postulation I definately wouldn't lay money on. I think the Yanks call it a 'sucker bet'