By Maxine Shapiro, KERA 90.1 business commentator
Dallas, TX – The highest objective of any Corporate Board of Directors is to genuinely represent the interest of the shareholder. But a new research study says many boards continue to fall short by cowering to compensation demands of CEO's. I'm Maxine Shapiro with KERA Marketplace Midday.
The Corporate Library, an independent research firm supplying analysis and data on corporate governance, released a new study ranking some the biggest corporate boardrooms. The report looked at how effective the directors were at overseeing their respective companies. Those that flunked - literally they received an F - mostly did so because of excessive executive compensation. And jeers to Citigroup for being the worst on The Board Effectiveness Rating. The financial service firm is followed by even more familiar names: Allstate, Honeywell, JP Morgan Chase (on everyone's Bad Boy list), SBC Communications and Walt Disney.
Let me jog your memory why Citigroup deserved to top the ten-worst list: the study points to one of the more bizarre scandals of last year. In exchange for admission to a prestigious New York preschool, CEO Sanford Weill agreed to give a favorable analyst report on AT&T. Citi, along with everyone else involved, had to pay a huge fine. And Weill can no longer speak to analysts without being accompanied by a lawyer. But who do you think paid the fine? Not Weill, even though it's quite clear he should be held personally accountable. Quoting the Corporate Library, "The fine was almost entirely paid for by Citi's current shareholders (and the shareholders of Citi's insurers)." But what probably put them ahead of the class; the board did nothing to hurt Weill's pay.
On the other end of the table, the AMR board of directors received a special "best under pressure" citation for responding "promptly and courageously" when Don Carty lost his credibility as CEO.
So when will other boards realize their true responsibility is to the shareholder? For KERA Marketplace Midday, I'm Maxine Shapiro.
Marketplace Midday Reports air on KERA 90.1 Monday - Friday at 1:04 p.m.
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