A Corporate Governance Wish List for 2013
Dec 26th 2012 1:31PM
Updated Dec 26th 2012 1:34PM
Many of us make New Year's resolutions, whether we remain resolved and keep them or not. However, they're often changes we really do need to make in order to make healthy progress in our lives. That's what makes them so hard so much of the time. Sometimes it's simply easier to stick with habits and to what you know.
In the spirit of the coming new year and a fresh start on the calendar, let's hope more corporate managements and boards make their resolutions thoughtfully. For example, resolving to run their businesses in a more stakeholder-friendly manner, without having to rely on heavy shareholder pressure, much less even heavier government mandates. Here are a few areas in the corporate governance realm where I'd like to see progress in 2013.
Pay for performance
Now that say-on-pay rules have been in effect for several years, we've seen a few high-profile shareholder defeats of some companies' compensation policies. In 2012, Citigroup's shareholders really made a say-on-pay ruckus by voting down former CEO Vikram Pandit's pay package.
Some companies' boards have been taking more robust action ahead of possible embarrassing say-on-pay defeats. For example, in 2011, General Electric altered its policy on stock options grants for executives, a move allegedly connected to concerns about how shareholders would vote on its compensation policy.
More companies are reaching out to shareholders to communicate about their pay plans, too. In 2012, ExxonMobil held a conference call for investors to defend its executive compensation decisions after proxy advisors ISS and Glass Lewis both recommended shareholders vote against executive compensation.
We're still in the early stages of a landscape where corporate governance has far greater significance to managements, boards, and the majority of shareholders, but change is happening.
In 2013, let's hope more companies do a better job of aligning executive pay with operational returns and actual performance metrics, and rein in ridiculous perquisites and money pits like golden parachutes.
We've seen high-profile female executives do well recently, including Yahoo!'s Marissa Mayer and former FDIC Chairwoman Sheila Bair's appointment as the second female director on Host Hotels & Resorts' board of directors. Regardless, overall female progress into corporate boardrooms was just plain sad in 2012.
That's despite the fact that we've got more and more data proving that increased female leadership and board participation helps companies perform better than their peers.
Hopefully, in 2013, more corporate managements and boards will do a better job of reflecting the reality of different types of people with different talents to bring to the table instead of continuing to embrace the suboptimal groupthink of homogeneous boards and executive teams.
In 2012, greater disclosure enjoyed some victories, such as the conflict minerals disclosure mandate issued by the Securities and Exchange Commission.
There are other disclosures that are on my wish list for 2013. For example, I'd like to see more companies disclose the risks climate change poses to their businesses in their filings.
Also, another rule in the Dodd-Frank Act that hasn't been mandated by the SEC yet is one that would require that companies reveal their CEO-to-worker pay ratios. I'd love to see some progress there in 2013. I'm sure it's pretty eye-opening information on a granular, company-by-company level, given AFL-CIO statistics claiming that overall, CEO pay outranked that of average workers' pay 380-to-1 by 2011.
Apparently, this particular disclosure isn't a high priority for the SEC to tackle, but hopefully the agency will get around to it in 2013. Information is power, and I'm a great believer that the more information investors can access, the better.
If it comes to light that companies treat their executives exponentially better than workers when it comes to paychecks, investors may want to think twice about whether management and boards care about anybody's pocketbooks except their own, and that includes shareholders, too. No wonder corporate managements and boards would rather this information stay well off the radar.
Here's to potential progress in 2013
Given events of the past several years, shareholder rights and good corporate governance policies are making some progress, even if it's not as rapid as many of us might like. A new year always represents new hope, and new chances. Hopefully, 2013 will be the year forward movements make great leaps and bounds.
What types of corporate changes are on your wish list for 2013? Add your wishes in the comments box below, and have a happy New Year's!
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Check back at Fool.com on Wednesday, Jan. 2, 2013, for Alyce Lomax's next column on environmental, social, and governance issues. Happy New Year's!
The article A Corporate Governance Wish List for 2013 originally appeared on Fool.com.Alyce Lomax has no positions in the stocks mentioned above. The Motley Fool owns shares of Citigroup Inc , General Electric Company, and ExxonMobil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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