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Archive for April, 2016

Is Bad Governance Chronic?

Once again Larcker and Tayan (Stanford Graduate School of Business and Stanford Closer Look Series, Corporate Governance Research Initiative (CGRI), April 14, 2016) offer us their insightful views on Corporate Governance, and we will briefly draft their contribution in this post.

In their brief article “Governance Aches and Pains: is bad governance chronic?”(1) they present us their view on Bad Governance as a common species, and particularly their perception that Bad Governance is often discovered only once bad decisions (damaging the interest of the corporation and its shareholders) have been adopted. They argue that governance quality is not easy to assess for shareholders and advisors.

In brief they advocate for a bigger awareness by shareholders of the relevance of corporate governance and the need for better discerning tools by them in order to use corporate governance more as an indicator for future bad performance than as a proof that there was a something that had to be tackled before the damage happened.

Larcker and Tayan describe some cases that help them expose their views: Read more…

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What is behind BP`s 2015 remuneration report and policy and investors` revolt on it?

 

News regarding an expected revolt at the Pay vote session in the next BP`s AGM to be held on April 14th 2016 appeared in press recently, (1). I dived into the remuneration report proposed to its shareholders and into the Remuneration Policy approved last year by 96% of them, in order to assess whether the revolt would be reasonable. (2)

The main argument by revolting shareholders concerns annual losses having peaked in 2015, and the inconsistency shown by BP when it increased its Ceo pay strongly. It is true that results in 2015 (3) have been deceiving, $ 6482 m in losses and revenue falling by 37%.

In its annual report (page 22) the company tries to explain the relationships among strategy, pay and performance. They argue that executives noticed the “lower for longer” forecast for oil prices, and reacted in every tool under their control to reduce costs and inefficiencies, while delivering priority projects and enhancing safety and operational performance. BP then drafts a view of their pay proposals: long-term and performance-based, focused on what executives can control, biased towards equity and long enough holding periods. Read more…

Should Corporate Governance include bondholders?

April 1, 2016 1 comment

In a recent post Prisker and Wang analyzed the benefits that deferred compensation or inside debt as a part of total Ceo pay would entail in favor of adequate risk-taking and value firm. (1)

In this post though, we will more broadly tackle the debt topic in connection with Corporate Governance, (CG). Are equity holders the only ones to be considered when CG is structured? This is what Steven L. Schwarcz studies in his recently published article, “Rethinking Corporate Governance for a Bondholder Financed, Systemically Risky World”. (2) Read more…