Gretchen Morgenson's Strange Argument For Proxy Access

Posted by John Carney, Dec 04, 2007, 4:31pm

We spent so much time yesterday talking about Ben Stein that we never got around to Gret-Gret’s Sunday essay decrying the SEC’s recent proxy access decision. Which is a shame because it was pretty loopy too.

Morgenson begins with the contention is that the recent losses by publicly held financial companies are the result of director incompetence. “In recent months, owners of many financial stocks have lost billions because the directors who represent them were clueless about risky mortgage operations or toxic loans held by their companies,” she writes.

That’s at least plausible. There are lots of dope and time servers on corporate boards. It’s certainly not obvious, however. We’re not sure that any board of directors, regardless of its composition, would have or could have prevented any of our largest financial institutions from getting caught up in the follies of the credit boom. But let’s grant her this point for the sake of argument.

It’s the next part where she completely loses us. “With so few capable directors who hold themselves accountable to owners at public companies, is it any wonder that pension investors are turning to alternatives like private equity? Those managers act like owners,” she writes.

This is quite a strange point to make in a column arguing for greater shareholder democracy. Those private equity firms—even the publicly traded ones—even less open to investor control than most public companies. It’s almost like some hidden, subconscious and highly intelligent corner of Gret-Gret’s mind smuggled in this paragraph to undermine the rest of her argument.

S.E.C. Sends Investors to the Children’s Table [New York Times]

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Posted by Breaking the Ben Stein Embargo, Dec 04, 2007 5:17PM

http://www.bloomberg.com/apps/news?pid=20601087&sid=aX1RdOcyY5LM&refer=home

You got to be kidding....

Posted by , Dec 04, 2007 5:36PM

What a dope (Dodd)

Posted by Novice, Dec 04, 2007 7:54PM

Is the "lots of dope on corporate boards" a Cayneian slip?

Posted by ambdex, Dec 05, 2007 3:49AM

I don't find a contradiction. Gret's point is not openness or lack of it .. rather she is addressing the agency problem inherent in boards. She is making the point that PE firms act as managers more than boards do (more sense of ownership). Granted its a tautological argument, but it is not inconsistent like you said.

Posted by NotNasser, Dec 05, 2007 9:20AM

It was one thousand and forty-four years ago yesterday that a council called by an Emperor deposed a Pope.

Believe it or not, I think that germane to proxy access.

Yes, it was on December 4 of 963 that a council called and controlled by the Holy Roman Emperor, Otto, deposed Pope John XII.

John's offense? were they arguing about Arianism or the payment of taxes on Church land or ... what?

Actually, the dispute between John XII and Otto was quite nakedly one about power. John had asked for Otto's help in protecting him from a more small-time despot, Berenger II of Italy, (a Lombard). But John soon realized that he was riding a tiger, that the Emperor's power both above and below the Alps threatened to eclipse his own.

John began a search for allies who might overthrow Otto. Otto heard about this and, unsurprisingly, took offense. Hence his call for a council.

Emperors and Popes would continue to battle for supremacy in western Europe for a long time to come, until the rise of national monarchies and Protestantism created multiple supremacies and rendered their old rivalry moot.

So on this, the day of his deposition, give a smidgen, but only a smidgen, of sympathy to John XII and to tiger-riders everywhere. As a general rule, there are better ways to deal with the local trouble-maker than calling in the bigger bully from across the mountains.

Doesn't it seem that AIG and other corporate folk had to call in Chris Cox in order to try to protect themselves from the trouble-making Lombards of AFSCME?

Here's wishing this particular Emperor had been a little more like his predecessor.

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