A large portion of the ministry's income is derived from membership gifts. I have not had any medical issues as a result of being on this plan and I have never felt better. The report, which relied in part on private telephone records, fingered George Keyworth , a longtime director and former science adviser to President Reagan, as the source of many of the leaks about board deliberations. We speak from personal experience. Quads, pecs, and lats are all at risk. Perhaps, BODs, if they feared any sting of accountability, would adopt the mantra of "trust, but verify" when dealing with the hired help. Her False Claims Refuted.
The church has two professional organizations for Adventist theologians who are affiliated with the denomination. During the s the Adventist Theological Society was formed to provide a forum for more conservative theologians to meet and is held in conjunction with the Evangelical Theological Society. Part of Friday might be spent in preparation for the Sabbath; for example, preparing meals and tidying homes. Adventists may gather for Friday evening worship to welcome in the Sabbath, a practice often known as Vespers.
Adventists abstain from secular work on Saturday. They will also usually refrain from purely secular forms of recreation, such as competitive sport and watching non-religious programs on television. However, nature walks, family-oriented activities, charitable work and other activities that are compassionate in nature are encouraged.
Saturday afternoon activities vary widely depending on the cultural, ethnic and social background. In some churches, members and visitors will participate in a fellowship or " potluck " lunch and AYS Adventist Youth Service. The major weekly worship service occurs on Saturday, typically commencing with Sabbath School which is a structured time of small-group study at church.
Adventists make use of an officially produced "Sabbath School Lesson", which deals with a particular biblical text or doctrine every quarter. After a brief break, the community joins together again for a church service that follows a typical evangelical format, with a sermon as a central feature. Corporate singing, Scripture readings, prayers and an offering, including tithing or money collection , are other standard features.
The instruments and forms of worship music vary greatly throughout the worldwide church. Worship is known to be generally restrained. Adventist churches usually practice communion four times a year. It commences with a foot washing ceremony, known as the "Ordinance of Humility", based on the Gospel account of John The Ordinance of Humility is meant to symbolize Christ's washing of his disciples' feet at the Last Supper and to remind participants of the need to humbly serve one another.
Participants segregate by gender to separate rooms to conduct this ritual, although some congregations allow married couples to perform the ordinance on each other and families are often encouraged to participate together.
After its completion, participants return to the main sanctuary for consumption of the Lord's Supper , which consists of unleavened bread and unfermented grape juice. Since the s when the church began, wholeness and health have been an emphasis of the Adventist church. The church discourages its members from consuming alcoholic beverages , tobacco or illegal drugs compare Christianity and alcohol.
In addition, some Adventists avoid coffee , tea , cola , and other beverages containing caffeine. The pioneers of the Adventist Church had much to do with the common acceptance of breakfast cereals into the Western diet, and the "modern commercial concept of cereal food" originated among Adventists.
His development of breakfast cereals as a health food led to the founding of Kellogg's by his brother William. In both Australia and New Zealand , the church-owned Sanitarium Health and Wellbeing Company is a leading manufacturer of health and vegetarian-related products, most prominently Weet-Bix. Research funded by the U. National Institutes of Health has shown that the average Adventist in California lives 4 to 10 years longer than the average Californian.
The research , as cited by the cover story of the November issue of National Geographic , asserts that Adventists live longer because they do not smoke or drink alcohol, have a day of rest every week, and maintain a healthy, low-fat vegetarian diet that is rich in nuts and beans. He cites the Adventist emphasis on health, diet, and Sabbath-keeping as primary factors for Adventist longevity. Adventists' clean lifestyles were recognized by the U.
The first task for the scientists was to find people willing to be infected by pathogens that could make them very sick. They found them in the followers of the Seventh-day Adventist faith. Although willing to serve their country when drafted, the Adventists refused to bear arms.
As a result many of them became medics. When contacted in late , the Adventist hierarchy readily agreed to this plan. For Camp Detrick scientists, church members were a model test population, since most of them were in excellent health and they neither drank, smoked, nor used caffeine. From the perspective of the volunteers, the tests gave them a way to fulfill their patriotic duty while remaining true to their beliefs.
The Adventist understanding of marriage is a lawfully binding lifelong commitment of a man and a woman. The Church Manual refers to the origination of the marriage institution in Eden and points to the union between Adam and Eve as the pattern for all future marriages. Adventists hold that marriage is a divine institution established by God Himself before the fall.
They hold that God celebrated the first marriage and the institution has as its origin the Creator of the universe and was one of the first gifts of God to man, and it is "one of the two institutions that, after the fall, Adam brought with him beyond the gates of Paradise.
The Old and New Testament texts are interpreted by some Adventists to teach that wives should submit to their husbands in marriage. Adventists hold that heterosexual marriages are the only biblically ordained grounds for sexual intimacy. Adventists do not perform same-sex marriages , and individuals who are openly homosexual but not "practicing" cannot be ordained, but may hold church office and membership.
Current church policy states that openly homosexual and "practicing" persons are to be welcomed into the church services and treated with the love and kindness afforded any human being. The official Adventist position on abortion is that "abortions for reasons of birth control , gender selection , or convenience are not condoned.
Adventists believe in and encourage abstinence for both men and women before marriage. The church disagrees with extra-marital cohabitation. The Adventist church has released official statements in relation to other ethical issues such as euthanasia against active euthanasia but permissive of passive withdrawal of medical support to allow death to occur ,  birth control in favor of it for married couples if used correctly, but against abortion as birth control and premarital sex in any case  and human cloning against it while the technology is unsafe and would result in defective births or abortions.
Adventists have traditionally held socially conservative attitudes regarding dress and entertainment. These attitudes are reflected in one of the church's fundamental beliefs:. For the Spirit to recreate in us the character of our Lord we involve ourselves only in those things which will produce Christlike purity, health, and joy in our lives. This means that our amusement and entertainment should meet the highest standards of Christian taste and beauty.
While recognizing cultural differences, our dress is to be simple, modest, and neat, befitting those whose true beauty does not consist of outward adornment but in the imperishable ornament of a gentle and quiet spirit. Accordingly, many Adventists are opposed to practices such as body piercing and tattoos and refrain from the wearing of jewelry, including such items as earrings and bracelets.
Some also oppose the displaying of wedding bands, although banning wedding bands is not the position of the General Conference. Though it seems unbelievable to some, I'm thankful that when I grew up in the church [in the s and s] I was taught not to go to the movie theater, dance, listen to popular music, read novels, wear jewelry, play cards, bowl, play pool, or even be fascinated by professional sports.
Adventists often cite the writings of Ellen White, especially her books, Counsels on Diet and Foods , Counsels to Parents, Teachers and Students , and Education as inspired sources for Christian deportment.
The Adventist church officially opposes the practice of gambling. The Youth Department of the Adventist church runs age specific clubs for children and youth worldwide. Pathfinders is a club for 5th to 10th grade up to 12th in Florida Conference boys and girls. It is similar to and based partly on the Scouting movement. Pathfinders exposes young people to such activities as camping, community service, personal mentorship, and skills-based education, and trains them for leadership in the church.
Yearly "Camporees" are held in individual Conferences, where Pathfinders from the region gather and participate in events similar to Boy Scouts' Jamborees. After a person enters 9th grade, he or she is eligible to join Teen Leadership Training within Pathfinders. In the 11th grade, typically after being a member of a club, they can become a Pathfinder or Adventurer staff member and begin the "Master Guide" program similar to Scout Master which develops leaders for both Adventurers and Pathfinders.
The Seventh-day Adventist Church operates youth camps all over North America and many other parts of the world. Each camp varies in the activities they offer but most have archery, swimming, horses, arts and crafts, nature, high ropes challenge course, and many other common camp activities. The Seventh-day Adventist church is governed by a form of representation which resembles the presbyterian system of church organization. Four levels of organization exist within the world church.
Each organization is governed by a general "session" which occurs at certain intervals. This is usually when administrative decisions are made. The president of the General Conference, for instance, is elected at the General Conference Session every five years.
Delegates to a session are appointed by organizations at a lower level. For example, each local church appoints delegates to a conference session. Within a geographic region, ministers receive roughly equal pay irrespective of the size of their church. The Church Manual  gives provisions for each level of government to create educational, healthcare, publishing, and other institutions that are seen within the call of the Great Commission.
The ordained clergy of the Adventist church are known as ministers or pastors. Ministers are neither elected nor employed by the local churches, but instead are appointed by the local Conferences, which assign them responsibility over a single church or group of churches. Ordination is a formal recognition bestowed upon pastors and elders after usually a number of years of service. In most parts of the world, women may not be given the title "ordained", although some are employed in ministry, and may be "commissioned" or "ordained-commissioned".
A number of lay offices exist within the local church, including the ordained positions of elder and deacon. Elders serve a mainly administrative and pastoral role, but must also be capable of providing religious leadership particularly in the absence of an ordained minister.
The role of deacons is to assist in the smooth functioning of a local church and to maintain church property. Although the church has no written policy forbidding the ordination of women, it has traditionally ordained only men.
In recent years the ordination of women has been the subject of heated debate, especially in North America and Europe.
In the Adventist church, candidates for ordination are chosen by local conferences which usually administer about 50— local congregations and approved by unions which serve about 6—12 conferences.
The General Conference, the church's world headquarters, claims the right to declare the worldwide qualifications for ordination, including gender requirements. The General Conference has never stated that ordination of women contravenes the Bible, but the General Conference has requested that no local conference ordain women until all parts of the world church accept the practice. The primary prerequisite for membership in the Adventist church is baptism by immersion. This, according to the church manual, should occur only after the candidate has undergone proper instruction on what the church believes.
As of December 31, , the church has 20,, baptized members. Depending on how the data was measured, it is reported that church membership reached 1 million between and , and grew to five million in At the turn of the 21st century the church had over 10 million members, which grew to over 14 million in , 16 million in , and 19 million in Jeffrey MacDonald, an award-winning religion reporter, and author of Thieves in the Temple, reports that the SDA church is the fastest-growing church in the United States.
The church has been described as "something of an extended family",  enjoying close, "two- degrees-of-separation social networks ". The Biblical Research Institute is the theological research center of the church. White Estate was established in at the death of Ellen White, as specified in her legal will. Its purpose is to act as custodian of her writings, and as of it has 15 board members. White Estate also hosts the official Ellen White website whiteestate.
The Geoscience Research Institute , based at Loma Linda University , was founded in to investigate the scientific evidence concerning origins. Started in the late 19th century, Adventist mission work today reaches people in over countries and territories. Missionary outreach of the Seventh-day Adventist Church is aimed not only at non-Christians but also at Christians from other denominations. Adventists believe that Christ has called his followers in the Great Commission to reach the whole world.
Adventists are cautious, however, to ensure that evangelism does not impede or intrude on the basic rights of the individual.
Religious liberty is a stance that the Adventist Church supports and promotes. Globally, the Adventist Church operates 7, schools, colleges and universities, with a total enrollment of more than 1,, and a total teaching staff of approximately 80, The largest in terms of population Seventh-day Adventist university in the world is Northern Caribbean University , located in Mandeville, Jamaica.
Adventists run a large number of hospitals and health-related institutions. Throughout the world, the church runs a wide network of hospitals, clinics, lifestyle centers, and sanitariums. These play a role in the church's health message and worldwide missions outreach. Adventist Health System is the largest not-for-profit multi-institutional Protestant healthcare system in the United States.
It is sponsored by the Seventh-day Adventist Church and cares for over 4 million patients yearly. ADRA works as a non-sectarian relief agency in countries and areas of the world. Worldwide, ADRA employs over 4, people to help provide relief in crises as well as development in situations of poverty. The church embraces an official commitment to the protection and care of the environment  as well as taking action to avoid the dangers of climate change: A reformation of lifestyle is called for, based on respect for nature, restraint in the use of the world's resources, reevaluation of one's needs, and reaffirmation of the dignity of created life.
The Adventist church has been active for over years in promoting freedom of religion for all people regardless of faith. In its leaders founded the International Religious Liberty Association , which is universal and non-sectarian. The Seventh-day Adventist Church State Council serves, primarily through advocacy, to seek protection for religious groups from legislation that may affect their religious practices. In May , for example, the organization fought to pass legislation that would protect Adventist employees who wish to keep the Sabbath.
According to Americans United for the Separation of Church and State, the Seventh-day Adventist Church has, throughout its history, aggressively advocated for the separation of church and state. Adventists have long been proponents of media-based ministries. Traditional Adventist evangelistic efforts consisted of street missions and the distribution of tracts such as The Present Truth , which was published by James White as early as Andrews was sent to Switzerland in , Adventist global efforts consisted entirely of the posting of tracts such as White's to various locations.
In the last century, these efforts have also made use of emerging media such as radio and television. The first of these was H. Richards ' radio show Voice of Prophecy , which was initially broadcast in Los Angeles in Since then Adventists have been on the forefront of media evangelism; It Is Written , founded by George Vandeman , was the first religious program to air on color television and the first major Christian ministry to utilize satellite uplink technology. Today the Hope Channel , the official television network of the church, operates 8 international channels broadcasting 24 hours a day on cable, satellite, and the Web.
Adventist World Radio was founded in  and is the "radio mission arm" of the Seventh-day Adventist Church. A large portion of the ministry's income is derived from membership gifts. SDA evangelists such as Doug Batchelor, Mark Finley and Dwight Nelson have undertaken a number of international satellite-broadcast live evangelistic events, addressing audiences in up to 40 languages simultaneously.
Additionally, there exists a range of privately owned media entities representing Adventist beliefs. In , the Church released their film, Tell the World that churches and institutions to show the film to the public, and for home viewing available on DVD as well as on social media like YouTube.
The Adventist Church owns and operates many publishing companies around the world. Two of the largest are the Pacific Press and Review and Herald publishing associations, both located in the United States. The Review and Herald is headquartered in Hagerstown, Maryland. The official church magazine is the Adventist Review , which has a North American focus. It has a sister magazine Adventist World , which has an international perspective. Another major magazine published by the church is the bimonthly Liberty magazine, which addresses issues pertaining to religious freedom.
The Adventist Church generally opposes the ecumenical movement , although it supports some of the other goals of ecumenism. The General Conference has released an official statement concerning the Adventist position with respect to the ecumenical movement, which contains the following paragraph:. While not being a member of the World Council of Churches , the Adventist Church has participated in its assemblies in an observer capacity.
The Adventist Church has received criticism along several lines, including what some claim are heterodox doctrines, and in relation to Ellen G. White and her status within the church, and in relation to alleged exclusivist issues.
Critics such as evangelical Anthony Hoekema who felt that Adventists were more in agreement with Arminianism argue that some Adventist doctrines are heterodox. Several teachings which have come under scrutiny are the annihilationist view of hell , the investigative judgment and a related view of the atonement , and the Sabbath; in addition, Hoekema also claims that Adventist doctrine suffers from legalism.
While critics such as Hoekema have classified Adventism as a sectarian group on the basis of its atypical doctrines,   it has been accepted as more mainstream by Protestant evangelicals since its meetings and discussions with evangelicals in the s. Later on Martin planned to write a new book on Seventh-day Adventism, with the assistance of Kenneth R. An Updated Assessment of Seventh-day Adventism", which upholds Martin's view "for that segment of Adventism which holds to the position stated in QOD , and further expressed in the Evangelical Adventist movement of the last few decades.
White 's status as a modern-day prophet has also been criticized. In the Questions on Doctrine era, evangelicals expressed concern about Adventism's understanding of the relationship of White's writings to the inspired canon of Scripture.
A common criticism of Ellen White, widely popularized by Walter T. Rea , Ronald Numbers and others, is the claim of plagiarism from other authors. Ramik, was engaged to undertake a study of Ellen G. White's writings during the early s, and concluded that they were "conclusively unplagiaristic". The ensuing project became known as the " 'Life of Christ' Research Project". The results are available at the General Conference Archives. Coon,  David J.
Denis Fortin,   King and Morgan,  and Morgan,  among others, undertook the refutation of the accusations of plagiarism. At the conclusion of his report, Ramik states:. It is impossible to imagine that the intention of Ellen G. White, as reflected in her writings and the unquestionably prodigious efforts involved therein, was anything other than a sincerely motivated and unselfish effort to place the understandings of Biblical truths in a coherent form for all to see and comprehend.
Most certainly, the nature and content of her writings had but one hope and intent, namely, the furthering of mankind's understanding of the word of God.
Considering all factors necessary in reaching a just conclusion on this issue, it is submitted that the writings of Ellen G. White were conclusively unplagiaristic. Finally, critics have alleged that certain Adventist beliefs and practices are exclusivist in nature and point to the Adventist claim to be the " remnant church ", and the traditional Protestant association of Roman Catholicism as " Babylon ".
In response to such criticisms, Adventist theologians have stated that the doctrine of the remnant does not preclude the existence of genuine Christians in other denominations, but is concerned with institutions. We fully recognize the heartening fact that a host of true followers of Christ are scattered all through the various churches of Christendom, including the Roman Catholic communion.
These God clearly recognizes as His own. Such do not form a part of the "Babylon" portrayed in the Apocalypse. But such a bid never materialized, and earlier this week Cerberus pulled its offer, citing turmoil in credit markets. ACS management along with some of its biggest shareholders, including Oppenheimer Funds, blamed the independent directors for allowing the deal to slip out of their hands -- by refusing to set a vote on the bid before pursuing alternatives.
The directors say they had a duty to look for other potential bidders, given that Cerberus's proposed deal included the participation of ACS's chief insider: The dispute is all the more extraordinary given the close, even cozy, relations Mr. Deason once enjoyed with a number of the independent directors -- Robert B. Livingston Kosberg, Frank A.
Several of them enjoyed business or personal ties with Mr. Deason in past years. The confrontation began Tuesday during a six-hour board meeting, when Mr. Deason demanded the directors resign immediately. He threatened to nominate a new slate of independent directors for election at the next shareholder meeting, in May, if they refused He also said he would issue a news release accusing them of neglecting their duties if they didn't comply by yesterday, these people said.
The directors responded in their own sharply worded letter: Late yesterday, the independent directors filed a lawsuit against Mr. Deason and other ACS executives in Delaware Chancery Court asking for a declaratory judgment that they haven't breached their fiduciary duties. The resignations came during a closed-door session in which the bloc sought to replace Chief Executive Alan Armstrong , who they felt was ill-suited to lead an independent Williams as it sets out a new course, the people said.
Chairman Frank MacInnis was among those who resigned, as were a pair of activist hedge-fund investors, Keith Meister and Eric Mandelblatt , who joined the member board following a public campaign in , the people said. All three had championed the merger with Energy Transfer, which Mr. Armstrong had opposed and continued to oppose even after it was agreed. The discussion turned to whether Mr. Armstrong was the best person to remain at the helm. The directors not including Mr.
Armstrong were split evenly, with six supporting Mr. Armstrong and six opposed. MacInnis, who had been Williams ' s chairman since , was opposed to Mr. Armstrong remaining as CEO, but resigned largely for personal reasons….
All three had been supportive of the merger. Did the newly departed leave with some benefits? Does one hand wash the other? Do CEOs and Directors say to one another, in substance, "I won't tell on you to Shareholders , if you don't tell on me"? A conflict of interests arises when Directors set their own compensation, e.
It is just another conflict of interest for which there is no real accountability. Corporate governance watchdogs fret that CEOs use lucrative pay packages to co-opt board members.
Still, that's not bad for a part-time job that requires attending a handful of meetings a year. And because boards seem reluctant to rein in compensation, some critics conclude that the system is irreparably broken. Sinegal of Costco Wholesale pay package seems a throwback to another era, especially when compared with the lavish compensation of Henry R. Sinegal's compensation is skinny, then corpulent is the word that comes to mind when considering the pay bestowed on Mr.
Silverman, the chairman and chief executive of Cendant, the travel, real estate and direct marketing concern. The fear, of course, is that corporate executives, who have oodles to gain from mergers, have too much say about the terms, structure and consummation of the transactions. When management is at the controls, as often seems to be the case, directors are asked mostly to rubber-stamp the deals.
Melican , president of Proxy Governance. Melican, an executive vice president at International Paper from to , was involved in many of that company's mergers. And because there are going to be shareholder lawsuits, you can pretty much assume you'll be in depositions for many years.
Melican said, when executives of the acquired company are promised high-ranking jobs at the combined entity, postmerger. Melican says, boards have to get in early. But hey, that's what being a fiduciary means. Anyone Tell the Board? Where there is a will, there is a way! CalPERS is "concerned by the timing of a decision in May by PacificCare 's board to boost payout that executives would get if the company was sold.
Typically a board would know whether high-level merger talks had been occurring for months Upon what need for change was it based? What are the odds that the BOD's decision was based upon a "fairness" or consultant's opinion, which issued by someone who was well-paid by Management? Steven Milloy … claimed that Goldman's policies are … designed to advance Mr. He objected to Goldman's gift of , acres in Chile to the Wildlife Conservation Society , calling it a conflict of interest because Mr.
Paulson is chairman of the Nature Conservancy, which works with the society, and has a daughter, Merritt, who sits on the society's board of advisors. Paulson batted away the charges with a simple defense: The board did it, not me. He was not even part of the discussions of the Chilean land deal.
Paulson's involvement with the conservancy or his advocacy of environmental causes. No one who makes it into the board room of a place like Goldman is unfamiliar with the time-honored strategy of gaining influence by showing interest in the CEO's interests, be they golf or global warming. Why wouldn't directors rubber-stamp Mr. There are no studies to prove this, of course.
But the society pages hold a clue: It's the CEO who is toasted at benefits and photographed for posterity. How often is the source of the funds -- the pockets of shareholders -- even mentioned?
The Free Enterprise Action Fund , a tiny mutual fund with a conservative political bent, says the gift hasn't benefited Chile or Goldman shareholders. The fund petitioned the Wall Street firm on Friday to have its board review the gift as part of a broader study of Goldman projects supporting environmental causes, and seeks a shareholder vote on the proposal. Treasury Secretary, defended the donation at Goldman's annual meeting on March 31, saying it was something 'Goldman Sachs wanted to do.
Paulson's son, Henry Merritt Paulson. At the meeting, Mr. Paulson said he knew of the deal but recused himself from the decision, leaving it to the board. Paulson's underlying assumption is that whatever Goldman wants is proper. Now the country's most important court for corporate law has raised questions about some deals. I n recent back-to-back opinions, the Delaware Court of Chancery criticized two publicly listed companies that have agreed to sell themselves to private investors. The rulings expressed concern that Topps Co.
The author of both opinions, year-old Vice Chancellor Leo E. Strine faulted the company's board for letting Chief Executive Robert E. Rossiter negotiate the deal with Mr. Icahn on his own. The Delaware court's increased scrutiny of possible conflicts comes amid rising complaints, and more lawsuits, criticizing buyout deals for allegedly enriching corporate executives at the expense of the shareholders.
In the current buyout craze, many buyout firms retain the management by offering rich pay packages and a stake in the newly private entity.
These deals are being challenged in the courts by shareholders who allege that they are getting a meager payout for the company. They say boards are accepting deals based on factors other than the best-available price.
In addition, shareholders are accusing boards of running into the friendly arms of private-equity buyers to escape activist hedge funds, who are trying to oust them through proxy battles. In the case of Topps, the New York producer of trading cards, collectibles and candy, shareholders have accused the board of breaching its duties to get the highest price for the company Strine warned in his Topps opinion.
Not only do CEOs get theirs, but , when they do wrong, Shareholders foot the bill. Once again, shareholders are shouldering the costs of unethical behavior they had nothing to do with. Hill and Richard W. Painter, professors at the University of Minnesota Law School. In 'Better Bankers, Better Banks,' they argue for making financial executives personally liable for a portion of any fines and fraud-based judgments a bank enters into, including legal settlements.
Hill said in an interview. If that's the case, bad CEOs are able to hang on to their jobs long after they should be driven out. In a new study titled Pay for Failure: Few of the plans, for example, required that the company's performance be measured against its industry peers. It's a matter of mutual back-scratching, as another recent study confirmed. The authors are John K. They found that companies paying CEOs excessive amounts also pay directors excessive amounts. Companies that pay too much also tend to perform worse than their peers.
Kozlowski was exceptionally extravagant with company money, Mr. Campriello showed jurors an expense report Mr. John Fort submitted for his attendance at a single three-day board meeting. Campriello asked 'This is the way we traveled,' Mr. Permitting extravagant expenses is the morale equivalent of bribery.
Raines received salary, bonus and other compensation last year However, Fannie Mae is not a person. The Broadcom Corporation … shareholders are being asked to vote on a company proposal to increase by 12 million the number of shares authorized for grants under its stock incentive plan.
In addition, a 'yes' vote will expand the types of stock awards that the company can offer executives and employees, as well as grant the compensation committee the right to reprice underwater options at any time. This objectionable repricing practice removes the risk for executives and employees that outside shareholders incur when their stock falls.
Had the proposed plan been in place last year, it would have cost shareholders an amount equal to about 75 percent of the company's revenue, the firm said. Berman had until 29 February been affiliated with a law firm that served as outside counsel to the Company and had since 1 March been engaged by the Company to render legal, regulatory and other professional services.
Berman was a director of Tyco until December 5, From March 1, through July 31, , Mr. Berman was engaged to render legal and other services.
During this period, Tyco compensated Mr. Berman with health benefits, secretarial assistance, a cell phone and electronic security services for his homes. Weingarten said the two clashed over several issues, including the amount of Tyco business sent to Kramer Levin for which Berman received referral fees.
Dennis Kozlowski , Tyco's former chief executive, and were not approved by the board or disclosed in filings with the United States Securities and Exchange Commission. He also has drawn fire from critics for having business ties to Disney in the past while sitting on the board.
Those payments ended two years ago amid an outcry from corporate governance experts. Independence of new chairman, who had sided with Eisner, is called into question. Mitchell, 70, … who has little business experience, said … yesterday that he had no desire to play the corporate strategist, as many chairmen do. Instead, he sees his main job as negotiating among factions of unhappy investors, other board members and Michael D. Eisner, the chief executive who lost the chairman's title in the wake of a resounding no-confidence vote at the company's shareholder meeting on Wednesday.
Mitchell's appointment is not sitting well with many of the investors … nor with corporate governance experts. They complained that not only does Mr. Mitchell have negligible corporate experience, but they say he is too closely allied to Mr. Eisner and his appointment does little to address investor discontent with Mr.
Eisner's management of the company. Mitchell takes umbrage at the notion he is beholden to Mr. He said he had only had three social dinners with Mr. Eisner actually approached Mr. Mitchell in to gauge his interest in joining Disney as president. Mitchell said because the decision was made only on Wednesday, the duties of the job had not been completely defined.
But he said the setup and his lack of business experience should not impede his ability to oversee Mr. The most beholden Directors may live in states of denial. And that has prompted some governance experts and investment fund officials to question his sincerity toward reform and sensitivity to appearances. Their concern is that directors may have competing loyalties between the shareholders they are supposed to serve and the executives who put them on the payroll. Sidhu has … become a national force in community banking by repeatedly triumphing over rebellious directors and shareholders.
Sidhu has excluded directors from important deal deliberations or waits until the last minute to brief them. Some investors say his public statements about acquisition plans are misleading. Sidhu has a board of supportive directors who have scant banking experience, are compensated unusually well and, in some cases, enjoy access to Sovereign loans and business opportunities.
While that's more than directors at similar banks get, Sovereign justifies the pay by noting that its directors meet 14 times a year, five more times than its peer average. Sovereign has had business dealings with and made increasing loans to its directors in recent years. Sovereign added that the Troilo leases all have been at market rates. Troilo didn't return calls. Troilo so he could buy a Lawrenceville, N. To help secure the loan, Mr.
Troilo used another Sovereign-mortgaged property, in Pennsylvania , that he also rented to the bank. The Monday filing said Mr. Troilo's bid was better because it included 'no financing, inspection or due diligence' conditions.
Was Sovereign concerned that its building could not withstand "inspection or due diligence"? Upon what objective criteria was that decision made and by whom? But, after all, it is just another instance of Shareholder assets being considered as chump change! The bank offers no relevant disclosure about the loans, including terms, interest rates or performance. Relational Investors discovered the full extent of them only by cross-referencing Sovereign's Securities and Exchange Commission filings with records at the Office of Thrift Supervision.
Sovereign says the SEC filings excluded credit extensions that haven't been drawn down. Since , however, Sovereign's filings have included no specific figures, just vague reassurances. Wall Street is skeptical that a three-year turnaround plan will work, and Fitch has cut its bond rating to triple C, which is low even for junk bonds. So far this year it is down another 27 percent.
But there is little pain at the top. But there is no mention of internal equity -- of the justice of paying a lot to bosses when workers and investors are suffering.
Perhaps board members think they deserve an increase because their past stock grants keep losing value. They face tricky choices in deciding how much to challenge year-old Mr. Mozilo, who co-founded the company 38 years ago. Countrywide's nonemployee directors collect fees, shares that they must hold for at least a year, and perks that include health insurance and spousal travel, according to the latest proxy statement. The pay range is above median total compensation for directors of the largest U.
Countrywide said directors review their compensation annually with the help of an independent pay consultant Countrywide rewards board members so well that 'at some point, you cross the line between paying for services provided and a very lucrative thing where board members aren't going to challenge management,' says Mark Reilly, a partner at 3C, Compensation Consulting Consortium. Corporate Library has long argued that Countrywide's board has done a poor job of designing Mr.
Mozilo's pay package, guaranteeing him too much compensation regardless of performance. The consultants urged directors to slim his hefty contract, partly by revamping his annual bonus formula Directors kept the formula and decided to replace the consultancy Snyder , 75, is Countrywide's lead director. Institutional shareholders who have tried to engage the Countrywide board on issues like Mr.
Mozilo's pay say that Mr. Snyder, who has been a board member since , prevents such dialogues from occurring. One complaint was that he does not share letters from stockholders with other members of the board. Charles Prince , for instance, who stepped down under fire as Citigroup Inc. The rules are in place to allow boards to retain an appropriate mix of retired and active executives and push out members who no longer have the time for outside directorships because of more demanding new jobs.
Still, many governance watchers and veteran directors say boards rarely accept a resignation after a member loses a CEO spot—no matter the reason. Another former chief who kept a directorship is Richard Syron , ousted as head of Freddie Mac in when the U.
He recently received a warning that he may face civil action from the Securities and Exchange Commission as part of its investigation into whether Freddie Mac properly disclosed its exposure to subprime loans. Syron held a board seat, rejected his offer to resign. Syron didn't have to defend his actions to fellow board members.
To be sure, boards occasionally drop a member after leaving a CEO post under fire. Advanced Micro Devices Inc. AMD declined to comment.
I just could not resist the temptation. The devil made me do it. The other dude done it. It was my poor upbringing. Then, there is reciprocal back scratching.
It would be so embarrassing at the country club to encounter a removed former fellow Director. Additional conflicts of interest are caused by the existence of a Director clique. No one wants a wild card. It's not surprising that their objective is to get along. Statistical analyses can go just so far in detecting links between Directors. For directors, it is simply bad form to nitpick over a couple of million dollars with another member of the club, particularly one who helps set director fees or serves on the compensation committee of other corporations.
Even legendary investor Warren E. Buffett was not immune to the collegiality. He recently wrote to the Shareholders of Berkshire Hathaway Inc. A certain social atmosphere presides in boardrooms where it becomes impolitic to challenge the chief executive, he wrote.
Buffett is reputed to be the best of the best! Thus, Shareholders have no reason to expect better representation from any other Director. Buffet, the best of the best, found it necessary to ask a subordinate multiple times about a sizable transaction and walked away without getting the "details. Was he suspicious when he had to ask a second time? What about the third time? Did the subordinate still retain his job? Is there a letter of reprimand in the file?
What does the subordinate say he communicated to Buffet? Why was the questioning of Buffet not done under oath? Well, since he was questioned by regulators, if the truth not be told, there is always the obstruction of justice route. Hopefully, Buffet does better where he serves in the capacity of a corporate Director.
After his talk with Mr. Ferguson wrote an e-mail to Joseph Brandon, then General Re executive vice president, describing the conversation with Mr. Buffet, saying that he asked Mr. Buffet whether the deal was proper. Ferguson reported that Mr. Buffet said the deal was proper, but not by a large margin. Buffet told regulators that didn't happen. Buffet told regulators that he asked Mr.
Brandon several times whether General Re's accounting on the deal was okay, but didn't learn details. Did Ferguson want to know? If not, why not? Was a copy of the email transmitted to Buffet when it was written?
Did Buffet read it and not respond? When did Buffet first question Brandon? What triggered the question? If Brandon was not answering Buffet, perhaps Buffet could have asked his external auditors? On the other hand, if one is suspicious, why alert the external auditors to look carefully at what might be a minefield?
Perhaps the issue of a Director's fiduciary duty to Shareholders was lost in an ethical haze? He stated, in part, "I've sat on enough boards and audit committees to understand the kind of culture of seduction that characterizes many boards.
It's a game that many CEOs played and played well by seducing their boards with perks and private attention and contributions to favorite philanthropies, and meetings that were short on substance and long on fluff. The boards became willing accomplices. And it's part of the American personality to go along and become more fraternal rather than more vigilant.
Levitt did all that board sitting before From to , as Chairman of the SEC, what did he do or attempt to do to cure the specific problem?
Also, it appears that Mr. Levitt is claiming that it would be un-American to require Directors to be vigilant on behalf of Shareholders. Directors who served at failed companies may rate a red badge of courage and additional opportunities to employ their varied talents. In some cases, however, companies have stopped passing on this information in proxy materials distributed to shareholders….
But what about the directors of companies like Enron, WorldCom, Adelphia Communications, Global Crossing, Waste Management, Tyco International and others who oversaw the implosion of hundreds of billions in market capitalization? In many cases, they got better jobs. But many companies don't make it easy for shareholders to find out where their directors have been. Sprint Nextel 's biography for William E. Conway , for instance, mentions nothing about his stint at Enron.
Thornton of Goldman Sachs Group Ford's, someone with whom he shares several friends and even more interests. Thornton was appointed to the Ford board at the recommendation of the company's chief executive and chairman The lawsuit … said the chief executive and chairman, William Clay Ford Jr. The suit said Mr. Ford's acceptance of the shares was a 'usurpation of an opportunity that belonged to the company' After shareholders complained in late , the company formed a committee that concluded that Mr.
Ford had not acted improperly. Ford's purchase in May of , shares of Goldman Sachs, the largest allocation to an individual, drew attention after a lawyer for Ford shareholders wrote to the company's board, demanding an investigation.
The shareholders demanded that Mr. Ford return any profits and pay damages to the company for the lost investment opportunity. Ford bought the shares, Goldman's co-chief operating officer, John Thornton, sat on Ford's board. Ford had no significant say in the awarding of investment banking business. They also said … that Mr.
Ford had a long personal banking relationship with the firm. Ford probably claimed a tax deduction for his charitable donation. And, how does one determine that "no wrongdoing had occurred"? Ford did not violate the non-existent policy. Therefore, "no wrongdoing had occurred. In some cases, 10 percent or more of all donations went to these organizations.
Companies, directors and non-profits routinely stress the importance of philanthropy and say the donations don't affect board members' independence. Critics, however, say big donations can create a clubby atmosphere that may make directors less likely to aggressively challenge management.
Although foundations detail their donations in annual tax filings with the Internal Revenue Service, companies are not required to disclose most non-profit affiliations of their directors, making it problematic for investors to know the full extent of such connections.
Farmer , the 87 year old chairman of the company Farmers, who are members of the board, along with other directors The coming-together will be at a town in Georgia where the main attraction is a 'gentleman's club' exclusive enough to garner members by invitation only.
Augusta National Golf Club, which openly and proudly discriminates against women, will produce its Masters Golf Tournament with considerable help from the masters of corporate America. It also makes a mockery of board independence, now required to protect stockholders and the public from cronyism in financial dealings.
The cronyism that perpetuates gender bias against employees is every bit as harmful, and ought to be stopped just as forcefully. At nearly all other companies, a simple majority will do.
Purcell will color their judgment in any way. Indeed, Morgan Stanley bankers, not to mention the dissident executives, have accused the board of coddling him. It is packed with former chief executives, many from the Chicago area, where Mr.
Some have golfed together; others have worked for one another. First, there is the Kraft connection. Miles, the chairman of the nominating committee and … recruited two former executives who worked for him at Kraft in the mid's: Then there is the McKinsey connection. Four directors were partners at McKinsey, the management consulting firm, as was Mr.
And finally, there is the fact that a number of directors, notably Mr. Miles, serve together on boards at other companies. Miles, for example, serves on six boards, including that of the AMR Corporation, where he serves alongside Mr.
Brennan also serves on six boards, and Charles F. Brennan during his battle with shareholders. Miles and Kraft on its merger with Philip Morris, and he is now advising the independent directors at Morgan Stanley on a range of matters, including their strategy for dealing with their antagonists. One point made by the retired executives is that until recently, no director - including Mr. Purcell - had ever operated a line of business for a securities firm. That set Morgan Stanley apart from nearly every other Wall Street firm.
Partners have fiduciary duties to one another. So much for the concept that BODs have undivided loyalty to represent the interests of Shareholders!
Who is watching the supposed watchdogs of Management? Do conflicts of interest disappear if they are disclosed to Shareholders who have no effective means to remedy the situation? Purcell, their first call for help when to the superlawyer Martin Lipton. Lipton quickly donned a number of other legal hats - advising the board, Mr.
Purcell and the company itself on tactics, legalities and, most controversially, severance pay to departing executives. Purcell stepped down, a compensation specialist at Wachtell, Adam D. Chinn, in tandem with the board's compensation committee, draft the controversial severance packages that awarded Mr. Chinn's reputation for cobbling together generous severance awards for departing chief executives is such that the contracts are known as Chinn-ups.
As a result of these payouts, the board has been sued by shareholders and received irate letters from institutional investors who have decried the packages as a violation of the very governance practices Mr. Lipton was hired to improve. Purcell's leadership, many Morgan Stanley executives were never quite clear about Mr. Several said they frequently asked each other: Was he advising the board? The answer, people close to the board said, is that Mr.
Lipton was, first and foremost, an adviser to the board. When it became clear that Mr. Purcell would depart, he hired his own lawyer to negotiate. While the very best governance practices would argue for the hiring of separate counsel on the compensation packages, time and confidentiality considerations led the board to stick with Wachtell.
Lipton for being an apologist for corporate management, that assertion misses the point - that Mr. Lipton's fiduciary responsibility is to best represent and advocate in support of his client's interests. If Lipton represented only the BOD and, thus, the Shareholders, his fiduciary duty was to get the executive to leave for the lowest amount.
It is fair to assume that he, at the least, did not discourage the BOD from appointing Chinn while knowing that he Chinn does Chinn-ups. Lipton and Chinn are members of the same law firm. Lipton probably benefits from each fee Chinn earns for the firm. The BOD tries to justify its act of hiring Chinn by claiming "time and confidentiality" considerations. Does Lipton's rolodex contain the name of at least one competent non-Wachtell attorney who has a reputation for being parsimonious when dealing with executive payoffs?
Couldn't Lipton have asked Chinn for a referral? Did the BOD not know that attorneys, even non-Wachtell attorneys, have a duty to maintain confidentiality? Purcell decided he should step down…. The tale serves as a caution for boards in an era when their role in corporate governance is drawing more scrutiny.
The damage from delay when directors fail to spread their antennae widely is especially great at a Wall Street securities firm like Morgan Stanley, where the most valuable assets can walk out the door and never return. At a mid-March board meeting, Laura D'Andrea Tyson , a former Clinton administration economic official who is dean of the London Business School , said directors should take the criticism of Mr.
Purcell's record more seriously. Tyson, calling her comment inappropriate … The board took steps to interview more employees. Knight, the director who had clashed with Ms.
Purcell and didn't see any reason to discuss the matter since the board had already decided on it…. The attempt to cut off debate bothered some other directors, people familiar with the meeting say. Knight and Zumwinkel left, the discussion turned more freewheeling. Knight's conduct is reminiscent of that of a school yard bully who made it to the big time. Institutional Shareholders do much "discussing an effort to out the directions," but, when push came to shove, they faded. Knight and Zumwinkel, who should be their first targets, need not lose any sleep.
Bostock , had a family connection to a hedge fund that does business with the firm. They generally worry that the indirect connections can impair the directors' abilities to serve as independent advocates for shareholder interests. Is this what is meant by "the ties that bind"?
If this is what Morgan Stanley does when it is under a corporate governance microscope, imagine what might occur when the spot light turns elsewhere business as usual. Yet during that time, the company's stock has slid 12 percent while shares of its archrival, Lowe's , have climbed percent. Why would a company award a chief executive that much money at a time when the company's shareholders are arguably faring far less well?
Two of those members have ties to Mr. Nardelli's former employer, General Electric. Nardelli's lawyer in negotiating his own salary. And three either sat on other boards with Home Depot's influential lead director, Kenneth G. Langone , or were former executives at companies with significant business relationships with Mr. In addition, five of the six members of the compensation committee are active or former chief executives, including one whose compensation dwarfs Mr.
Governance experts say people who are or have been in the top job have a harder time saying no to the salary demands of fellow chief executives. Moreover, chief executives indirectly benefit from one another's pay increases because compensation packages are often based on surveys detailing what their peers are earning.
To its critics, the panel exemplifies the close personal and professional ties among board members and executives at many companies — ties that can make it harder for a board to restrain executive pay. They say this can occur even though all of a board's compensation committee members technically meet the legal definition of independent, as is the case at Home Depot.
Langone's circle of friends and associates… [T]he Home Depot board decided … Mr. Nardelli, who had no retail experience, should become CEO. Nardelli might not hit one of the few performance goals the board had set to cause payment of a long-term incentive plan, the board lowered the goalposts….
More than a dozen U. Several factors are spurring such appointments, recruiters and management consultants say. Boards are quicker to fire poorly performing CEOs, often before potential internal successors are ready for the job.
Many of these companies have deep-seated problems, making it harder to recruit outsiders. And increasingly, there's a deep pool of outside executives in the boardroom.
They contend that a chief chosen from the board signals cronyism and weak succession planning. A director's comfort with a colleague obscures 'a clear view of the individual's suitability to be a successful CEO,' says Richard Breeden, an activist investor and former chairman of the Securities and Exchange Commission.
Franks , the former chief of the Public Broadcasting System and the publisher of a Spanish newspaper would seem to have nothing in common — except for one thing. They all sit on the board of Bank of America. But as they and 13 of their colleagues meet Wednesday to discuss how to steer the bank through its troubled merger with Merrill Lynch, they are likely to be united by something else: Their shareholder scrutiny has also turned an unusual spotlight on the oversight role played by the board members, many of whom were picked by Mr.
Lewis from several companies that the bank, based in Charlotte , N. Bank of America's board is an eclectic group, and it will grow larger this week when it adds three members from the board of Merrill.
The bank's two most powerful directors, O. Spangler , are close to Mr. Lewis's predecessor, Hugh L. Lewis, only two people on the board — the former chief of FleetBoston and a former senior executive of MBNA — have roots in banking. While Wall Street is rife with tales of bank and brokerage directors who deferred to executives seeking faster growth through ever-riskier business, Bank of America's shareholder advocates have grown increasingly concerned about the board's ability to understand financial risks and rein in managers.
While critics charge that Bank of America's board has been little more than a rubber stamp in the empire-building campaign of Mr. Lewis, others describe it as independent and willing to push back against the chief executive. Its members are expected to vote Wednesday on the addition of three directors from Merrill Lynch Their approval would raise the number of board members to 20, and would tighten the web that already binds many of the board's current representatives.
Yet some board members are connected in other ways that reveal strong cross-pollinations with other company boards. Nothing could get the attention of Directors more than the prospect of being held personally accountable for their lack of diligence in performing their duties to Shareholders.
Board members also acknowledge they are struggling to rein in bloated executive compensation, but are counting on investors to lead the cause to knock it down.
Those conclusions aren't a decade old, but are part of a recent survey from the consulting firm PricewaterhouseCoopers and the Corporate Board Member magazine , which culled responses of more than 1, directors at U.
Directors still don't have as much control over corporate dealings that many believe is needed to curb supersized compensation.
While more boards are independent of management, there are still plenty of cases of directors using flawed judgment or kowtowing to demanding executives who are pushing their own agendas. Part of the problem, it seems, is that boards are still controlled by CEOs, with 50 percent of directors surveyed saying that board leadership flows from the company's top executive who is also board chairman.
Those individuals, therefore, set the agenda as well as the flow of information at board meetings and among members. In the area of compensation, two-thirds of responding directors believe that U. Separately, a third believe that stockholders are the group most likely to get pay pared down. But it is hard to reduce pay when the directors themselves don't know how much they've even agreed to pay executives. Less than half of those surveyed said their boards use tally sheets to add up total compensation, and about one in five directors said that they didn't know what the CEO would collect if he or she is terminated, retires or should there be a change in control.
Among the bigger shockers in these filings are the tallies showing how much money executives will cart away if they are terminated or agree to a merger. Buried in these figures is one of the most contentious items in all of payland: Michael Kesner , principal at Deloitte Consulting in Chicago said, 'Boards are now just getting a sense of how big that number is.
If directors are surprised by gross-ups, you can imagine how stockholders will react. And given how ubiquitous gross-ups are -- surveys say 75 percent of chief executives have such arrangements with their companies -- the shocks could be far and wide. Training the spotlight on gross-ups may help stamp them out. As long as they were kept under wraps, directors didn't have to justify them to angry shareholders.
Six days later, its chief executive, E. Underlying the situation at Merrill is the nagging question of what a Wall Street board is expected to know about complex financial markets where asset values can shift drastically and where many directors are not in the business of managing trillion-dollar balance sheets — or perhaps have little experience in doing so. Directors should know what independent risk controls are in place, who is overseeing that function After every market crisis Case law, lawyers say, has affirmed that directors have to be informed and make sure that obvious red flags are not ignored.
There were certainly some red flags waving in front of directors. One issue should have been the revolving door of talent in the upper echelons of the firm And, like everyone else, directors knew about the bank's very public shift into riskier business areas, which until this summer were delivering handsome profits.
Merrill had become the top issuer of collateralized debt obligations in the marketplace, and its profitability soared; fixed-income revenue in the second quarter was up percent. According to some analysts, the billion-dollar size of those profits — and the soaring return on equity — should have caused directors to ask whether the risks being taken to generate higher profits warranted better controls.
Analysts say that directors should have asked about the exposures and, more important, what might happen to those exposures under various financial scenarios, including a collapse of the mortgage market. In July, when credit markets worsened and Merrill faced escalating losses Merrill's potential losses did not reflect the heavy levels that they ultimately reached in October. Management realized that there was a structural problem, and Merrill announced on Sept.
Regardless of what ratings agencies had to say about the securities Merrill and others were juggling, many investors, especially hedge funds, had been pointing out the flaws in the structured finance market. Did ML Directors feel that packaging such loans enhanced investment quality? The most plausible explanation is that the question of whether a company has a good or poor leader remains disturbingly nebulous for boards. A 'star CEO' seems to be, regrettably, more a social construction of the media and company PR efforts than a knowable reality — except, perhaps, with the benefit of hindsight.
Then last week, shareholders lost the only shot they had at firing incompetent directors when the Securities and Exchange Commission voted to prevent investors from nominating their own board candidates.
Certainly the losses generated over the last few months by major financial firms indicate that something is very wrong with the boards of these companies.
These directors either knew of the risks their managers were taking and blessed them, did not know of them at all, or were advised of them and were unable to rein in the executives in charge. Moore the treasurer of North Carolina noted that these boards happily paid enormous sums to executives when mortgage desks were coining money. Those managers act like owners. What acts constituted the exercise of "diligence"?
What did the BOD do to act "aggressively"? What was "the information"? When it all of the foregoing occur? What "information" did the BOD not know? Why did the BOD not know the "information"? Kilts knows a thing or two about dealing with corporate boards. Kilts gave a keynote speech at a corporate-governance conference last April, he decided to share some of what he has learned over the years. The advice was surprisingly simple. Kilts told the crowd of executives, directors, corporate-governance gurus and others.
CEOs, he said, must be open with their board about a range of issues, from the failure of strategic plans to unsavory business practices within the organization. Such a recommendation may seem obvious, but people who have spent time in corporate boardrooms say honest communication is often lacking between CEOs and their fellow directors.
We're talking here about the CEOs who try to solve problems themselves without keeping the rest of the board informed of new developments. Or the CEOs who are reluctant to admit mistakes -- and may massage the truth to make things appear better than they are. Why is it so tough for CEOs to keep the board informed in a timely manner? Simply enough, CEOs want to appear to be in control, experts say.
It can be hard for them to concede defeat or to admit they don't have all the answers. CEOs can also be reluctant to admit that things are not progressing as expected, or that a change in plans may be warranted. This is especially true when it comes to the executive's vision for the company. Of course, it can be hard to get up the courage to tell the board something it may not want to hear. But its directors apparently do. While CEO Vikram Pandit can argue that many of Citi's problems were created before he arrived in , most board members have no such excuse.
For much of that time he was chairman of the executive committee, collecting tens of millions to massage the Beltway crowd, though apparently not for asking tough questions about risk management. The writers at the Deal Journal blog remind us of one particularly egregious massaging, when Mr. Rubin tried to use political muscle to prop up Enron, a valued Citi client.
Rubin asked a Treasury official to lean on credit-rating agencies to maintain a more positive rating than Enron deserved. Chairman Sir Win Bischoff has held senior positions at Citi since All the more so given that Citi's board has lately been airing dirty laundry about Mr.
Bischoff's role and leaking petty grievances. The directors all but started a run on the bank themselves, even as the bank assured the world it was sturdy enough to withstand any losses. While other banks can claim to be victims of the current panic, Citi is at least a three-time loser. The same directors were at the helm in when the Fed suspended Citi's ability to make acquisitions because of the bank's failure to adhere to regulatory and ethical standards. Citi also needed resuscitation after the sovereign debt disaster of the s, and it required an orchestrated private rescue in the s.
Such a record of persistent failure suggests a larger -- you might even call it 'systemic' -- management problem Rubin, senior counselor and a director at Citigroup, acknowledged that he was involved in a board decision to ramp up risk-taking in and , even though he was warning publicly that investors were taking too much risk.
He said if executives had executed the plan properly, the bank's losses would have been less. From the time Mr. Rubin joined Citigroup in October Rubin said it is a company's risk-management executives who are responsible for avoiding problems like the ones Citigroup faces.
Rubin was deeply involved in a decision in late and early to take on more risk to boost flagging profit growth, according to people familiar with the discussions. They say he would comment that Citigroup's competitors were taking more risks, leading to higher profits. Colleagues deferred to him, as the only board member with experience as a trader or risk manager. Rubin said, referring to collateralized debt obligations, instruments tied to mortgages and other debt that led to many of Citigroup's losses.
Rubin said the decision to increase risk followed a presentation to the board by a consultant who said the bank had committed less of the capital on its balance sheet, on a risk-adjusted basis, than competitors. He said success would have been based on having 'the right people, the right oversight, the right technology. He said the Citigroup board could bear some responsibility. How much did the BOD pay the "consultant" who told them if Citi did things "right," it would result in gains?
Did the "consultant" describe the potential problems if things were not done "right"? What was the "plan"? How should the "plan" have been implemented differently?
Perhaps, the BOD Minutes would set forth some details. How much less would "losses" have been? What factors were considered in Rubin's alternative loss analysis? What are the "facts" that the BOD knew? What "things" should the BOD have done differently? Did the BOD request or receive interim progress reports?
For payment of a few hundred thousand dollars to the right PR firm, Rubin and other Directors similarly situated could have their public images burnished and their disastrous decisions expunged. It would not be necessary to blame others and the fickle financial markets, but it has become the American way. Bank directors presided over a disaster in a collective stupor, yet unaccountably continue to hold on to their seats At BofA , the board of directors includes several current or retired business executives, a college president and Gen.
Tommy Franks , architect of the brilliantly executed Iraq war. My favorite director is Jackie M. Ward , a retired software executive who also serves on five other boards. I don't mean to pick on Ms.
Ward, who for all I know is still a business dynamo at the age of Yet given that she chairs the BofA board's committee on asset quality, which is ground zero of the company's implosion, might the institution not have been better served if she had focused on this one thing? You would, however, be wrong. Directors who were supposedly minding the store as disaster struck at companies like Countrywide Financial, Washington Mutual or Fannie Mae have not all been banished from other boardrooms.
In many cases, directors just seem to skate away from company woes that occurred on their watch. Taxpayers and shareholders, meanwhile, who had nothing to do with the problems, are left holding the bag. This is not to say that these directors are not performing their duties. Indeed, some would argue that directors who have witnessed at close range the collapse of a company may learn a great deal from that experience and bring to their boardroom activities an increased sense of responsibility.
But it is hard to blame shareholders for wondering whose side directors are on, given the broad failures by many board members to recognize and rein in risk-taking at so many companies. As fiduciaries for the owners of the companies on whose boards they serve, directors have a duty to act in shareholders' interests.
After all, they are the shareholders' representatives, and they are charged with ensuring that their companies are operated soundly and with long-term profitability in mind. Yet it doesn't always seem to work out that way. The main reason for director dysfunction is that board members have little fear of being fired for incompetence or sleepwalking through meetings.
Because of the way director elections are structured, board members can win their seats if they receive just one vote of support. And even if a majority of shareholders withholds support from directors at annual elections, the directors who are singled out are often allowed to stay.
Shareholders interested in ousting a director or two must mount an expensive proxy fight to do so.