Backlash to austerity

[LCHIEN]

its hard to agree or disagree with what Carl Icahn says.
There's problems with corporate boards of directors.
For one, while outside directors are sometimes nominated by large shareholders, usually the officers and other directors nominate the candidates AND recommends them on the ballots sent to shareholders. Its very cozy, the directors are hand poicked by the administration and in turn they usually rubber stamp the administration. Their will at some point approve or even select the CEO and major officers. They can raise questions at what must be relatively infrequent board meetings (12 a year? once a quarter?) like what the risk, and they should make the CEO worry a bit. But in the end they uusally rubber stamp the CEO's plans since they picked him for his supposed business acumen.

OTOH, they are usually shareholders with a fair amount of stock and or options. So they should have a strong interest (beside the cushy fees and perks they get for attending meetings). in the company doing well.

I really have a hard time imagining how to govern a company in a better way... the board of directors falls short in many ways but I haven't seen a better way.

Also, what company would charter itself in North Dakota which is shareholder friendly... any company would charter itself where it had the most power. I can hardly see a "chartered in NoDak" label being a strong stock price pusher. Most corproate boards would charter them selves in states being cheap, low fees and taxes and corporate board friendly, not stockholder friendly.

[jackellis]

Jeff, I confess that I did not address the substance of Icahn's letter. Managements should do what's right but neither they nor directors do so with alarming regularity. However Mr. Icahn cannot claim to be a paragon of virtue. In Time Warner's case, he wanted to "unlock shareholder value", which meant taking on $20 billion in debt and using the proceeds to either pay a dividend or buy back stock. This was perhaps a year ago, which in hindsight was the wrong time to be taking on more debt.

I have nothing but admiration for Mr. Buffett, and especially for his habit of buying companies and holding them forever. He has sold off shareholdings from time to time in companies where he's bought partial stakes but he still owns the Buffalo News in spite of the fact that newspapers are a very poor business to be in these days.

I would never suggest stockholders simply trust management, but there is a finer line than you might believe between oversight and interference. I'm thinking in particular of a former director at a company where I am one of the largest shareholders. This individual is very disruptive (actually I think that word is spelled a**...) and I would ban him from board meetings if I had the power to do so.