How "they" get away with the corruption:
(This tragic report is from ESPN of all places.)
The Case Against Corporate Boards: During the 2010 period when she was under consideration to become chancellor of the New York City school system, Cathleen Black filled out some disclosure forms -- and revealed she was being paid about a half million dollars a year just to sit in on some corporate board meetings for Coca Cola and IBM.
Harold M. Lambert/Lambert/Getty Images "Gentlemen, (the chart shows management's plan to loot the shareholders). "All say aye!"
Corporate board memberships are among the greatest hustles in American commerce. The Wall Street Journal recently reported that large public corporations pay their directors a median of $244,000 annually, plus lavish benefits, merely to sit in on occasional meetings, often held at luxury resorts.
In theory, corporate boards exist to police management and protect shareholders, ensuring management doesn't loot the company at shareholders' expense. In practice, many boards are rubber stamps that let management get away with anything. The 2011 book "Money for Nothing," by John Gillespie and David Zweig, estimated that the typical public-company board awards 10 percent of the annual dividend pool to the CEO, regardless of his or her performance. It is nearly unheard-of for a corporate board to oppose lavishing a windfall on the CEO -- because any corporate board member who opposed CEO pay would be dismissed, losing access to his or her own hefty payday for doing next to nothing.
Shareholders could revolt against lapdog corporate boards. But since even the most excessive board deals work out to a few cents of a major company's share price, only those who hold huge blocks of stock have an incentive to fight corporate-board corruption. That's why two recent developments are encouraging.
The mutual fund firm T. Rowe Price, with about $620 billion under management, has begun filing objections to directors who always vote to favor management over shareholders. (Owing shares of a company allows a person or business to file objections to a company's behavior; generally a large bloc must be held to make this worth one's time.) Institutional Shareholder Services, a private firm whose corporate-governance guidelines are influential, last week said that beginning in 2014, it will oppose the re-election of corporate directors who always favor diverting money from shareholders to management. If corporate boards were watchdogs rather than lapdogs, shareholders would be better served: and the sense that many CEOs are robbing the till might decline, which would be healthy for capitalism.
A lesser but still important concern about corporate boards is the number of university and philanthropy presidents present. Lawrence Small caused a 2007 scandal at the Smithsonian Institution when it was revealed he had been cheating on his expense account: in the aftermath of the scandal, a congressional report revealed Small was neglecting his duties to spend much of the year on multiple corporate boards, to pull in easy money. Too many college presidents neglect their duties in favor of what Michael Kinsley calls "buckraking" on corporate boards, and it's not because they are ill-paid. University presidents who are very well-paid should not be skipping work to fly to some vacation resort where they rubber-stamp a corporate plan, in return for a hefty check: university presidents ought to be spending their time and energy helping average people afford college.
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