Corporate Reform... or Business As Usual?

Christensen, Patrick T.
November 2002
Journal of Financial Planning;Nov2002, Vol. 15 Issue 11, p21
Academic Journal
This article discusses the role of financial planners in reforming corporate governance. It has been an eventful year for corporate scandal and intrigue. Each week, it seems, there have been new revelations of accounting irregularities, fraud, bankruptcy and insider trading coupled with the regrettably familiar news of excessive management compensation, faltering stock prices, layoffs and cuts in employee benefits. First and foremost, shareholders need to be allowed to nominate prospective members of the board of directors. Boards, which are supposed to protect shareholder interests, have in many cases been hijacked by company management. Because most chief executive officers also serve as the chairman of the board of directors. Second, management and the board of directors should be required to honor shareholder resolutions that receive a majority shareholder vote in two consecutive years. It would seem reasonable that the owners of a company get to dictate its direction. Third, senior management and members of the board of directors should not be allowed to sell their company stock until one year after their departure. Fourth, mutual fund companies and other institutional investors should be required to disclose their proxy voting records.


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