Wall Street Misunderstood: Governance Reform Needed

You can tell that the corporate public relations consultants and experts have properly prepared the CEOs of the federally bailed out corporations to be apologetic and otherwise say all the right things in public and before Congress. These "hand-out bandits" know that CEO salaries and bonuses are now in the cross-hairs.

When executives get performance pay and bonuses without delivering, they are robbing the stockholders of the corporation and this represents malfeasance on the part of the corporation's board of directors.

I believe very few people understand that the primary beneficiary of the billions of dollars infused into these companies are the stockholders not the management. Directly and indirectly retirement and pension funds own the largest chunk of equity in corporate America. The executives in most cases are hired guns who own a tiny percentage of the companies stock. (Most of the exceptions are companies that are run by the person who founded the company.) Unfortunately, corporate boards are way too cozy with the executives and fail to truly protect the interest of the shareholders.

It is time to change the governance rules regarding the selection and independence of corporate boards. Pension funds like California Public Employees' Retirement System (CalPERS) have pushed for and developed models for better corporate governance.

When good governance is practiced by the board of directors of a corporation, our collective interests are protected. The real focus of protecting shareholder (and with the bail-out bandits the taxpayer) interests and the lever for reforming pay-for-performance at the executive level is true independence on the part of the board.