governance

Andrew Hill

US national security concerns apart, China’s Huawei has one of the strangest governance structures of any multinational company: a “panel” of three chief executives each of whom rotates into the top executive role every six months.

On the issue of Huawei’s links with the Chinese military, the telecommunications equipment company has proved the equal of any western counterpart when it comes to using spin-doctors to push out a strong and consistent message that it has been maligned. But when it comes to the rotating CEOs, its founder, Ren Zhengfei (who is one of the trio), is remarkably frank that the arrangement is a bold experiment. “Even if we fail, we will not regret our choice because we have blazed a new trail,” he said in the most recent annual reportRead more

Andrew Hill

In the annals of odd academic tasks, trawling through nearly six decades of obituaries for chief executives ranks highly. But, in doing so, Timothy Quigley of Lehigh University has disinterred interesting evidence that the all-powerful CEO is alive and well.

For a paper to be presented to next month’s Academy of Management annual meeting in Boston, Prof Quigley looked at the market’s response to 193 sudden CEO deaths (with causes from plane crash to cerebral haemorrhage) between 1950 and 2009. The magnitude of investors’ reaction, whether negative or positive, was greater in recent years than in the early part of the period. In fact, the share price rise (or fall) for deaths announced between 1990 and 2009 was more than double the reaction in the 1950s and 1960s. Read more

Andrew Hill

Corporate governance can be dull. But Nomura’s annual meeting on June 27 will be livened up no end if the Japanese bank’s chairman allows any discussion of shareholder proposal 12, “regarding overhaul of basic daily movements”. Here it is in full:

Details of Proposal: It should be stipulated in the Articles of Incorporation that all toilets within the Company’s offices shall be Japanese-style toilets, thereby toughening the legs and loins and hunkering down on a daily basis, aiming at achieving 4-digit stock prices.

Reasons for Proposal: The Company is on the verge of bankruptcy. In other words, it is the time to hunker down. The Company cannot avoid bankruptcy if it merely adopts a spiritual approach such as encouraging sales persons to speak in a loud voice, but the Company can surely avoid failure if they straddle over a Japanese-style toilet every day and strengthen their lower body. If it cannot, it can only be accepted as a bad luck.

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Andrew Hill

Rupert Murdoch

Rupert Murdoch

It will be a shame if bitter and partisan debate over whether Rupert Murdoch is “a fit person to exercise the stewardship of a major international company” obscures the more important conclusion of the UK parliament’s culture, media and sport committee on phone-hacking: that he and his son James were wilfully blind to what was going on.

Whether BSkyB, controlled by the Murdoch-owned News Corp, is a “fit and proper” owner of a broadcasting licence is a question for Ofcom, the regulator, which has now entered an “evidence-gathering” phase of its probe.

But as even the dissenting members of the committee said on Tuesday, if the “fit person” line had been omitted from the report, they would have voted unanimously to back it, including the charge that the Murdochs oversaw a culture of wilful blindness. Read more

Andrew Hill

The greenest job applicants know that to make any sort of impression on their prospective employer they must at least know something about the company where they wish to work and the position for which they’re pitching. That lesson appears to have been lost, however, on many of the experienced hands seeking to join the boards of Britain’s financial companies.

Hector Sants – outgoing chief executive of Britain’s Financial Services Authority – used his valedictory speech on Tuesday to underline how would-be directors are failing even the most basic examination of their credentials for high office. Read more

Andrew Hill

The problem with conventional wisdom is that academics will insist on testing whether it is truly wise.

So the popular assumption that Lehman Brothers would not have collapsed if it had been Lehman Sisters (to quote, among others, European commissioner Viviane Reding and former UK minister Harriet Harman) seems to take a knock from a new discussion paper published by Germany’s Bundesbank. It concludes:

Board changes that result in a higher proportion of female executives also lead to a more risky conduct of business.

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Andrew Hill

“Day by day Volkswagen… appears less like a public company, and more like a complex oligarchy.” That’s how The Economist began a critique of the German carmaker’s flawed corporate governance – in December 2005.

Not much has changed since, as the latest developments in Wolfsburg suggest. In spite of periodic protests about governance, Ferdinand Piëch, VW’s chairman, has reinforced his hold over the group and is expected to seek another five-year term in the chair. The latest news is that his wife, Ursula, will stand for nomination to the board. This may be, as the FT wrote on Sunday, part of “a fairly well-established tradition of spouses taking up powerful positions at German companies”, citing the board positions held by Friede Springer at Axel Springer, and Liz Mohn, at Bertelsmann. But to anybody outside this tradition of family-controlled companies, it looks distinctly odd. As Dow Jones pointed out in its account, “there are no reports…. that would suggest she has any high-profile corporate management experience“. Read more

Andrew Hill

It’s more common to cite strategic than structural differences as a reason for resignation. But Carla Smits-Nusteling – one of the most prominent women in Dutch business – is quitting KPN, the telecoms group, because, in the words of Tuesday’s statement, “she does not agree with the internal governance of the company in the new executive structure”.

Ms Smits-Nusteling, KPN’s finance director, sat on its management board (which is itself overseen by a supervisory board, in the continental European style). KPN has expanded that board from three people to 12, by bringing in all the divisional heads.

This could be about power. After all, a one-third say in decisions about a company’s operational direction is different from a one-twelfth say. Jos Versteeg, an analyst at Theodoor Gilissen, a Dutch bank, told Dow Jones:

The new management structure might compromise some of [Ms Smits-Nusteling's] executive authorities, handing over more power to the CEO, which could be the reason for her dissatisfaction.

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