Sunday, September 13, 2015

Trump Recognizes the Corporate Governance Crisis

“It does bug me," Trump said. "It’s very hard if you have a free enterprise system to do anything about that. You know, the boards of companies are supposed to do it, but I know companies very well and the CEO puts in all of his friends.”

He cited Macy’s, which cut ties with him after his controversial comments about immigrants from Mexico, saying, “They put in their friends as the head of the company and they get whatever they want.” “You see these guys making these enormous amounts of money, and it’s a total and complete joke,” Trump said.
The board of a corporation should be constituted automatically from the largest shareholders. A good size for a board is about five people. Thus, a 20% owner would have one board seat.

Forget about dealing with all the dirty tricks in corporate bylaws (staggered boards, non cumulative voting), which are terrible. If the board was automatically reconstituted after changes in ownership (and there shouldn't be restrictions on changes in ownership, either), then ownership and control would be tightly coupled, as they should be.


Anonymous said...

Five is too few. Audit and Comp committees take a lot of time. Challenging to serve on both, if not impossible unless Board is composed entirely of retirees. Seven is minimum needed - six independent with one being an independent Chairperson, and the CEO.

Ludwig said...

Kind of an autistic comment. No wonder Credit Bubble isn't blogging much.