atans1

The PAP way is the American corporate way

In Corporate governance, Political governance, Public Administration on 15/07/2018 at 11:21 am

They both exercise “extreme ownership”: Ownself check ownself.This way really delivers compared to the British way of checks and balances.

At more established US companies, managers often practise “extreme ownership” — which Jocko Willink and Leif Babin, the Seals-turned-management gurus, define as taking charge and holding yourself accountable. They have to. There is no one else to do the job.

When he was not writing books or building the world’s biggest chipmaker, Grove of Intel weighed in on this perpetual corporate governance debate: “The separation of the two jobs goes to the heart of the conception of a corporation. Is a company a sandbox for the CEO, or is the CEO an employee? If he’s an employee, he needs a boss, and that boss is the board. The chairman runs the board. How can the CEO be his own boss?”

That comment has since been quoted in numerous shareholder proposals to install an independent chairman, including at Amazon, Kroger, Target, Goldman Sachs, JPMorgan Chase, ExxonMobil, Wendy’s and AbbVie. They have all been defeated. A report this week by Equilar, the pay and governance consultants, found that 38 of the top 500 US public companies last year had proposals to install an independent chair. All failed.

At seven of the top 10 US companies by market value, there is no independent chair. Most shareholders are content to give the CEO a sandbox if he builds a nice enough castle.

Contrast that with the UK, where independence is deemed essential by the corporate governance code; chairs even feel empowered to pontificate in public on the direction of their companies.

This may play well with corporate governance experts. It does not seem to help performance. The top four companies on the S&P 500 are now worth more than the entire FTSE 100.

FT

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