NEW YORK (
) - Although I've been an outspoken proponent for strong corporate governance and am genuinely sorry about the state of it today in Corporate America, I'm not always in agreement with what some argue is in the best interests of shareholders.
A case in point is push by some for more "Say-On-Pay" votes at shareholders' meetings. Large institutional shareholders and pension funds carp on the fact that CEO and executive pay continue to climb in this country. Often, CEOs get paid even when their companies are chronic under-performers of the market. We often hear about how much more than the "average" worker CEOs are getting today versus the 1960s.
And, look, I'm against over-paying fat-cat CEOs who add no value as much as the next guy. Heck, that's partly why I launched my campaign against Terry Semel at
in 2007 to remove him. He ended up pulling out more than $600 million from that company for his 6 years of work there. Most would say he got way more than he deserved.
Yet, these say-on-pay votes are always non-binding. Shareholders keep putting them on the proxies to be voted on whether to include them or not. Sometimes they pass. Sometimes they don't. Even when they do pass and then -- a year later -- get voted on in a disapproving manner, not much has changed.
In my view, shareholders can already show their displeasure with high executive compensation: vote "no" against the re-election of the directors who served on the compensation committee or -- if you don't feel that's sufficient -- against all the directors.
I was irate that Terry Semel got paid that amount of money but, at the end of the day, if I were in his shoes and Yahoo!'s board offered me that kind of sweet deal, I couldn't say I wouldn't have accepted the same package. It wasn't an inanimate object known as Yahoo! who offered the deal to Semel, it was the members of the board.
I also recently objected to some overly-zealous corporate governance advocates who banged the drum for
to reveal its succession plan for Steve Jobs. They stirred up this belief that the board was holding something back. The media also ran with this.
"All this criticism would go away if Apple would just reveal their plan," I was told. The problem is that no company ever reveals a detailed succession plan. They might say the son of the founding father will take over the company when he dies in a family-run business, but very rarely will they reveal a detailed succession plan in a major company as the critics were calling for. Thankfully, in my opinion, Apple shareholders voted down the proposal by a 2-1 margin.
What is going to be the next shareholder transparency issue? Are we going to see shareholder proposals that all quarterly human resources reviews should be included in the 10-Q filings with the SEC? I'm all for sunlight being the best disinfectant, but at some point the managers have to run the company without the shareholders getting in the way by getting in the weeds.
Now, there's a new corporate governance issue involving Steve Jobs which just came to light. And, again, I'm going to go against what these shareholders are saying is best for good corporate governance.
Steve Jobs sold the company he founded, Pixar Animation Studios, to
in 2006. Pixar, which revolutionized the animation film genre, is yet another part of Jobs' incredible legacy. The deal has also been a huge win for Disney, despite costing a lot, at least by 2006 standards.
Because Jobs owned such a large stake in Pixar and because Pixar was valued highly at the time of the 2006 deal, Jobs because Disney's single largest shareholder, owning 7.3% of the huge global iconic brand.
What's good governance for? It's to protect the rights of the shareholders. Too often, companies appoint representatives of shareholders to the board who actually have no or little shareholdings themselves. But this is not the case with Jobs.
He's got real skin in the game with his 7.3% stake in Disney. If Bob Iger does a crummy job and the stock takes a hit, Jobs feels it immediately. As the single biggest holder of Disney stock, he deserves to be there and he wouldn't have agreed for Pixar to be acquired without board representation. Disney (and its shareholders) happily agreed to that condition.
Now, the complaint of the AFL-CIO and Institutional Shareholder Services is that Jobs has only attended 25% of Disney board and committee meetings in the last three years. In their view, that's not serving Disney shareholders. The AFL-CIO has gone so far to call on Jobs not continuing to serve on the board.
Again, I have to disagree. It would be ideal for Jobs to participate in the all board meetings. Perhaps he should even consider a stand-in for his for the next year or two (although I'm sure he has a board observer attending all meetings he misses). However, Disney shareholders decided five years ago that it was a great thing to own Pixar and all the conditions that came with that.
Jobs is there to represent the 138 million Disney shares he owns, not the 92% of other shareholders. Those shareholders are represented by the other outside directors. Obviously Jobs feels comfortable with his investment, despite his lack of participation. He deserves to be there.
If Disney shareholders feel their views are not being adequately represented (and they have had to suffer through the last year where their stock price went up only 23% compared to 11% for the S&P 500), they should look at replacing the other outside directors, not Jobs.
At the time of publication, Jackson was long Yahoo! and Apple.
Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. You can follow Jackson on Twitter at www.twitter.com/ericjackson or @ericjackson