Subject: [NEXTEL-1] Volcker Panel

From: Marcel <[email-masked]>
Date: Thu, 09 Jan 2003 13:32:40 -0500

01/09 11:28
Volcker Panel
Says Boards
Must Have
Greater
Autonomy

By Jack Duffy

New York, Jan. 9
(Bloomberg) -- U.S.
executives must give
corporate boards
more independence to
regain the trust of
investors, a panel of
financial leaders
including former Federal Reserve Chairman Paul Volcker said.

The Conference Board's Commission on Public Trust and Private Enterprise
called on companies to split the roles of chairman and chief executive officer, or
name a lead director without ties to management to run board meetings without
executives present.

``The overall theme is, how can we make boards more independent and more
effective,'' said Charles Bowsher, the former U.S. Comptroller General and a
panel member.

Corporate power in the U.S. has long been concentrated at the top: 80 percent of
the companies in the Standard & Poor's 500 index are run by someone who
combines the roles of chairman and CEO. The failure of boards to monitor
executives at Enron Corp., WorldCom Inc. and Tyco International Ltd. caused
many investors and governance experts to urge that changes be made.

While Enron and Worldcom had separate chairman and CEO positions, both
roles were filled by people with ties to management.

``The question is whether the chairman is an independent outsider,'' said Nell
Minow, editor of the Corporate Library, a research group that monitors corporate
governance. ``If you're talking about the founder or former CEO, there is no
independence.''

Panel member John H. Biggs, former chairman and CEO of TIAA- CREF,
dissented from the recommendation for a separate chairman and CEO, saying it
``would impose unnecessary costs on American business.''

Ties to Management

The commission said that in cases where the chairman has ties to management
and is not independent according to stock exchange rules, boards should appoint
a lead independent director.

``It is essential that non-CEO chairmans not have any relationships with the CEO
or management that compromises their ability to act independently,'' the
commission said.

The panel also recommended boards have a ``substantial'' majority of
independent members, and said the independent board chairman or lead
independent director should have ultimate approval over information that goes to
the board and over its schedules and agendas.

Some companies have begun responding to calls for greater independence on
boards. Insurer Chubb Corp., food retailer Pathmark Stores Inc. and auto repairer
Midas Inc. have all named non-executive chairmen since September.

Dow, Tyco

Investors including union-sponsored pension funds of the AFL- CIO, which has
$400 billion under management, have filed resolutions that would require splitting
the chairman and CEO roles at Tyco and 16 other companies, according to the
Investor Responsibility Research Center, which monitors such votes.

Dow Chemical Co. is ``discussing the matter with the proponents,'' said Cindy
Newman, a spokeswoman. Tyco spokeswoman Liz Mather said the resolution
and the company's position will be included in its proxy materials.

``There's a lot more buzz about this issue than I've ever heard before,'' said Beth
Young, an independent consultant to institutional investors. ``More buzz does not
always translate into more votes,'' she said.

Not only do few U.S. companies have an independent board chairman, there is
no direct correlation between companies with more independent boards and the
performance of their stocks, governance experts say.

Performance

Twenty percent of S&P 500 companies had a separate chairman and CEO as of
June 30, according to the investor research center, and only 3 percent had a
board chairman with no previous ties to management. Shares of that group,
which includes Agilent Technologies Inc., Safeco Corp. and Nextel
Communications Inc., fell an average 16 percent last year, compared with a 21
percent decline for the S&P index. In 2001, the average stock in the group fell
twice as much as the S&P index.

``There is no consistent evidence that shows that splitting the CEO from the
chairman makes a company perform better'' in the stock market, said James H.
Davis, a professor at the University of Notre Dame's Mendoza College of
Business who specializes in corporate boards. ``No one size fits all'' in terms of
board structure, he said.

Some academic studies have shown that companies with a non- executive
chairman have had more success in increasing revenue and controlling costs
than companies where one person combines both roles. Studies focused on
stock-market performance have shown no consistent benefit to shareholders,
Davis said.

Members

Chief executives hold more sway over boards in the U.S. than in Europe, said
Lutgart Van den Berghe, a business professor at the University of Ghent in
Belgium. One reason is that ownership of American companies is splintered
among thousands or millions of investors, leaving CEOs unrestrained by any big
shareholders, she said. Some European companies also have two-tier board
systems that separate executives from non-executive members.

The Conference Board panel is co-chaired by Blackstone Group Chairman Peter
Peterson and CSX Corp. Chairman and CEO John Snow, President George W.
Bush's nominee for Treasury secretary.

Other members include Vanguard Group founder John Bogle; former U.S.
Senator Warren Rudman; former SEC Chairman Arthur Levitt; Peter Gilbert, the
Pennsylvania State Employees Retirement System Chief Investment Officer;
Harvard Business School professor Lynn Sharp Paine; and Ralph Larsen, former
CEO and chairman of Johnson & Johnson.

Levitt is a director of Bloomberg LP, parent company of Bloomberg News.

In September, 10 members of the panel recommended that companies account
for stock options as a compensation expense. The group was organized in June
to help rebuild investor confidence. It agreed unanimously on 22 other proposals,
such as one requiring executives to give advance notice of plans to sell their
company shares.

http://quote.bloomberg.com/fgcgi.cgi?T=marketsquote99_relnews.ht&s=APh2jFhX6Vm9sY2tl

Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/