The divine right of the imperial CEO

By John Plender, May 26th 2013, Financial Times

So there it is. The divine right of the imperial chief executive to combine the roles of chairman and CEO in the US remains intact for now. That much is clear from the protest vote of only 32 per cent against Jamie Dimon at JPMorgan Chase’s annual meeting last week, down from 40 per cent last year. But what does it tell us about the state of corporate governance after the crisis?

First, it confirms the remarkable weakness of shareholder rights in the US, compared with the UK and much of continental Europe. Even if a majority had voted against Mr Dimon, the vote would still have been purely advisory. Under Delaware law, the pre-eminent jurisdiction for big corporations, shareholders can call a meeting to remove a director only if they are the chief executive or a plurality of the directors. And directors can freely resort to poison pills to protect themselves from hostile takeovers.

Shareholders can use the proxy solicitation process to put proposals to the board. Yet the Securities and Exchange Commission, against which it is very difficult to launch an appeal, decides which proposals management has to include on the proxy. The commission’s critics argue that its decisions are remarkably arbitrary. This lack of adequate accountability to shareholders explains why the US is, bizarrely, in breach of OECD Principles, the widely respected governance recommendations. Continue reading…



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