Proxy Statements, Part Two

Proxy Statements, Part Two

I’m back with more good stuff on the proxy statement. Let’s start with the board of directors. The responsibility of the board is to enhance the long-term value of the company for its stockholders. In executing its responsibilities a board has specific functions in addition to the general oversight of management and the company’s business performance. This would involve things like evaluating strategic initiatives, reviewing financial and business goals, approving the terms of a major acquisition, hiring outside council and all that other good stuff.

As for myself I have my own personal agenda. I prefer not to see more than seven directors on the board (I want to avoid the old boy’s club). I don’t want too many of the company’s employees on the board as I’m looking for an independent and objective voice to keep management’s feet to the fire. I don’t want to see a lot of the members with the same last name (despotism is alive and well). I prefer to see directors with short tenures to avoid complacency. Do all the directors own shares in the company and how many do they own? I hope they bought those shares themselves and didn’t have them handed to them. As you can see I’m a demanding boss, maybe that’s why I’m unemployed. The bottom line is that the board has to be independent. If not they are liable to go easy on management and rubber stamp what ever management wants to do, like boost the compensation package for the CEO.

And then there is the dreaded “related party transactions”, can you spell, ”conflict of interest”. Look for employees or directors who own stock in companies that are suppliers or customers to their own company. And look for family members who are being used as consultants. You get the idea; despotism again, isn’t human nature wonderful.

And lastly you want an independent auditor who doesn’t earn a lot of money providing consulting services to the firm, conflict of interest again. The proxy will tell you all the fees paid to the independent auditor.

After reading all this stuff about the proxy statement I think I’ll have a look at it myself sometime, which leads me to the next post. Do you really want to spend all this time doing your due diligence or would you prefer to let randomness do the heavy lifting for you. Stay tuned.