Comments on: Board compensation datapoints of the day http://blogs.reuters.com/felix-salmon/2011/03/11/board-compensation-datapoints-of-the-day/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: DHume http://blogs.reuters.com/felix-salmon/2011/03/11/board-compensation-datapoints-of-the-day/comment-page-1/#comment-24750 Sat, 12 Mar 2011 21:53:36 +0000 http://blogs.reuters.com/felix-salmon/?p=7599#comment-24750 The effect is even more interesting when you consider board members who give the appearance of being independent, e.g., academics and college presidents, for whom the director’s fee is a very substantial income supplement. For example, Mary Sue Coleman, President of the University of Michigan, is one of two academics who are members of the board of Johnson & Johnson. The $200K plus that they receive is more significant to them than it is to many board members who are wealthier. The academics appear to be independent but often are the least independent because the prospect of losing an amount of money that would change one’s financial life is not something anyone wants to face.

Very useful when it comes to having a vote against being acquired (and losing that board position) or against firing a CEO (like Bill Weldon at JNJ).

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By: AdamJ23 http://blogs.reuters.com/felix-salmon/2011/03/11/board-compensation-datapoints-of-the-day/comment-page-1/#comment-24724 Fri, 11 Mar 2011 22:04:14 +0000 http://blogs.reuters.com/felix-salmon/?p=7599#comment-24724 RZO- While a primary concern of the limitations of indemnification is the indemnifying parties ability to pay (which you aptly point out isn’t much of a concern for Berkshire), another limitation is that to benefit from indemnification you have to meet a conduct threshold (not act in bad faith, not be negligent- depends on the state of incorporation’s law), while insurance you do not. Of course, most people would think a conduct threshold to avoid personal liability is a good idea…

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By: right http://blogs.reuters.com/felix-salmon/2011/03/11/board-compensation-datapoints-of-the-day/comment-page-1/#comment-24719 Fri, 11 Mar 2011 20:03:59 +0000 http://blogs.reuters.com/felix-salmon/?p=7599#comment-24719 Management does not set board compensation, so there’s no reason this would be a mechanism to “capture” a director. Directors comp (and, indeed, CEO comp) is set by the Compensation Committee of the Board of Directors, which, for companies listed on US exchanges at least, includes only independent directors.

I’m not sure why a cap on director comp would be helpful though. Some companies need to attract qualified independent directors and paying them well is one way to do so. Not every company is in Buffett’s fortunate position of having enough well-aligned and well-qualified shareholders with time to spare.

(None of this is to defend the specific compensation arrangements of Rajat Gupta, which seem excessive and well above market.)

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By: 3oosion http://blogs.reuters.com/felix-salmon/2011/03/11/board-compensation-datapoints-of-the-day/comment-page-1/#comment-24715 Fri, 11 Mar 2011 18:12:07 +0000 http://blogs.reuters.com/felix-salmon/?p=7599#comment-24715 Self insurance is usually not a good idea. The issue isn’t financial ability to pay, it’s the legal ability to pay.

For example, under Delaware law, there are circumstances under which a corporation can’t pay its directors, yet a third party (such as an insurance company) can.

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By: RZ0 http://blogs.reuters.com/felix-salmon/2011/03/11/board-compensation-datapoints-of-the-day/comment-page-1/#comment-24714 Fri, 11 Mar 2011 17:50:20 +0000 http://blogs.reuters.com/felix-salmon/?p=7599#comment-24714 For Berkshire, the lack of D&O isn’t a big deal. Berkshire is big enough and liquid enough to self-insure:
http://www.iii.org/insuranceindustryblog  /?p=2014
and
http://bit.ly/eM0ED1

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By: 3oosion http://blogs.reuters.com/felix-salmon/2011/03/11/board-compensation-datapoints-of-the-day/comment-page-1/#comment-24711 Fri, 11 Mar 2011 17:16:59 +0000 http://blogs.reuters.com/felix-salmon/?p=7599#comment-24711 This is why corporations hate ‘activist shareholders,’ in other words those who hold a lot of stock and want the corporation to be responsive to its owners. Management doesn’t want owners with a real stake monitoring its activities, it wants well paid lackeys.

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By: y2kurtus http://blogs.reuters.com/felix-salmon/2011/03/11/board-compensation-datapoints-of-the-day/comment-page-1/#comment-24707 Fri, 11 Mar 2011 16:15:22 +0000 http://blogs.reuters.com/felix-salmon/?p=7599#comment-24707 “As an individual shareholder, I’d be much more comfortable being represented by a Berkshire-style board.”

How about this… pay travel expences directly, 1st class (or private), 5-star Hotel to attend the meetings and then your only financial reward would be a large stock award. Let’s restrict half of it for 5 years and half of it FOREVER.

When you die your kids can sell it or you can gift it to charity but as long as you’re breathing than you own the stock. That would incent boards to think about the truely longterm health of a company in the same way Buffett does.

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