[Vision2020] I thought you might be interested in this article

Jeff Harkins jeffh at moscow.com
Fri Sep 1 14:41:44 PDT 2006

Well Bill, you can state that the Board election structure is 
anti-democratic and you can state that the purpose of the "vote per 
share" model is to keep control away from the masses - but that does 
not make it so.  In point of fact, the "vote per share model" is 
intended to provide protection to shareholders based on the amount of 
capital at risk - that is, the more shares you have (the more assets 
you have invested), the more votes you have.  It is a pro-rata 
model.  Your "collective" can easily control any corporation it 
wishes.  Just pool your resources and buy a majority of the stock and 
you can elect the board and appoint the management.  And I would be 
willing to bet that once you got control, you would want your 
ownership shares to vote on a pro-rata basis.

Think of it like a fire and casualty insurance policy for one of your 
assets - the more valuable your car, home or other insured asset, the 
more the premium is going to cost (because the cost of repair is 
going to be higher).  Under your model, all fire and casualty 
insurance policy premiums would be the same.

Board elections couldn't really be more fair.  The more of a stake 
you have in the corporation, the more you can direct the activities 
of the company (ie, elect board members and officers).  Since you 
have more to gain or lose, based on your interest in the firm, you 
have more say - on a pro-rata basis.

At 12:29 PM 9/1/2006, you wrote:
>The critical difference is that corporation board elections are not
>democratic (as in one person, one vote).  They are specifically
>anti-democratic (as in one share, one vote) with the purpose of keeping
>control away from the masses and maintained within the tight circle of upper
>managers and wealthy shareholders.
>welcome to the real world...the multinational corporations operate well
>beyond the reach of law and ethical constraints.
>----- Original Message -----
>From: "Jeff Harkins" <jeffh at moscow.com>
>To: "Andreas Schou" <ophite at gmail.com>; <vision2020 at moscow.com>
>Sent: Thursday, August 31, 2006 7:59 PM
>Subject: Re: [Vision2020] I thought you might be interested in this article
> > Granted - but you miss the point again.
> >
> > The Board of Directors is elected by the shareholders - to whom the
> > BOD members are directly accountable.  Some BOD's may own stock in
> > the corporation, but it is not a defacto standard.
> >
> > Also, although there are a few exceptions, the compensation of the
> > BOD is determined by a vote of the shareholders.
> >
> > The company is indeed managed by the owners and duplicity is often
> > dealt with harshly by the owners.
> >
> > You see, corporations (owners or shareholders) find it in their best
> > interest to attract the very best top executives they can afford -
> > and that action must meet a market test.  If golden parachutes are a
> > standard clause for competitors, it is likely that a corporation must
> > match or exceed a package offered to a candidate being courted by the
> > competition.
> >
> > There is another subtlety that I hope you recognize.  If you are an
> > owner in a corporation and you do not agree with the BOD or the
> > management or both (it strikes me that this is the situation you find
> > yourself in), you can participate in the strategic decisions related
> > to the hiring of management and the BOD by exercising the rights
> > afforded to you as a shareholder - just don't exercise the proxy.
> >
> > Of course, that would require an investment of your time and
> > capital.  Fortunately, you have a fall back position - you can simply
> > sell your shares and invest in a company that meets your standards
> > for determination of executive compensation as well as BOD's that
> > advance the long-term strategies consistent with your investment
> > philosophy(ies).
> >
> > Finally,  Title 4 of the Sarbanes Oxley Act provides additional
> > assurance to shareholders that top executives and BOD's member will
> > act prudently with regard to the management of a corporation
> > (publicly traded firms only).
> >
> >
> > At 11:12 AM 8/31/2006, you wrote:
> > >On 8/31/06, Jeff Harkins <jeffh at moscow.com> wrote:
> > >>The compensation packages for CEO's and other top executives are
> > >>negotiated transactions in the marketplace.
> > >
> > >The compensation packages for CEOs and other top executives are
> > >determined by the board of directors' compensation committees, which,
> > >itself, is largely composed of other CEOs and top executives. There
> > >exists a significant conflict of interest between their interest in
> > >the corporation as stockholder and their interest as an executive
> > >whose compensation is likely to be later determined by exactly the
> > >same person whose compensation they are currently determining. Whether
> > >or not it's explicit, there exists a certain element of quid pro quo
> > >in executive compensation -- especially when you consider golden
> > >parachute clauses, which allow a CEO to fail out of their position
> > >several hundred million dollars richer than they would otherwise be.
> > >
> > >-- ACS
> > >
> >
> >
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