SEC proxy rules

The SEC is soliciting comments about a new proxy rules document, at http://www.sec.gov/.  I recommend that you visit the site, and put in your two cents.   Here's mine.

I read the document, and found it to be obfuscating.  Rather than clearly lay out a set of principles it indulges in 175 pages of bureaucrat-ese.

I think there are some basic principles that need to be followed:

• The criteria upon which the performance of corporate executives and boards of directors are evaluated needs to be clear and explicit, and the performance of those people needs to be verifiable independently. 
• These criteria need to include: financial performance, corporate ethical performance, safety and environmental performance, and long term corporate sustainability performance.
• The shareholders should have the opportunity to accept or reject the criteria, and the evaluation of corporate officers against those criteria.

There are some additional issues that need to be addressed arising from the ownership of large blocks of shares by mutual funds and other institutions.  My sampling of mutual funds, by no means systematic nor thorough shows that most frequently the mutual funds will vote accepting the board of directors recommendations.  I think that some of the above will help address this, but nonetheless, these are huge blocks of stock, possibly controlling the corporation, and someway needs to be instituted so that the institutions are doing more than just looking at the bottom line, frequently on a quarterly basis.

Additionally, there needs to be a way to remove directors from the board, when they do not exercise their fiduciary duty. 

For example, using my own experience with BMY and Mr. Dolan. During his last years, he made some very serious missteps, the worst being a botched and likely unethical deal with Apotec regarding Plavix.  Mr. Dolan was not removed by the board of directors until the federal judge overseeing the BMY consent agreement from another case forced the issue.  Mr. Dolan was removed, with a generous consulting fee, and the board of directors remained intact, even though, in my eyes, it obviously failed in its duty to the shareholders.

I am not opposed to large bonuses in principle, but it appears to me that the top executives of a corporation and the board of directors form some sort of mutual admiration society.  Again as an example, several large pharmaceutical corporations have recently been fined for illegally marketing drugs, and these fines have been substantial, for example, in the case of Pfizer, over a billion dollars.  Yet the CEO was awarded a bonus of about twenty million that year. (even more perversely, he's on President Obama's export council--more on that at another time).  How much was that fine per share?  Why aren't there corporate policies addressing this kind of lapse? Where was the board of directors when this happened?

The SEC document doesn't even understand these issues.