October 24, 2011
I can't always understand just what it is the Occupy Wall Street protesters want. The New York Times had a piece last week that suggests the protesters themselves aren't always sure. I have some suggestions, few of which would be well received and none of which will be listed here, since no doubt the protesters and I would not agree on much.
Except maybe on this: public companies are owned by their shareholders. In a publicly-owned company, the Board of Directors is supposed to protect the interests of the owners by appointing and overseeing senior management. If a company does poorly, senior management often gets the blame, and that's proper since they are running the company. Directors, however, should not always be let off the hook. After all, the Board exists for a reason, not just to rubberstamp what is handed up to it by management.
Which brings me to the tragedy playing out at 343 State Street, right here in Rochester. We have watched the agonizing decline of the Eastman Kodak company for years: watched as successive waves of smart and hardworking Kodakers retired or were chased away by a company that no longer needed their skills; watched as iconic products like Kodachrome were discontinued; watched as buildings came down in clouds of dust. Now we're watching to see if Kodak will survive. Management is huddling with lawyers and loudly declaring their intent to avoid bankruptcy. For the last couple of years that same management has touted their hefty cash balances, but that line has gone silent as credit lines are drawn down sans comment, and creditors huddle with lawyers of their own.
Since Antonio Perez became CEO, Kodak's sales are down by more than half and shareholders have seen the stock's value plunge by about 95%. That hasn't stopped Mr. Perez from enjoying Dow-30-style benefits despite being dropped from that list 7 years back. And where is the Board of Directors? When will they answer for what has (and hasn't) happened to Kodak?
I don't really want protesters to occupy State Street. But if they start asking Boards to demand performance for jumbo CEO pay, I'll be nodding in agreement.
GTC
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).