A vision of value-based governance.

• Author: Seely, Michael
• Position: Chairman's Agenda: Balancing Shareholder Interests

A Vision of Value-Based Governance

Lots of us should be ashamed of ourselves. Through one of the biggest merger waves in history, we've managed to do two things simultaneously: pay huge amounts of "protection money" to takeover defense advisers while getting taken over in unprecedented volume. Even as the takeover era wanes, over 600 companies still pay up to $150,000 a year for so-called "stock watch" services - the Maginot Line of modern corporate life.

Ahead of us, fueled by still-rising institutional ownership of corporate stock and investor activism, appears an ear of bitter investor-management dissension. Investor Access Corp.'s annual tracking of governance shareholder proposals suggests that the number of such proposals may approach 500 in the 1991 proxy season. Many of them will be hotly contested.

It need not be so. Indeed, corporate management and institutional investors are natural allies on our most pressing economic issues. The competitiveness of U.S. industry in increasingly global markets begs that we harmonize this relationship.

To do so, we must express a holistic vision of the public company - one ordered by values that both "clear" the potential conflict on issues as wide-ranging as greenmail, South Africa, the Valdez Principles, and the secret ballot, and also encourage collaboration between the two groups.

We have a remedy. This vision has been staring us in the face for a decade. It can be implemented easily. And, I firmly believe, it is that rare thing in organizational life - a solution that will draw favor to pathfinding early adopters even though it challenges the status quo.

What have events of the last 10 years taught us? The golden rule - he who has the gold rules. Restated: Shareholders come first, other capital contributors thereafter, and other constituencies in the order that they contribute to the long-term profitability of the business. Public companies aren't in business to reward creditors, inspire the devotion of their employees, win the favor of the communities in which they operate, or have the best plants or products. These are all means to an end - making shareholders richer. Putting wealth creation first doesn't eliminate these concerns; it simply orders values in a way that eases corporate conduct.

Executive pay and incredulity

Take executive pay, as an example. Every year the media scan proxy statements and list those CEOs with the highest compensation. This typically inspires incredulity on the...