'We have no good ways of handling this': what happens when you start tinkering with a board's fiduciary duties to achieve other ends?

Position::DUTIES OF DIRECTORS
 
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What about the goal of profit maximization?

At first blush, the topic of government as shareholder seems to involve banking institutions. But when you think about it, the government owned General Motors; the government owned AIG, an insurance operation; and the German government was a significant shareholder in Volkswagen, with the state of Lower Saxony owning about 20% of the company and having two board seats--which with the scandal over emissions rigging raises the question of whether it was a government agenda for the full employment of the citizenry of Lower Saxony that superseded any fiduciary agenda. Your goal as a director is profit maximization for your investors. The government, as a shareholder or significant regulator, may have different goals. What happens when the government's goals do not coincide with your goals? How, as a director, do you work through that?

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--Charles Elson, Professor and Director, Weinberg Center for Corporate Governance

New drivers of board agendas

There are many different dimensions to this topic. One aspect that we at The Clearing House have been focusing on is evaluating the impact of the cumulative regulatory requirements imposed on the board of directors of a banking group. These requirements, which are intended to serve public policy objectives, increasingly are driving board agendas of many financial companies and, therefore, in practice, are raising a new set of policy issues, such as what should boards of major financial institutions be focused on. Directors and officers at financial institutions are being confronted with the challenge of setting very busy agendas and priorities in line with both regulatory responsibilities as well as what may be characterized as the more traditional corporate law responsibilities to serve as a fiduciary to the company and to the shareholders. Having the most qualified and dedicated directors serve on the boards of our major financial institutions is a shared objective for the government, industry, and investor communities as well as the public at large.

--Gregg L. Rozansky, Managing Director, The Clearing House

Regulators have their place, but ...

It is a question of who you are elected by. I am elected by the shareholders of JP Morgan, so that is who I work for. The bank has 180 regulators around the world. They have a function, and I respect that function. I spend a lot of time with the regulators. They are like everybody else--you have to communicate with them, just as you have to communicate with your shareholders. So while the regulators have their place, the 10 independent directors on the board have been able to run the company for the shareholders and, so far, the shareholders have rewarded us.

--Laban P. Jackson Jr., Chairman and CEO, Clear Creek Properties Inc., and Director, JPMorgan Chase & Co. (where he serves as Chair of the Audit Committee)

AIG's instructive lesson

The AIG bailout by the government was a unique set of circumstances but offers an instructive lesson. In setting up a trust to oversee its...

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