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Governance, Risk Management, and Compliance: It Can't Happen to Us—Avoiding Corporate Disaster While Driving Success by Richard M. Steinberg

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Chapter 16

Where the Power Lies

It's extraordinarily clear that shareholders are angry. They're angry about opaque or otherwise bad financial reporting, seemingly outrageous CEO compensation, poison pills, staggered boards, and anything else that emanates from the perception that boards of directors are not doing their jobs. The underlying cause, some say, is a still too-cozy board-CEO relationship and directors who don't care about legitimate shareholder needs.

Shareholders' concerns moved from simmering to boiling over when their companies lost many billions of dollars in the financial system's near meltdown, signaling to these shareholders that the boards failed in their responsibilities to oversee what managements were doing. And many just shook their heads in dismay when the CEO of General Motors told a reporter, “I get good support from the board—we say what we're going to do, and here's the time frame, and they say ‘let us know how it comes out’”!

But things have evolved, with shareholders gaining significant rights, and one might believe cool heads will prevail and a mutually beneficial understanding will emerge among shareholders, managements, boards, regulators, and others. Still, the cries for change seem to only get louder.

Make no mistake, this is about power and who wields it. Shareholders who believe boards are making decisions that cost their companies huge amounts of money, or are otherwise not seeking to maximize returns, maintain that they should have greater ...

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