Corporate Governance Gets Personal: The Mess At Massey Energy
Professor Joseph Grundfest is quoted from his remarks at the 2010 Directors' College on corporate governance and social responsibility. Helen Coster of Forbes filed this story:
On the second day of last week’s Stanford Law- sponsored primer on corporate governance, I heard professor Joseph Grundfest, faculty director of the Rock Center for Corporate Governance, talk about the evolving role of corporate boards. Grundfest thinks that in the near future, individual directors will face more scrutiny from the press, and shareholders will use their voting power to influence corporate governance—rather than shell out millions of dollars to litigate or wage proxy campaigns.
“Running a corporation will become a much more political task,” says Grundfest. “Chief executives and board members will have to think more about the voter base. Currently many people take the view that you don’t have to worry about winning the support of majority shareholders.”
Grundfest used Massey Energy, which operates mines throughout Appalachia, as an example of how shareholders can exert power on a company through corporate governance. In April, 29 people died after an explosion at Massey’s Upper Big Branch mine. Since April 2009, federal regulars repeatedly cited the mine for violations related to its methane control plans.
Massey responded by agreeing to de-stagger the board, and also to voluntarily adopt a majority vote bylaw. “The mechanism for corporate democracy is becoming cheaper,” Grundfest says. “We’d be seeing the exact same things at BP if it were a US-chartered company. You don’t have to get into the front door to get into the house.”