Ryn The Guardian Melberg made observations and recommendations about corporate governance and the negative impact to employees, customers, shareholders and other stakeholders to her podcast audience this week, May 18, 2015. Her opinions and suggestions were based on recent events and published articles about Dow Chemical CEO Andrew Liveris and NFL quarterback Tom Brady.
To hear her weekly podcast, go to iTunes (https://goo.gl/DLWBjO), Soundcloud, or Stitcher. Melberg has a great deal of experience managing and consulting on issues about the risk shareholders are exposed to when corporate boards of directors and senior leaders are negligent in the care they take with company owned assets. The examples of both Liveris and quarterback Brady are the latest as Melberg previously talked about the situation with the board at Wynn Resorts, and the vacation cruise industry.
Dow’s Andrew Liveris is one of the more high profile corporate leaders anywhere. The article in Forbes (http://www.reuters.com/investigates/special-report/dow/) states that there were many years of impropriety by Liveris and complacency on the part of those charged with overseeing the behavior of all employees at Dow, including the CEO. Most significant, according to Melberg, was the retraction of shareholder statements.
The article reported that there were auditors at Dow who reported concerns to company officials. But the failure, according to Melberg, was the lack of action taken by anyone at the company. “Even when one of the auditors had to retract statements to shareholders because of executive compensation, there was no action taken by the board. That’s what should concern people most.”
While Liveris repaid the company $719,923.00 for personal expenses in 2011 (according to the Reuters article), the fact that this was not based on a single instance or single audit was concerning. “The struggle is that there are instances reported both before and after the shareholder statement(s) revision,” she said. Melberg also pointed out the tax implications of Liveris’ alleged misreporting of personal and business expenses. “If he took things as perks, those are taxable because they are considered income,” she said.
As a remedy, Melberg prescribes action by shareholders. “I’m always surprised at how many shareholders are turning their proxies over,” she said. There is hope however in the form of activist shareholders. “People like this on boards are known for having a low tolerance for poor governance,” Melberg said. “Companies with strong governance have a better financial record than those that do not. They have ownership of how the company performs, especially at companies that use Agile methodologies.”
Melberg says that situations like the one at Dow are not that unusual. “I worked with a company where the CEO was financing an affair with a co-worker,” Melberg said. While Melberg stated that the amount of money he used was small, he was removed from his job and lost stock and compensation worth $22 million. “It sent a very strong message to everyone else that the company took governance issues seriously.” Melberg stated that part of governance was for company leaders to “model good behavior” and create the right kind of atmosphere at a company; one where financial or ethical slip ups would not be tolerated.
Maybe Tom Brady Is Not That Good
Even in sports and the scandal with Lance Armstrong, Tom Brady and the New England Patriots, we see smart, talented people who do not have to bend the rules to be successful at all, do so. What causes this?
“It’s hard to say,” Melberg mused. “In the case of Dow, and based on his public statements, it sounds like an incredible sense of entitlement by Liveris,” Melberg said. “Brady has always been on a team with cheating scandals and never played for any other. So I’m not sure if Brady could succeed on team where cheating was not part of the landscape”. It leaves fans to wonder if Brady would do as well if he played for another team. “Maybe he’s not that good and needs an unfair advantage,” Melberg proposed.