Wednesday, April 05, 2006

Morgan Stanley, related-party transactions, and severance packages

Morgan Stanley has often been in the news for its poor governance, and is back again today.

Footnoted.org, the famous Wall Street blog that brings us titbits from SEC filings, noted Morgan's propensity for fishy-looking related-party transactions more than a year ago in this post.

Forbes in a 2005 article critiques Morgan Stanley's board, which it says is "chock full of people who have long-standing professional or personal ties to (CEO)Purcell. ". (This in spite of the fact that Morgan Stanley has clear written corporate governance policies stating that they will have a majority of independent directors).

An article in the WSJ, also in 2005, documents that Morgan Stanley's corporate governance falls short of desired standards by not giving shareholders the right to call special meetings.

Here's a target for a bylaw change if I ever saw one!
But if you're getting any ideas, Morgan Stanley has pre-empted you: shareholder-initiated bylaw changes at Morgan are near-impossible because they require an overwhelming majority in order to pass. The company requires that 80% of the shares outstanding must be voted in favor of such a resolution.

Today, huge severance packages given to the CEO and his buddy in 2005 have provoked a backlash, with shareholders voting to require the firm to seek shareholder approval for severance packages providing benefits of more than 2.99 times the sum of an executive's base salary plus cash bonus.

CalPERS, are you listening?

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