Every corporation is an alliance between share-holders and managers. As in any relationship involving two parties with overlapping but not identical interests, at times tensions can run high-especially in public companies, where shareholders are far removed from management.
This is one of those tense times. Shareholders and their advocates are howling about executives who ran amok during the boom years, enriching themselves at the expense of the true owners of the companies they ran and concealing their companies’ true financial condition from those with the most right to know. The managers retort that short-term thinking by shareholders fueled the stock-market frenzy, forcing managers to make bad decisions.
This month, we tackle the shareholder/ management alliance from three different perspectives. Our cover story, “Better Options”, examines the ongoing pursuit of the Holy Grail of executive pay-a compensation system that motivates managers to act like shareholders. As senior writer Kris Frieswick explains, popular schemes may come and go, and come back again, but the goal remains elusive.
So elusive that some companies have chosen to abandon public shareholders altogether. In “Off the Street”, senior writer Tim Reason explains how unhappiness with public markets and shareholder reform initiatives is prompting some public companies to go private, a move that innately brings shareholders and managers closer together.
Finally, as one of the most respected defenders of shareholder rights, former SEC chairman Arthur Levitt has been a frequent critic of executives. But in “You Are the Guardians”, he challenges CFOs to function as the bridge between the executives and those shareholders.