Are Your Corporate Advocates Playing Hooky?

Everybody knows that pay for many CEOs is out of hand. However, it's easy to forget that some corporate directors make a lot of money for what they're charged to do, too. Granted, these are important tasks, but they're not full-time jobs. The important part is that directors are supposed to be looking out for shareholder interests, but believe it or not, some of them are literally missing in action.

GMIRatings has released a report, Board Attendance Failures, flagging several companies for having at least one director who has not met the 75% attendance standard for board meetings.

Half the job is showing up
In my last column, I addressed boards of directors as a key group in every corporation, although the spotlight rarely shines on these individuals when things go wrong. I suggested a few disruptive changes in how boards of directors are composed, which could make for more robust -- and responsible and enthusiastic -- boards.

As proxy season heats up, though, shareholders can start by withholding votes for directors who aren't doing their jobs appropriately. And tracking board meeting attendance is one of the easiest ways to identify a potentially weak director.

GMIRatings' subscription service offers up a slew of data about the quality of corporate directors. Let's take a look at a couple of the companies it's flagged in its report.

All in the family
Cablevision  (NYSE: CVC  ) is family-controlled, so maybe nepotism is to be expected. Recently, in a bizarre turn of events, CEO James Dolan expanded the corporate responsibilities of his wife, Kristin. Although that sounds like a clear conflict of interest, it's a little stranger still since the company had disclosed that the couple had separated. Meanwhile, Dolan's brother-in-law, Brian Sweeney, has been awarded with a promotion to spearhead corporate strategy.

The company's Form 10-K is pretty open about the fact that Cablevision indulges in what corporate governance stalwarts call a major no-no: an overlapping board of directors with Madison Square Garden (where James Dolan is executive chairman) and AMC Networks (where Charles Dolan is executive chairman).

Reading through the document will show you that it's pretty much a mind-numbing "all Dolan, all the time" at that company.

According to Cablevision's most recent proxy statement, all of its directors attended at least 75% of the company's board meetings in 2011... well, except for Kathleen M. Dolan and Deborah Dolan-Sweeney. (Edward Atwood didn't, either, but he might get a pass for having joined the board in May 2011.) Even worse, all directors attended the annual meeting of shareholders... except for Charles, Patrick, and Kathleen Dolan.

At least they can all catch up with one another over family dinner.

Gone to the movies
Netflix (NASDAQ: NFLX  ) has its hands full lately. Many people doubt it can truly compete in a world where Amazon is making more and more important deals with streaming. (I am one of those people.)

Call me crazy, but I'd say the company needs all hands on deck for these meetings right now.

Unfortunately, Netflix's most recent proxy statement actually refers to its website for information on director attendance, meaning an investor who desires this information has to take an additional step beyond simply reading the proxy statement. According to the page, available here, Netflix directors are encouraged to attend board meetings, but it's not mandatory. (Of course, all companies would "encourage" directors to attend board meetings.)

Even more insulting to investors, directors Richard Barton and Timothy Haley both skipped out on the annual meeting of shareholders. Incidentally, Haley is up for reelection this year.

It sounds like some directors are missing the big picture.

Quality control
GMIRatings indicated nine total companies for this particular corporate governance failure; download the report here.

Obviously, there are a lot of reasons attendance failures may be a problem in terms of duties to shareholders. Shareholders pay directors for their troubles. Some directors are frankly overextended, and simply can't be of much use to anyone. Some exhibit conflicts of interest. According to GMIRatings, "When a director is failing to attend at least 75% of meetings, it may be a sign of overcommittment or other factors compromising the quality of his or her board service."

So, when you're about to vote your proxy this year, do some quality control and make sure directors attend 75% of meetings, and annual meetings of shareholders, too. Presence is an important start in performing the job shareholders pay them for.

Want to learn more about Netflix?
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Check back at Fool.com for more of Alyce Lomax's columns on environmental, social, and governance issues.

Editor's note: A previous version of this article erroneously referred to a candidate who was up for reelection in 2012 rather than this year. The Fool and the author regret the error.



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  • Report this Comment On April 10, 2013, at 5:10 PM, corpgov wrote:

    Great post Alyce. Re Netflix, I think Haley will be on the proxy this year. He was on last in 2010 and 39% of shares were voted against hime. Not only did he miss meetings last year, he also doesn't hold any actual shares in the company and has been on the board for 15 years. That doesn't exactly scream confidence or commitment.

    I should have a proxy access proposal on the ballot as well, so shareowners who think we should have the right to place a director nominee on future proxies will have an opportunity to vote in favor of that.

  • Report this Comment On April 10, 2013, at 5:33 PM, TMFLomax wrote:

    Hi corpgov,

    Thank you SO much for pointing out my error. I do see I was referencing the proxy from April 2012 (could have sworn it was just filed, but looks like it will be filed later this month!). I need to check, double-check and triple-check. I have sent corrections to my editors.

    Also thank you so much for the information about Haley -- also great to know for the purposes of proxy voting! And I'll be looking forward to seeing your proxy access proposal on the ballot too! Good stuff. A proxy access article would be a good topic for a future piece.

    Best,

    Alyce

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