Please ensure Javascript is enabled for purposes of website accessibility

Are Your Corporate Advocates Playing Hooky?

By Alyce Lomax - Apr 10, 2013 at 3:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Boards of directors are supposed to advocate for shareholders. Are yours MIA?

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 (NFLX 3.29%) 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.

Check back at 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
$185.88 (3.29%) $5.93

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.