I’ve been picking on Gretchen Morgenson, in a couple of cases because of her columns here and here on Hank McKinnell's pay at Pfizer. Now she has company --The WSJ’s Alan Murray. Both columnists are following the lead of a guy named Shad Rowe (really) who’s formed a group called Investors for Director Accountability Foundation.
Murray describes Mr. Rowe as a Dallas investor who is “strictly business,” not some do-gooder corporate activist. He emphasizes that Rowe's teamed up with the likes of other strictly business types like Vanguard’s John Bogle and Boone Pickens.
Morgenson explored a different facet of Mr. Rowe, describing him last week as “grassroots” and in her first column quoting him as concerned that "[managers and their friends have done well while future retirees, endowments, universities, museums, widows and orphans have broken even, if they are lucky." Morgenson didn’t mention any links with Boone Pickens.
Morgenson's description may be more accurate. As described here, the group
coalesced over the past year as members discussed the pension crisis and governance issues in the U.S., arose from him watching fire departments volunteer to reduce benefits for firemen because communities couldn't afford to pay what was promised.
The story also notes that the group "doesn't plan to take an economic interest in any of the companies it targets." How comforting.
Why pick on Pfizer? Note that Pfizer was a leader in instituting director voting rules that give groups like Rowe’s some leverage, as well as in improving disclosure of executive pay even before adoption of the SEC disclosure proposal. Nevertheless, the story quoted above said that “the group said it decided to focus on Pfizer after quantitative screens applied to the largest 1,000 American corporations.” The screens included not only the size of the CEO’s pension but the company’s “popularity and the fact that it's a widely held stock.”
So despite Murray’s contention that it’s all about hard-headed concern for the bottom line, in fact it sounds more like a populist group seeking leverage and publicity from the usual resentment about fat cat executives.
After reading Murray’s column I started to experience surprising nostalgia for Morgenson’s analysis. At least she knew where to start – ask why the big shareholders whose money really was on the line weren’t objecting. Her answer was weak – it’s all about how they’re getting fees for managing funds of portfolio companies. But at least she had the right question.
The biggest oddity about Murray’s story is that what concerns him isn’t the size of the paycheck – his earlier column defending Lee Raymond's pay makes that clear – but about the fact that Pfizer’s stock is down. If this is because of McKinnell, then the prescription seems obvious – fire him. What matters to shareholders should be the quality of management. I liked Boone Pickens better when he was challenging oil company executives who were wasting shareholders’ money.
I'm not trying here to defend either Pfizer or McKinnell. For all I know, McKinnell is being overpaid and, more importantly, is doing a bad job at Pfizer. Maybe the Pfizer directors are supine and shouldn't be reelected. On the other hand, maybe not. I just doubt I'm getting the full story from Murray, Morgenson and Rowe.
Murray and Morgenson’s work on this issue shows what can come of moves to increase disclosure and shareholder power: Activists armed with populist rhetoric team with journalists in search of an entertaining story to target companies based on their news value. In the meantime, I hope Pfizer’s happy with the results of its efforts to lead the way in disclosure and governance reform.
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