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2 Harvey H. Segal, Corporate Makeover: The Reshaping of the American Economy , Viking, New York, 1989, pp. 5-6.
3 Arthur M. Schlesinger, Jr., The Age of Jackson , Little Brown & Co., Boston, 1945, p.75.
4 53 S. Ct. 487,490 (1932).
5 Id., p. 7.
6 The Economist , 7/30/94, p. 57.
7 Lindbloom, Charles E., Politics and Markets: The World's Political Economic Systems , Basic Books, 1977, p. 356.
8 Barnet, Richard J. and Muller, Ronald, Global Reach, The Power of the Multinational Corporations , 1974, p. 15.
9 Hurst, James Willard, "The Legitimacy of the Business Corporation in the Law of the United States, 1780-1970", University of Virginia , 1970.
10 Dan Clawson, Alan Neustadtl and Denise Scott, Money Talks , Basic Books, 1992.
11 William Greider, Who Will Tell the People , Simon & Schuster, 1992, pp. 331-332.
12 Hurst, op. cit. supra at p. 58.
13 Epstein, Edward J., Who Owns the Corporation? .A Twentieth Century Fund Paper, Priority Press, New York, 1986, p.13.
14 Eisenberg, Melvin Aron, "The Structure of Corporation Law," Columbia Law Review , Vol. 89, No. 7, November 1989, p. 1461.
15 Id., p. 1474.
16 Marlene Givant Star, "Paying for Approval", Pension and Investment Age , July 24, 1989, p.1.
17 Eisenberg, op. cit. supra, p. 1477.
18 Eisenberg, op. cit. supra.
19 Dobrzynski, Judith, Business Week , 8/8/94, p. 27. Korn/Ferry found in 1991 that 82 percent of board vacancies were filled by recommendations by the chairman. Korn/Ferry Organizational Consulting, "Reinventing Corporate Governance: Directors Prepare for the 21st Century. Results of Fortune Company Directors," January 1993.
20 Lipton, Martin and Lorsch, Jay W., "A Modest Proposal for Improved Corporate Governance," The Business Lawyer , Vol.48, No. 1, November 1992, p.64.
21 Drucker, Peter, "The Bored Board", in Toward the Next Economics and Other Essays , Harper & Row, New York 1981, p. 110.
22 Makihara, B. Minoru, CEO of Mitsubishi Corporation in a speech at Suffolk University, 4/29/94. There is concern that "corpocracy - control of the state by business - exists in modern Japan. Consider the following fictionalized account by author Tom Clancy, Debt of Honor , (Putnam, 1994), at p. 120: "Japan was not a democracy in any real sense, rather like America in the late Nineteenth Century, the government was in fact, if not in law, a kind of official shield for the nation's business. The country was really run by a relative handful of businessmen - the number was under thirty, or even under twenty, depending on how you reckoned it - and despite the fact that those executives and their corporations appeared to be cut throat competitors, in reality they were all associates, allied in every possible way, co-directorships, banking partnerships, all manner of inter-corporate cooperation agreements. Rare was the parliamentarian who would not listen with the greatest care to a representative of the zaibatsu."
23 Private letter to the author from Allen Sykes.
24 The Cost of Talent: How Executives and Professionals are Paid and How if Affects America , 1993.
25 Hurst, op. cit. supra. at p. 87.
26 See, for example, Power and Accountability , Robert A.G. Monks and Nell Minow (1991), Corporate Governance , Robert A.G. Monks and Nell Minow (1995), and sources cited therein. See also, Conflicts of Interest in the Proxy Voting System, James E. Heard and Howard D. Sherman, Investor Responsibility Research Center (1987)
27 ERISA, Section 404(a)(a)(A)
28 See, however, Politics and Public Pension Funds by Roberta Romano, Manhattan Institute , June 1994 - "public pension funds may be free of some of the particular types of conflicts which afflict private funds, but they are subject to many other, mostly political, which make activism on their part of dubious value."
29 France, in particular, has had great difficulty accommodating the goals of both privatization and of protecting what are thought to be industries vital to the national industry. The pattern of insuring "control" over publicly held companies through the issuance of special shares - the "noyaux durs" (the functional equivalent of the "golden share" in the UK) - to safe affiliates was rudely jolted when Swedish Volvo withdrew from a much acclaimed merger with Renault. At the end of the day, the Swedish interests were not prepared to cede "control" of the merged enterprise to a "nominee" of the French government. The French are now in the process of trying to create a funded pension system. "Because of the lack of big institutional investors and the stable long term shareholders they represent, French industry has been forced to seek alternatives. One such has been a relatively high reliance on bank loans and direct equity investment by banks. Another has been the creation of complex systems of cross-share holdings. The pattern of cross-shareholdings is also open to criticism... 'The system can reduce the rigor of shareholder discipline'... Financial Times , "Grey on Top, Thinning Below", 7/27/94, at p. 11.
30 U.S. Department of Labor "Interpretive Bulletin 94-1" (7/29/94)..
31 See - Rule, Charles F. - Letter to Institutional Shareholder Services (ISS).
32 Cary, William L., "Federalism and Corporate Law: Reflections Upon Delaware," Yale Law Journal , (83)4, March 1974, Pp. 663-705.
33 The Brancato Report, Vol. I, Edition 3, September 1994, p. 3.
34 The Department of Labor's Enforcement of the Employee Retirement Income Security Act (ERISA), A REPORT prepared by the Subcommittee on Oversight of Government Management of the Committee on Governmental Affairs, United States Senate, April 1986, p.70.
35 Dent, George W., Jr., "Towards Unifying Ownership and Control in the Public Corporation", 5 Wisconsin Law Review (1989), p. 881, 907.
36 McWhirter, Darien A., Sharing Ownership , John Wiley & Sons, Inc. 1993.
37 Sykes, ibid. at p. 15.
38 Dent, George W., Jr. "Toward Unifying Ownership and Control in the Public Corporation", 1989 Wisconsin L.Rev ., pp. 881, 914, 915.
39 Parker, Hugh, Letters to a New Chairman , The Director Publications Ltd. 1979.
40 See, for example, Stobaugh, Robert A., "More and More Directors Are Owners," New York Times , January 1, 1995.
41 Taylor, William, "Can Big Owners Make a Big Difference?" Harvard Business Review , Sept. 1990.
42 Gilson, Ronald J. and Kraakman, Reinier, "Reinventing The Outside Director: An Agenda for Institutional Investors," Presented at the Solomon Brothers Center, June 14-15, 1990, p 47, 48.
43 ERISA requires investment managers to diversity to the maximum extent practical - unless to do so is clearly harmful to the fund. Public pension plans can escape the vulnerability of "back door socialism" best through indexing.
44 Testimony of Robert A.G. Monks, Securities and Exchange Commission, December 17, 1986.
45 DOL Interpretive Bulletin, op.cit.supra , at fn. #30.
46 Several analyses estimate the level of "management fees" for ERISA plans at 1/2 percent of capital. This suggests that up to $15 Billion is currently being paid. Charles Ellis and Wilshire Associates have suggested that the results of stock management have been zero value added. In view of the large sums available and the problematic benefit of other forms of "management," it seems not unreasonable to require trustees to expend reasonably on being informed and active shareholders. This appears to be the recommendation of the DOL in its 7/28/94 statement.
47 Porter, Michael E., "Capital Choices: Changing the Way American Invest in Industry", Council on Competitiveness ,1992, p. 92.
48 Paul Carroll, Big Blues, The Unmaking of IBM , (Orion, 1993) at p. 222.
49 Monks, Robert A.G. and Minow, Nell, Power and Accountability , Harper Business, 1991, p. 111.
50 Letter from Peter F. Drucker to Robert Monks, 6/17/93. Peter Drucker, along with former New York State Controller Ned Regan has advocated periodic business audits by expert outside parties to provide perspective in evaluating a company's performance. My own view is that professionals belong inevitably to the person paying them (or, at least the person most likely to pay the largest bills in the intermediate run). There are few professional service organizations in the United States who did not provide corroboration of this - harsh seeming - judgment in connection with "fairness opinions" during the 1980s.
51 Welch, Jack, "Nightmare on Wall Street", Fortune , Sept. 4, 1994, p. 41.
52 32 Stanford L.Rev. 1 (1979).
53 Hayek, F.A., The Political Order of a Free People ,Chicago, 1979, p.82.
54 ERISA Sec. 405 (C) (1) DOL Interpretative Bulletin, op.cit. supra, at p. 6.
55 O'Barr, William M. and Conley, John M., Fortune and Folly: The Wealth and Power of Institutional Investing , with economic analysis by Carolyn Kay Brancato, Business One Irwin, Homewood, IL, 1992.
56 Id., p. 85 (emphasis added). See also Pound's piece on Balance in Governance.
57 Sykes, Allen, for the October 1994; (No 2.4) edition of CORPORATE GOVERNANCE, an International Review.