Panel to Offer Corporate Governance Guidelines
The Conference Board climbed on the bandwagon Thursday to restore confidence in corporate America, assembling a blue-chip panel to issue guidelines on thorny issues such as stock options.
But whether the influential research group’s 15-member panel--boasting the likes of former Federal Reserve Chairman Paul Volcker, Vanguard Group founder John Bogle and former Johnson & Johnson Chairman Ralph Larsen--will be able to sway corporate behavior is up for debate.
The panel is one of several that have cropped up in recent months in response to rapidly deteriorating investor confidence after a string of corporate scandals that have engulfed financial markets.
“Our intention is not to duplicate what others have done,” John Snow, chairman of U.S. rail giant CSX Corp. and co-chairman of the panel, told reporters at a news conference. “Our intention is to take a broad perspective on what has gone wrong.”
The panel--to be called the Commission on Public Trust and Private Enterprise--said it would tackle a wide range of issues, including auditing and accounting standards, executive compensation and relations between corporate management and boards.
But by its own admission, the group has no power to enforce the guidelines it creates. Instead, it is banking on “moral suasion” for its efforts to bear fruit.
“I think they may be a little bit behind the curve when it comes to this,” said Ralph Ward, publisher of the newsletter Boardroom Insider, which deals mainly with corporate governance and boardroom issues.
Panel co-Chairman Peter Peterson, former U.S. secretary of Commerce and current chairman of investment firm Blackstone Group, is optimistic nevertheless.
He said the panel already had the support of a few companies that he declined to identify.
The group is expected to deliver recommendations by October.
NYSE Short Interest Surges to Record High
Wall Street’s bears appear to have dramatically increased their bets on lower stock prices.
The New York Stock Exchange said Thursday that “short interest”--the number of NYSE-listed shares borrowed and sold, usually in a bet that prices will drop--soared 7.5% in the four weeks ended June 14.
The total number of shorted shares stood at a record 7.2 billion on June 14, compared with 6.7 billion on May 15.
In a short sale a trader borrows stock (usually from a brokerage) and sells it, pocketing the proceeds. If the stock’s market price declines, the trader can buy back the shares later to replace the loaned stock. The net profit would be the difference between the sale price and the stock’s repurchase price.
But short sellers bear considerable risk: If a stock’s price rises rather than declines, a short sale can result in unlimited losses until the transaction finally is closed out.
A surge in short sales in two stocks--Lucent Technologies and Nortel Networks--accounted for a major share of the increase in NYSE short sales between mid-May and mid-June, NYSE data show.
The number of shorted Lucent shares rose to 367 million from 262 million; the number of shorted Nortel shares rose to 330 million from 133 million.
Lucent shares closed Thursday at a multi-year low of $2.42. . Nortel stock closed at $1.70 Thursday, down from $2.74 in mid-May.
