Panel Recommends Splitting Top Posts
A business group looking at ways to restore trust in corporate America recommended Thursday that the jobs of chief executive and chairman be held by different people, or that a company designate an independent director to control the board’s agenda.
Saying that public trust in CEOs is only slightly higher than it is for car dealers, the report from the Conference Board’s commission on public trust and private enterprise said the ultimate responsibility for good corporate governance rests with a company’s board of directors.
Problems can arise when a chief executive also is chairman of the board, said Peter Peterson, a former U.S. Commerce secretary and head of investment firm Blackstone Group.
“This dual role can provide a potential for conflict, particularly in those cases in which the CEO attempts to dominate both the management of the company and the exercise of the responsibilities of the board,” said Peterson, co-chairman of the commission.
The other co-chairman, Treasury Secretary nominee John W. Snow, did not attend the briefing because the White House has asked him not to speak publicly until after his confirmation hearings. Snow, the chairman and CEO of railroad company CSX Corp., had a significant role in developing the recommendations, Peterson said.
The commission recommended boards be carefully selected and hold frequent meetings without management so members may comment freely on the performance of chief executives and evaluate their work.
“Everyone who works needs a boss,” said Intel Corp. Chairman Andrew Grove, a commission member.
In a dissenting opinion, Commissioner John H. Biggs, former chief executive of TIAA-CREF, said failed companies Enron Corp., WorldCom Inc. and Global Crossing Ltd. maintained separate roles for the chairman and the chief executive. Although agreeing that it is desirable for boards to meet without management, Biggs questioned the need for an independent director to run a board’s agenda.
Wachovia in Talks
to Buy Prudential Unit
Wachovia Corp., the fourth-largest U.S. bank, is in talks to buy insurance giant Prudential Financial Inc.’s securities unit, a purchase that would almost double the size of Wachovia’s brokerage, people familiar with the negotiations said.
The acquisition would create a new company with more than 13,000 brokers, almost as many as Merrill Lynch & Co., the biggest U.S. brokerage. Wachovia is the fifth-largest brokerage.
Charlotte, N.C.-based Wachovia and Prudential, based in Newark, N.J., held talks last year on a possible venture. The discussions foundered over which company would be in control.
Under current talks, Prudential would get a minority stake in the new firm but no cash, the people said.
Prudential wants to exit a business that has lost about $300 million in the last two years. Meanwhile, Wachovia’s effort to expand comes as some analysts expect a rebound in stocks.
“We have just gone through a ferocious bear market, and in three to nine months Wachovia is probably going to have a wind behind them” if the brokerage business improves, said David Katz, a money manager at Matrix Asset Advisors Inc.
Wachovia shares rose 49 cents to $38.30 and Prudential jumped $1.20 to $33.40, both on the New York Stock Exchange.
Spokesmen for both firms declined to comment.
From Bloomberg News
