Below is my comment on Steven Davidoff's piece in today's New York Times, where he points out that weak oversight by MF Global's board of directors had a role in its spectacular demise. It's a good piece, but unfortunately he kind of phones in the ending, calling for more regulation and noting that "hard questions" need to be asked.
Fortunately, some of the answers aren't so hard to come by: perhaps MF Global's board's oversight wasn't more rigorous because the board was chaired by Corzine himself.
It defies reason to expect a board to meaningfully oversee management on behalf of shareholders when they are effectively overseeing themselves. And yet if only this problem were limited to MF Global; however, the Corporate Library's research indicates that fully two-thirds of the S&P 500 have a board whose chair is also the CEO.
To Mr. Davidoff's call for regulation, readers should be forgiven if they are unenthusiastic about pinning their hopes on Congress. Still, shareholders could empower themselves if they could find a way to organize their interests. As it stands, it's surprising to me that we haven't yet seen much shareholder activism from organized labor, as their pension funds are among the biggest corporate investors going. To take the thought one step further, given the longstanding trend to 401k plans (which predominantly invest in mutual funds), index fund providers looking to differentiate themselves should start offering funds that will take more activist roles with their proxy votes. Given that Federal Reserve studies show that a majority of all US stock is owned either by pension funds or mutual funds, these vehicles have great potential as voices for shareholder interests.
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