Fretting about empty suits at USB…

March 5, 2008

images2.jpegWe couldn’t help but chuckle a bit after reading US Bancorp’s (USB) latest proxy. Not over the executive pay, which is reported here. Instead, it was the board’s response to a shareholder proposal to split the Chairman and CEO jobs currently held by Richard Davis. Like many other boards, USB isn’t all that keen on doing that and recommends voting against the proposal. But it’s the words that they use that make it all the more amusing. Here’s a snippet:

An independent chairman has the effect of diffusing authority within the company and diminishing the stature of the CEO among employees and our peers. Accordingly, failing to elect a CEO as chairman, especially a CEO who has only recently succeeded to the position, sends a message to the company, and the industry, of a lack of confidence in the new CEO. The Board does not lack that confidence, and refuses to send such a message.

The language seemed so unique that we decided to do a bit of searching to see if any other company facing a similar shareholder proposal — and there are plenty — gave a similar response. We couldn’t find a single one that cited fears over diminishing the top executive’s stature among employees or investors.

Earlier in its response, USB notes that none of its peers has an independent chairman and that only 13% of companies in the S&P 500 have one, which seems to conflict with the numbers that consulting firm Spencer Stuart released back in October, when it found that just over 1/3 of S&P 500 companies had split the two roles, up from 25% in 2002.

Who’s right? Seems hard to believe that the two numbers would differ so dramatically given that both are citing the S&P 500. But not quite as hard to believe that by separating the two jobs, Davis would be an empty suit.

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