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Panelists: Michael Jensen and Robert Monks
Moderator: Ralph Walkling
I. Introduction
Ralph Walkling: Good morning, I'm Ralph Walkling, current president of the Financial Management Association. Both in this role, and as Director of the Center for Corporate Governance at Drexel University's LeBow School of Business, I'm excited-and indeed honored-to be moderating this panel on U.S. corporate governance with Robert Monks and Michael Jensen, two of the most prominent authorities on the subject. The original title for this event, as proposed by Mike Jensen, was just "Failings of the U.S. Corporate Governance System." But we later decided that, given Mike's and Bob's reputations for plain speaking, we could change the title a bit without dampening people's expectations for a provocative discussion.
And let me say a bit here about our two main speakers:
Robert Monks has been a passionate advocate of corporate governance reform for nearly 30 years, and a leader in putting such reform into practice. In 1985, Bob and Nell Minow founded Institutional Shareholder Services, a private firm that advises investors on proxy voting and how to respond to issues of corporate governance generally. In 1992, Bob and Nell sold ISS and started the shareholder activist investment firm called LENS. Much like today's activist hedge funds, LENS bought large stakes in underperforming companies with what Bob and Nell felt were unacceptable governance systems-Sears, Westinghouse, and Eastman Kodak, among others-and then engaged management in a dialogue to bring about change. Bob has served on the boards of directors of at least ten publicly held companies. He is also the co-author, with Nell Minow, of six books on corporate governance, books that many of us now use in our classrooms.
Michael Jensen is the Jesse Isidor Straus Professor of Business Administration Emeritus at Harvard Business School. But Mike's academic career did not start at Harvard. While at the University of Rochester in the 1970s, he wrote a paper with Bill Meckling on "Agency Costs and the Theory of the Firm" that revolutionized the study of corporate finance. It did so by focusing the attention of finance academics on the conflict of interest and incentives between management and shareholders that ends up reducing the value of most if not all public companies. In writing this paper,...