Just recently, following the scandal at Chesapeake Energy (NYSE: CHK) when CEO Aubrey McClendon made investments in drilling projects in which the company was involved, the issue was in the limelight again. Chesapeake, based in Oklahoma, has two powerful politicians on its board - former member of the Senate from Oklahoma, Don Nickles, and former Oklahoma Gov. Frank Keating. The company's board members used the firm's private planes for travel - a perk most governance experts frown upon. Perhaps the more salient question is why the two have stayed on the board under the current circumstances. It is equally reasonable to ask why politicians, with their backgrounds unrelated to running big companies, were even appointed to the board.
Many other politicians sit on the boards of America's largest public companies, and some aspects of their services raise troubling questions. Some are successful lobbyists because of their Washington connections. These firms could work for causes or companies that do not have identical interests to those of the corporations of the boards on which they sit. There are questions about the past ethical behavior of others among these board members. In most cases, the former politicians have no obvious backgrounds that qualify them to be on public companies' boards. A final problem is that some have done very well financially because they sit on several boards - another practice many corporate governance experts oppose.
The common thread among the directors on this list is that they have been paid very well in their roles. Most make more than a quarter of a million dollars a year. Most also have stock ownerships or grants that add substantially to those payments and usually amount to millions of dollars.
24/7 Wall St. examined the boards of the largest 100 public companies in America based on sales to find politicians who are currently serving on those boards or who have recently served. To qualify, a person must be a former governor, senator or member of the House of Representatives. We scrutinized their past records in elected office , their current jobs and their qualifications to serve as directors of public companies.
Research firm GMI Ratings was critical in supporting us with research for much of our analysis. Securities held by these board members at the corporations they serve include stock ownership, securities that can be acquired, exercisable options and deferred stock units. All data are from the most recent proxies.
This article should provide shareholders of public companies, both institutional and individual ones, with some guidance about why politicians are chosen for boards. It should also reveal the extent to which these individuals are qualified, both ethically and in terms of work experience, to effectively do their jobs.
- Board member: Chuck Hagel
- Board compensation: $301,199
- Director since: 2010
- Primary job: Distinguished professor at Georgetown University and chairman of think tank Atlantic Council
- Common stock ownership: 3,046 shares
- Government service: U.S. senator from Nebraska (1997 - 2009)
2. General Electric (NYSE: GE)
- Board member: Sam Nunn
- Board compensation: $312,793
- Director since: 1997
- Primary job: Co-chairman and chief executive officer, Nuclear Threat Initiative
- Common stock ownership: GE stock-based: 273,878 shares
- Government service: U.S. senator from Georgia (1972 - 1997)
- Board member: Richard A. Gephardt
- Board compensation: $224,455
- Director since: 2009
- Primary job: Gephardt Government Affairs
- Common stock ownership: 32,346 shares
- Government service: U.S. House of Representative from Missouri (1976 - Jan 2005)
- Board member: Jon M. Huntsman, Jr.
- Board compensation: New director
- Director since: February 2012
- Primary job: Chairman of the Huntsman Cancer Foundation
- Common stock ownership: Zero shares
- Government service: Governor of Utah (2005 - 2009)
5. JP Morgan (NYSE: JPM)
- Board member: William H. Gray III
- Board compensation: $266,250
- Director since: 1992, stepped down at last annual meeting
- Primary job: Chairman of government lobbying and advisory firm Gray Global Strategies
- Common stock ownership: 89,061 shares
- Government service: U.S. House of Representative from Pennsylvania (1978 - 1991)