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By Joseph Giannone, Nanette Byrnes and Jess
November 4, 2011 1:28 AM EDT
Following MF Global's
In particular, corporate governance and executive compensation experts are raising questions about how effectively the board evaluated and oversaw the risky strategy pushed by its CEO Jon Corzine.
While it is not being accused of any illegalities, critics say the brokerage and clearing firm's board tolerated at least one possible conflict of interest, bent its own rules and failed to rein in Corzine as he drove the company into dangerous bets.
The former Goldman Sachs
The board also approved a pay package for Corzine that the experts say may have encouraged the former New Jersey governor to take big risks.
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Experience certainly wasn't the problem. All of the eight board members had years of financial sector experience, including a former bank CEO and a former insurance company CFO. The most seasoned member spent more than 40 years at Merrill Lynch, including as executive vice president of operations and as a member of the executive management committee.
Directors did not respond to requests for comment. But a source familiar with the board's discussions said directors did not allow Corzine to do everything he wanted and that "there was a significant amount of debate and discussion with (Corzine) about many things, including the European portfolio."
He did not provide further details about the discussions but stressed that the board disclosed everything required under listing rules and securities law.
MF Global declined to comment and Corzine could not be reached.
"EXEMPLARY" LEADERSHIP
The board, though, did indicate that it was very happy with Corzine, and some critics say it may have been too star struck by his presence. When Corzine joined MF Global in March 2010 there had been some surprise that he would take a job running a relatively little-known firm.
As recently as July, MF Global's Compensation Committee lauded his leadership as "exemplary" and praised the strategy he set for the firm, "including significant improvements in the reputation of the firm" and "its improved posture with regulators," according to its proxy statement ahead of its annual meeting.
"I think they were intimidated by him," said Jack Connell, managing director of Connell & Partners, a Woburn, Massachusetts, executive compensation consultant who has advised other boards who hire powerful CEOs. "They just gave in to his demands as they really, really wanted him to run MF."
GovernanceMetrics Inc gave MF Global a "D" grade for corporate governance and ranked the firm's risk management profile among the bottom 20 percent of U.S. companies before the past week's crippling blows.
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