US Bancorp CEO sees more activism
Jan 28, 2010
Head of bank lobbying group predicts hot proxy season
The chairman of a powerful banking industry lobbying group predicts a hot proxy season coming up, particularly on questions of executive compensation. ‘I think you’re going to see a whole new groundswell of shareholder activism,’ predicted Richard Davis, chairman of the Washington DC-based Financial Services Roundtable.
Davis, who is also chairman, president and CEO of Minneapolis-based US Bancorp, went on to blast his own industry saying ‘as an industry, we failed the American people,’ a view he says is shared by most of his banking colleagues. The comments were made on local public radio in Minneapolis on Monday Jan 25 where Davis was alternately apologetic, diplomatic and combative in discussing the future of the banking industry.
As incoming chair of the roundtable, Davis is increasingly front and center in discussions with the government over the direction of the nation’s financial industry regulation and faces a tough political environment where he says banks have a ‘very negative reputation for (being) the responsible party for this financial downturn.’
He insists most leaders in the industry recognize their low credibility with both Washington and the public, saying they have done ‘a lousy job of describing our position and our relevance in this economy. We haven’t done a very good job of describing what we’ve done right and what we’ve done wrong. ... As an industry, we failed the American people.’
But he resists the notion that there is widespread opposition to financial regulatory reform within the banking industry. Acknowledging that there are ‘a few outliers’ resisting change, Davis suggests the majority of his colleagues ‘believe now is the time ... we start making amends for the things we did wrong, and also show how important we can be in the recovery going forward.’
Of particular interest are his comments on the upcoming proxy season and what he sees as a groundswell of shareholder activism directed at managements and boards of directors.
‘A couple of years ago you couldn’t (influence executive compensation). I think we’re at a point in time where shareholders’ voices and activism will be much more clear. It’s happening already. So I think we need to let that play out over the next couple of months and let the shareholders have their voice… We have the ‘say on pay’ proxy season coming up and you have shareholders of one of those very large investment banks stepping back saying we may want to see some of that (compensation) back in our earnings.’
The phenomena of activism about pay is a relatively new concept, according to Davis, and it is very much a function of the reduced performance of recent years: ‘This is the first time executive compensation became an issue of interest to a number of shareholders… They haven’t (had a voice) up until now... (but) they haven’t had a concern either. They were making lot of money. They weren’t asking these companies to stop doing what they were doing.’
He also points out that it is important not to taint the entire industry because of the actions of the few. ‘There are three or four companies that have compensation issues… three or four banks in America we have got to deal with. It is not the 8,070 other banks.’
By Brad Allen