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Recent Columns By Stephen Davis And Jon Lukomnik

Davis & Lukomnik
To provide readers with the governance perspective of institutional investors, Compliance Week recruited two institutional experts to write a monthly column. Stephen Davis, a Pulitzer-nominated authority on shareholder rights, was a founder of the Global Shareholder Service at the Investor Responsibility Research Center, and also co-founded the International Corporate Governance Network. Jon Lukomnik, a former governor of the ICGN, was previously the deputy comptroller for the City of New York, where he was investment advisor for the city's treasury and benefit plans totaling $80 billion in assets. Their recent columns are below:

  Title & Description Date Type of Article
1. Dept. of Labor to Figure Prominently in Coming Year
Now that the election is over, get ready for a deluge of predictions on the coming wave of corporate governance legislation and regulation.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
11/11/08 Columns & Editorials
2. Risk-Based Strategic Analysis Critical to Long-Term Success
In the midst of the financial sector meltdown, directors and executives are asking innumerable questions. One, in particular, seems central: “In our quest for pay for performance, have we—boards, executives, and shareowners alike—created pressure points that influence risk-taking behaviors in unintended ways?”
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
10/14/08 Columns & Editorials
3. Investor Questionnaire Enriches Director Elections
If there is one thing corporate managers (and columnists like us) know well, it’s the experience of pitching what we think are great ideas to an audience—and seeing them enthusiastically ignored. But every once in a while an idea sticks.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
09/09/08 Columns & Editorials
4. Board Not Solely to Blame for Bad Governance
At the risk of drumming ourselves out of the corporate governance fraternity, we have a message to our brethren: We, as a species and as individuals, make mistakes. Creating accountability doesn’t negate human fallibility.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
08/12/08 Columns & Editorials
5. Dreaming the Impossible Governance Dream
“When I was your age,” the Queen said to Alice in Wonderland, “sometimes I believed as many as six impossible things before breakfast!" Corporate governance may not be quite so radical, but by late next year the United States may well see two things happen that most boardrooms today consider impossible.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
07/08/08 Columns & Editorials
6. Compliance Lessons From the Non-profit World
A compliance revolution is about to take place in America’s not-for-profit sector. The result may well be that corporate executives who serve on not-for-profit boards will face compliance challenges in their charitable endeavors just as challenging as those they face in their 9-to-5 lives—if not more so. And the revolution is being led by what many consider Washington’s most powerful government agency: the IRS.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
06/10/08 Columns & Editorials
7. How to Hire a Director
The 2008 proxy season in the United States is revealing hazardous gaps among the responsibilities expected of corporate directors, the way directors are elected, and the way investors treat decisions about how they vote.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
05/13/08 Columns & Editorials
8. An Ounce of Disclosure for Hedge Funds …
With activist hedge funds stirring up drama in boardrooms from the New York Times Co. to Motorola, we thought it timely to scan the just-released findings and recommendations of the Conference Board’s Working Group on Hedge Fund Activism. Full disclosure: We were co-chairs of the group. That being said, the fact remains that what hedge funds are doing these days, and how they operate, is of considerable interest to many people.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
04/08/08 Columns & Editorials
9. Activism During a Recession: What to Expect
When the tide goes out, that’s when you see where the stinking fish really are.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
03/11/08 Columns & Editorials
10. Corporate America Now Desperately Seeking SWF
Wanted: SWF, with appetite for risk and lots of money to spend. Discretion a plus. Serious inquiries only.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
02/12/08 Columns & Editorials
11. A Season in Corporate Governance Purgatory
Barry Diller, chairman and CEO of Interactive Corp., once said: “Corporate governance is completely misunderstood, certainly by the birdbrains who write about it.”
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
01/08/08 Columns & Editorials
12. How the Sub-prime Mess Hits Governance
We admit to being a little disappointed with the financial press coverage of the sub-prime and structured credit problems. In our opinion, too much of it has been of the 20-20 hindsight variety—the “what part of packaging dodgy mortgages and calling them as AAA-rated financial instruments did Merrill Lynch or Citi or Bear Stearns not understand?” type of story.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
12/11/07 Columns & Editorials
13. Corporate Governance After Jan. 20, 2009
Now that we have started the one-year countdown to the U.S. presidential election, it is time to get braced for what could be a sea change in corporate governance regulation if a Democrat gains the White House. Polls show that is a real possibility. Even more likely is a Democratic sweep of Congress. If both occur, the effects on corporate governance could be profound. A Democratic incomer might change both policy and people at the top. We will offer some juicy, early speculation about just who to watch. But before that, let’s check where the partisan divide over current issues is deepest; where, unfortunately, the existing policy makers have deadlocked. That is where policy will switch first.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
11/13/07 Columns & Editorials
14. Governance Divided by a Common Language
George Bernard Shaw had it right. When it comes to corporate executives and investors discussing corporate governance, we are, in the great Irish playwright’s phrase: “divided by a common language.” Knowing which interpretation of that phrase is relevant in what situation can mean the difference between success and failure. It can even determine the future of your company.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
10/16/07 Columns & Editorials
15. A Fractured SEC vs. Everyone Else
Just as investors and boards are test-driving collaborative dialogue on hot governance issues, regulators at the wheel of the U.S. Securities and Exchange Commission seem bent on yanking the parties toward collision. The SEC may need urgent rescue from, well, itself. And corporate officials and investors may have just the lifelines to help.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
09/11/07 Columns & Editorials
16. It’s Not the Hedge Funds, It’s the System
It’s been hot this summer. Maybe that explains the rhetorical heat aimed at hedge funds. Consider the adjectives that mainstream press, regulators, and even investors throw at hedge funds: secretive, dangerous, risky, short term, and promiscuous. The nouns are no better: raiders and locusts. Not a day goes by without a call for increased regulation of hedge funds from someone somewhere in the world.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
08/14/07 Compliance Week Coverage
17. The Proxy Industry: What You Know … Is Obsolete
We need hardly tell you that proxy services firms hold material and rising influence over the way institutional investors perceive Corporate America. Ever since 1988, when the Department of Labor issued its landmark “Avon Letter” declaring voting a fiduciary obligation, funds have turned to these outside specialists for proxy advice. In turn, corporations have learned to live, sometimes unhappily, with this watchdog industry.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
07/17/07 Columns & Editorials
18. One Share, 0.001 Vote?
One share, one vote! More than 20 years ago, that was the rallying cry around which the Council of Institutional Investors was created, ushering in the modern era of corporate governance. To the initial 21 pension funds which formed CII’s membership, that simple phrase resonated with all the moral high ground institutional investors could muster. In four words, it conveyed a myriad of powerful, consistent messages: Say no to greenmail; align voting power with capital at risk; shareowners should have a voice.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
06/12/07 Compliance Week Coverage
19. Directors At Risk
Strange and unexpected things are happening in the world of U.S. boardroom elections. For one, the old assumption that directors have a free pass to election is fading fast into history. New figures compiled by the law firm Neal, Gerber & Eisenberg LLP reveal the stunning fact that 52 percent of S&P 500 corporations have now adopted some form of a majority rule standard.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
05/15/07 Compliance Week Coverage
20. Taking Long View Of Corporate Governance
Recently we were interviewed by a college student doing homework for a career placement class. She came prepared with enthusiasm—you could tell she was a bright student sure that her future would be bright—and with a list of questions from her professor. Then came one question that made us stop and recalculate: “What are the pending changes in your field that someone in my generation will have to understand in order to succeed?”
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
04/10/07 Columns & Editorials
21. Activism ‘B-List’ Portends Greater Agitation
Typically, we use this column to spotlight important corporate-governance trends that are on the horizon and heading toward boardrooms. This time we go deeper under the radar to find a phenomenon that promises to turbocharge shareowner activism—and to provide new wormholes for executives to monitor dissent. In 2007, blogs, bulletin boards and email blasts have reached a critical mass among investors. That “B-List” has powerful consequences: the stately pace that once marked the procession of dissident shareowner campaigns from a gleam in the eye to annual meeting threat is now hugely compressed. The Internet has put shareowner activism on fast forward. Plus, it’s global.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
03/13/07 Columns & Editorials
22. Activists Have Sudden Outbreak Of Dialogue
Here’s a surprise start to the 2007 proxy season: An unprecedented level of dialogue among the institutional investor and corporate communities has broken out.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
02/13/07 Columns & Editorials
23. This Spring’s Big Fight: Say On Pay
Every new year, it seems, governance Cassandras like us warn of fresh shareowner uprisings aimed at skyrocketing executive compensation. And of course, at each year-end, we wind up tallying a handful of serious rebellions but another market-wide record for payouts—even at companies inching toward collapse. But unlike years past, 2007 is shaping up as the year where the powers that be are poised to impose a market-wide solution. Welcome to the era of “say on pay.”
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
01/17/07 Columns & Editorials
24. Changing SOX In A Dodd-Frank Washington
With all the spotlights on new faces streaming into Congress in January, it’s worth noting two people who won’t be lawmakers next year: Both Sen. Paul Sarbanes and Rep. Michael Oxley, the eponymous authors of the Sarbanes-Oxley Act, are retiring from office. Reform—or at least the Washington, D.C., version of it—will now be fully in play.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
12/12/06 Compliance Week Coverage
25. ‘Stakeholders’ Reshape Corporate Agenda
In this exclusive report, Compliance Week columnists Stephen Davis and Jon Lukomnik share an excerpt from their book, “The New Capitalists: How Citizen Investors Are Reshaping The Corporate Agenda,” released Nov. 1.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
11/21/06 Compliance Week Coverage
26. UnitedHealth’s Bold Move For Board Power
Where better to find signs of the next big leap in corporate-governance practice than in the detritus of the latest stock option backdating scandal? Sure enough, it’s there—at UnitedHealth Group.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
11/14/06 Columns & Editorials
27. Self-Referential, But Not Self-Reverential
As this Davis & Lukomnik column marks the end of their second year of punditry for Compliance Week, they figured it was a good time to analyze the best—and worst—of the past two years, along with self-imposed grades (and lessons learned).
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
10/17/06 Columns & Editorials
28. How Heinz Squeezed Out Its Proxy Victory
Heinz’s tomato ketchup served as Hollywood’s prop of choice for years; early movie directors reached for the company’s distinctive bottles whenever they needed gore authentic enough to make an audience’s skin crawl. Now, thanks to a nasty shareowner insurgency mounted last month by Nelson Peltz, managing partner of the Trian Group, Heinz is sending goose bumps through another crowd: that of American corporate directors.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
09/12/06 Columns & Editorials
29. Fixing A Company’s Failure To Communicate
This week, Stephen Davis and Jon Lukomnik pen a letter to Home Depot CEO Bob Nardelli, offering tips to improve communications with shareholders. "We suggest that you look forward, not back, and find best practices to communicate more effectively with your owners. Luckily, a model exists." It's called the Pfizer Playbook...
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
08/15/06 Columns & Editorials
30. Board Directors Now Face A New Firing Line
To paraphrase Winston Churchill, never in the course of U.S. corporate governance have so many board elections depended on the votes of so few.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
07/11/06 Columns & Editorials
31. A Short Story Of Potentially Large Disruptions
Unless you’re an electrician, you probably don’t think about the wires running through the walls of your house—until, that is, you get a shock. The stock market has similar hidden wiring. Normally, it works well. Stock trades settle, dividends are paid, proxy votes get recorded. So we don’t think about how it all happens. Recently however, that hidden infrastructure has increasingly come into sharper relief, for the same reason we pay attention to wiring: Various companies, executives, and investors have been shocked by shorts.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
06/13/06 Columns & Editorials
32. The Surprise Consequence Of Majority Voting
You can’t drive through Leicester, Vt., without gaping at a 19-foot, 16-ton concrete gorilla brandishing a golden VW Beetle. Think of it as a monument to the law of unintended consequences: In 1968, the Legislature outlawed giant billboards to preserve the Green Mountain State’s unspoiled landscape; a used car lot soon found a way around the ban, planting its giant promotional ape at a turn along a country road.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
05/16/06 Columns & Editorials
33. Building Alliances For Long-Term Growth
Pick your caricature: A) Activist owners are greedy short-term players willing to destroy the company long-term in return for a short-term stock price jump. B) Executives are entrenched management, protected from the downside of their flawed decisions, but reaping the upside when their stock options kick in because of short-term earnings management. Intriguingly, the only trait those opposing two-dimensional clichés share is a belief that the other side myopically focuses on the short term.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
04/11/06 Columns & Editorials
34. Trying Times: Activists Take To The Courts
Meet the new policemen of US corporate governance: the nation’s judges. Like it or not, shareholder activism to exert control over board behavior is migrating as never before to courtrooms, giving magistrates and juries unusual sway over how companies are run. Canny executives can take steps to avoid getting into plaintiff lawyers’ sites.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
03/14/06 Columns & Editorials
35. Executive Compensation: This Time, It’s Different. Really.
We’ve lost track. We don’t know how many executive compensation reform plans we’ve witnessed over the decades. Each time, proponents claim that this particular reform is the magic bullet. Each time, unintended consequences follow. Each time, someone says, “This time is different.” In 2006, they may finally be right.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
02/14/06 Columns & Editorials
36. No Rest For Governance-Weary In 2006
Well, folks, enjoy the New Year’s lull while it lasts—because we predict a bracing year of new compliance measures in 2006. Judges, regulators, investors, lawmakers and even the United Nations are poised at the starting gate, ready to reshape the corporate governance landscape yet again both in the United States and abroad.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
01/17/06 Columns & Editorials
37. “Factory Style” Proxy Voting: Changes Are Afoot
As the truism goes, where you stand on an issue often depends on where you sit. Unfortunately, your shareowners sit all over the place. Literally. And that has a major effect on how they view your company’s governance.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
12/20/05 Columns & Editorials
38. Fiduciary Revolution: Lawyers Say Funds Can't Ignore ESG
“Freshfields.” Sounds gentle. Except that you will soon recognize it as code for tough-minded investor scrutiny of your company’s management of environmental, social and governance risks. You’ll even begin to hear that particular troika referred to by a new shorthand: ESG. What’s going on?
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
11/15/05 Columns & Editorials
39. Seeing Risk, Opportunity In Climate Change
The national headlines and global business reports were anything but quiet last month. Hurricane Katrina. Oil prices at $70 a barrel. Gas prices above $3 a gallon. Refineries off-line. Hurricane Rita.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
10/11/05 Columns & Editorials
40. With Disney Decision, Institutions Aim Activism At Directors
The wall at the Ellis Island Immigration Museum may seem like a strange place to go to understand investor reaction to last month’s milestone decision in the Disney case. But some truths are universal and cut across both time and place. The museum quotes an Italian immigrant who stepped off the boat in New York about a century ago: “Before I came to America I had heard that the streets were paved with gold. But when I got here, I discovered three things. First, the streets were not paved with gold. Second, they were not paved at all. Third, they expected me to pave them.”
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
09/13/05 Columns & Editorials
41. Gadflies Go Mainstream: Governance Gets Institutionalized
What happens when gadflies become mainstream? Over the past 20 years, corporate governance has evolved from a noisy, often dismissible, gadfly movement into a mainstream corporate activity. Market players now recognize it as an enabler of value creation, and regulators see it as a pillar of business integrity. As investors, we’re all in favor of that. But compliance officers now have to bear the brunt of unintended, and possibly unwanted, consequences of governance gone mainstream.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
08/09/05 Columns & Editorials
42. Dodging The Executioners: Partisan Politics And The CCO
This is Compliance Week, not Washington Monthly. Unfortunately, starting this summer, compliance executives across the country will need to avoid political traps as well as regulatory ones. Some powerful political players are beavering to transform key 2006 elections into public referenda on whether the Enron-fueled crackdowns on U.S. corporations have gone too far. And, while elected officials like New York Attorney General Eliot Spitzer are the prime targets, the reality is that compliance officials, chief executives, and institutional investors are in danger of being in the line of fire.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
07/12/05 Columns & Editorials
43. Executive Compensation Trends For 2006 (Yes, 2006)
It has become a rite of summer: Add up the previous proxy season compensation disclosures, slice them, dice them, and spit out numbers. It's interesting stuff, but—ultimately—interesting stuff viewed in the rear-view mirror.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
06/14/05 Columns & Editorials
44. Tough Choice For Execs: Your Lobbyist Or Shareowners
Imagine you’re the director of a company faced with a shareholder revolt. They’re demanding the head of your CEO, a CEO who had previously turned around your company, but who, recently, seems to pick fights just to pick fights. You worry that his abusive nature is endangering the corporate future, but are indebted to him for the past. What do you do? Do you fire the CEO? Rein him in? Ignore the owners and hope the firestorm dies down?
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
05/03/05 Columns & Editorials
45. “Who Are These Guys?” Welcome To The Hedge Fund Era
Welcome to the Age of The Hedge Fund, a unique era in corporate influence in which new and largely misunderstood market forces have already demonstrated an uncanny ability to grab the attention of boards of directors. And while we’re still in the era’s early “Jurassic” period, it’s likely that the Age of The Hedge Fund will create interesting challenges and opportunities for public companies.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
04/05/05 Columns & Editorials
46. Money Talks: Brokers Getting Paid To Track Social Impact
Executives heard the drone of exhortations from social activists for years: Quit apartheid South Africa. Stop selling tobacco. Go green. Mostly the campaigns amounted to harmless nattering, with little if any impact on the bottom line; despite advocates building a business case for social responsibility—you know the argument: boost earnings by doing good—the pressure to date has turned out to be shrill sound and little fury.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
03/08/05 Compliance Week Coverage
47. Looking For A Goldilocks Accountability Standard
Sometimes we can’t help but feel like Goldilocks, particularly when it comes to the contentious issue of holding directors accountable for corporate misbehavior. We’ve tasted porridge too cold, and porridge too hot. So far, we’re still looking for the porridge that’s just right.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
02/01/05 Columns & Editorials
48. Institutional Investors’ Perspective: Priorities For '05
Remember the old days when corporate executives stood astride the known world, masters of markets? Today, with fetters such as Sarbanes-Oxley, residents of the C-suite feel they are doing something closer to dancing atop a basketball.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
01/11/05 Columns & Editorials
49. The Illusion Of Proxy Access Is Classic SEC Misdirection
In their debut column for Compliance Week, two institutional shareholder experts take on the SEC's proxy access proposal. According to John Lukomnik, the former deputy comptroller for the City of New York, and Stephen Davis, cofounder of the International Corporate Governance Network, the SEC’s cumbersome proposal is a red herring, and a two-headed one, at that.
 By Stephen Davis and Jon Lukomnik, Compliance Week Columnists
11/30/04 Columns & Editorials

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