Attorney Jeremy Goldstein Explains Corporate Governance

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Jeremy Goldstein Attorney - corporate governance

New York lawyer Jeremy Goldstein has a unique perspective on its significance in the highly competitive business world. His firm, Jeremy L. Goldstein & Associates LLC, advises compensation committees and management teams as well as CEOs on executive compensation to ensure an optimal motivation for corporate officers. With experience as a partner at a large law firm in New York before he opened his boutique firm, Jeremy Goldstein founded his practice to specialize in corporate governance and executive compensation. In this article, we explore corporate governance from his unique perspective.

Understanding Corporate Governance

Governance at the corporate level provides a system of rules, regulations and processes that enables businesses to function efficiently and effectively. A framework that underlies almost all aspects of management, it identifies the power structure that ensures ethical decision making and the accountability that comes with it. Corporate governance delineates lines of authority and balances the interests of a company’s many stakeholders.

Groups that hold a vested interest in the operation of a company include its customers, the community that it serves and the government at large. Integral to the functioning of a corporation, the senior management executives hold critical positions of influence that governance helps clarify and support. Suppliers, financiers and shareholders have vital responsibilities that contribute directly to a company’s performance. Corporate governance enables processes that set objectives and ensure an active pursuit to achieve them.

Considering the Basics

Profit-seeking organizations seek to maximize shareholders’ wealth as a primary goal, and corporate governance affects sustainability as well as long-term value. Given its role as the structure that ensures a company of a system of rules, practices and processes, the essential nature of corporate governance becomes clear. As the guiding force that provides direction and management, it dictates organizational behavior. While stakeholders affect governance tangentially, they do not contribute to corporate governance itself. With the pivotal position that the board of directors occupies, it exerts considerable influence over a company’s equity valuation.

Communication Responsibility

The responsibility for communicating a company’s corporate governance lies with the departments that handle community and investor relations. A feature of a firm’s investor relations website needs to outline its organizational leadership by identifying its executive team and its board of directors. The site must include a full description of corporate governance by describing its committee charters, guidelines for stock ownership and a copy of the articles of incorporation.

Disclosures

The full disclosure of a firm’s corporate governance helps instill confidence in the market. By demonstrating the systems, principles and processes that run the company and the checks that ensure ethical management and prevent conflict of interest, a company can help investors gain confidence. Most companies tend to establish a significantly high level of corporate governance to provide the transparency that engenders high-quality investor relations.

Many shareholders look for more than profitability however, and evidence of corporate citizenship means a lot to them. Some qualities that discerning investors may use as qualifying factors include environmental awareness, sound evidence of the adoption and practice of outstanding corporate governance and demonstration of ethical behavior. With clarity of definition and transparency in a set of rules, a firm can present a composite picture of an organization that aligns the incentives for its shareholders, officers and directors.

Examining the Role of a Board of Directors in Good Corporate Governance

Stakeholders look to the board of directors as the primary influence on corporate governance. Whether elected or appointed, the members of the board make crucial decisions that have far-reaching effects. Appointments of corporate officers, the company’s policy on dividends and executive compensation as matters of financial optimization face challenges for attention when shareholder resolutions demand priority consideration of environmental or social concerns.

Board Structure

The makeup of a board of directors provides the most efficient operation when it includes independent and inside members. Founders, executives and major shareholders comprise the insider representation while independents bring experience in managing or leading other large companies. As impartial members who have no ties to a firm, independents help lessen the powerful influences of the inside contingent.

The interests of shareholders can better align with those of the insiders through the participation of independent board members. With a blend of talents from different viewpoints and experiences, the board can better meet its obligation to provide oversight and planning. Diversity can broaden the effectiveness of corporate governance and gain approval from regulators and investors. Boards can benefit from the diversity of members who bring not only skills and experiences but also a range of differences in age, ethnicity, gender, religion and race.

Coping with the Impact of Bad Corporate Governance

The consequences of bad corporate governance can lead to lax internal controls, poor risk management, improper accounting and irregularities in financial reporting. Some serious consequences of bad corporate governance prevent investors from gaining knowledge of inappropriate practices or the existence of inadequate financial controls. Misleading financial statements and the failure of external audits to detect caution signs can produce catastrophic results. Even more damaging in some situations, a hint of substandard business ethics can make it nearly impossible for a company to recover lost trust. The practice of bad corporate governance can create impacts on a company’s financial health, its reliability, transparency and integrity.

The news informs the public of scandalous activities that can produce severe impacts on a company’s sales and stock value. With the revelation that Volkswagen AG had manipulated pollution test results by rigging the emission equipment on its engines, the company’s stock price drop by almost half. Vehicle sales fell by 4.5 percent in the first full month after the announcement. Businesses that put growth ahead of corporate governance may increase profit margins temporarily, but it may lead to a lack of investment in risk management. The power to maximize profits can motivate a company until a reconsideration of priorities provides an emphasis on good corporate governance.

Practices that Destroy Confidence

By allowing a slow and gradual erosion of good corporate governance, companies risk losing the transparency, integrity and reliability that lead to financial health. When companies fail to provide adequate cooperation with auditors or choose those with poor qualifications, the publication of false or non-compliant documentation can occur with devastating effects. Boards that offer insufficient compensation packages for executives may do so without realizing the impact that it has in the reduction of incentive for dedicated and productive corporate officers. Without a diversified and well-structured board of directors, shareholders may find the process of removing ineffective incumbents too problematical.

Reassuring the Public

Punishment for transgressions in corporate governance can have a long-lasting effect when publicity informs the American public of dishonorable practices. In the dawn of the 21st century, fraudulent activities by Enron and Worldcom led to their declaration of bankruptcy and corrective action by the Congress of the United States. The passage of the Sarbanes-Oxley Act strengthened the recordkeeping guidelines for companies, and it stiffened criminal penalties for violations. A sense of outrage created a need to restore confidence in public companies and helped establish credibility in the reliable operation of some of America’s highest-profile companies.

About Jeremy Goldstein

Jeremy-Goldstein-HeadshotWith degrees from some of America’s finest institutions of higher learning, Mr. Goldstein has accumulated an outstanding academic record. At Cornell he graduated cum laude before continuing his education by earning an M.A. from the University of Chicago. His juris doctor degree from the New York University School of Law allowed him to enter the legal community where his expertise in corporate governance has guided some of the decade’s most significant corporate transactions.

Mr. Goldstein serves as chair of the Mergers & Acquisition Subcommittee for the American Bar Association Business Section’s Executive Compensation Committee. He has a reputation as an accomplished executive compensation attorney. The Legal 500 and Chambers USA Guide to Americas Leading Lawyers for Business include him in their listings. He shares his expertise by writing and speaking on corporate governance matters and executive compensation issues as well. His civic duties call him to serve as a member of the Fountain House board of directors. Mr. Goldstein contributes his time to aid in the welfare and recovery of men and women who have a mental illness. He has hosted charity events that benefit the work of the organization.

Follow Mr. Goldstein on LinkedIn

 

12 COMMENTS

  1. New York lawyer Jeremy Goldstein has a unique perspective on its significance in the highly competitive business world. His firm, Jeremy L. Goldstein & Associates LLC, advises compensation committees and management teams as well as CEOs on executive compensation to ensure an optimal motivation for corporate officers.

  2. At first I thank you for this wonderful article This article is one of the best articles I have read in my life, useful article contains good information

  3. This is very informative, well described, and professionally done. It’s easy to understand all the points being made about Jeremy Goldstein. I like how it goes into great detail because this is something that everyone should know about. There’s a lot of misleading information out there but this is a site I can always trust. I can’t wait to read more articles like this one because you can never learn too much. I enjoyed it a lot and will share what I learned with all of my friends. They have the same interests as I do so I know they will love this as much as I did.

  4. This is an odd statement in this climate of corporate greed and massive compensation packages/golden parachutes for corporate board members and CEOs. How do you balance paying executives enough for them to care and incentivize then to reach corporate goals with not giving them massive amounts of money for work that is obviously not worth it . If a ceo or executive is only incentivized by money to work for your company do you really want him on your board or as your leader ? It seems like a successful CEO would be someone who believes in the mission Of your company and will strive to meet your goals because they believe in them. Adequate compensation for executives is obviously important but it seems like if money is gonna be the breaking point then that person is just greedy and not the right fit .

    How can you balance the needs of the executive with the need of the company to have an officer who will believe in the company no matter what? Do you pay the best person the maximum amount of money even if there just being the ceo for the payday? Or do you try and find someone who actually believes in the company ? The public perception is that corporations are overpaying executives and board members so it’s very different for me as a lay person to see the other angle of not adequate compensation for board members . You don’t see that angle ever in the press or in the media.

  5. very informative article i have ever seen about Corporate Governance.great explanation that makes me easy to understand.i am very happy about your presentation.really you explain every details very well.learn lots of things that was unknown but very important to know.thanks for sharing.

  6. Transparency in all business dealings, whether it be single owner or corporation need med of virtue in order to carry out transparency in any avenue of life that interacts with different types of human consciousness.

  7. This is really a great and detailed article about corporate governance. I have learned so many facts by reading this article. Jeremy Goldstein explains the matter very well. I really do appreciate of his explanation about corporate governance. This type of article is very helpful for people like me. Thanks a lot for sharing this article with us.

  8. How do you balance paying executives enough for them to care and incentivize then to reach corporate goals with not giving them massive amounts of money for work that is obviously not worth it . If a ceo or executive is only incentivized by money to work for your company do you really want him on your board or as your leader ? It seems like a successful CEO would be someone who believes in the mission Of your company and will strive to meet your goals because they believe in them.

  9. Corporate governance delineates lines of authority and balances the interests of a company’s many stakeholders.Its a very informative article i have ever seen about Corporate Governance.great explanation that makes me easy to understand.i am very happy about your presentation. This is really a great and detailed article about corporate governance. I have learned so many facts by reading this article.I enjoyed it a lot and will share what I learned with all of my friends. They have the same interests as I do so I know they will love this as much as I did. This type of article is very helpful for people like me. Thanks a lot for sharing this article with us.

  10. This is a good article to read about corporate governance. Jeremy is very detailed oriented and doesn’t miss a beat when explaining things. It’s also good that he reassures the public about corporate governance and the long lasting effects it can have.

    Either way, this is a good article for anyone to read who has an interest in corporate governance and what it entails, whether you are a single business man, small business owner or someone who works part of a large corporation.

    It was also nice to read that he got his M.A. from university of Chicago.

  11. This is an odd statement in this climate of corporate greed and massive compensation packages/golden parachutes for corporate board members and CEOs. How do you balance paying executives enough for them to care and incentivize then to reach corporate goals with not giving them massive amounts of money for work that is obviously not worth it .The public perception is that corporations are overpaying executives and board members so it’s very different for me as a lay person to see the other angle of not adequate compensation for board members . You don’t see that angle ever in the press or in the media.

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