Fiduciary Responsibility & the Board of Directors
Fiduciary Responsibility & the Board of Directors
As a former employee and current shareholder of Express-Scripts (ESRX) and current shareholder of Caremark I have watched the takeover battle of Caremark (CMX) with much interest. I have feelings on the strategic value of an ESRX/CMX entity but that is not the reason for this entry. This entry is about the actions of the Board of Directors of CMX. It is truly astounding that a Board can so blatantly put aside their true mission to protect their own. Maybe a CMX/CVS merger of equals make since, maybe it doesn't but for the CMX Board to outright push aside any attempt to raise the CVS offer by taking competing bids is egregious. To have the bankers in a deal to be paid upfront to only promote one offer without the aid of knowing what offers may come later is deplorable. Obviously, the options backdating scandal has blinded the Chairman of the Board (Mac Crawford) and others whom have pledged their responsibility not to themselves, or even their employees but to the shareholders of their company. The CVS deal protects those who are now facing the government and specter of criminal and civil prosecution. The ESRX deal flatly leaves these executives to face their future on their own. This is why the CMX board has been so flatly against a buyout that most Wall Street analysts believe in the long run will be most beneficial. Clearly the FTC hurdles faced buy a ESRX/CMX union are limited - as even in previous talks CMX has agreed that these hurdles are not insurmountable. Why then has the CMX Board taken this stance now - PERSONAL GREED and FEAR. This is not the first time Mac Crawford has faced scrutiny and it won't be the last. He has shown his true colors before and will again. As a shareholder and an American investor MAC Crawford shame on you - we trusted you and you again let us down.
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From the CFA center:
Fiduciary Responsibilities Directors’ Loyalty Position: Corporate directors have a fiduciary duty of loyalty to the best interests of shareowners.
Rationale: Directors are representatives of shareowners and are charged with overseeing management — whose role it is to oversee relationships with employees, customers, suppliers, and neighbors — and, as stewards of corporate assets, are responsible for overseeing the investment of those assets in a manner that maximizes shareowner value
. Board Member Responsibilities Position: Individual board members must take responsibility to ensure that the board of directors properly fulfills its responsibilities. Rationale: Unless each board member takes the board’s responsibilities toward shareowners seriously, the board may lose its focus. To achieve this goal, Board members must have access to the information they need.
About the CFA Centre
The CFA Centre was created to develop timely, practical solutions to global capital market issues, while advancing investors’ interests by promoting the highest standards of ethics and professionalism within the investment community worldwide.
Established by CFA Institute as a distinct division with its own executive director and advisory council, the CFA Centre will build upon the CFA Institute 40-year history of standards and advocacy work, especially its Code of Ethics and Standards of Professional Conduct for the investment profession, which were first established in the 1960s.
http://www.cfainstitute.org/index.html
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For the record I am against the Express-Scripts takeover of CMX for strategic reasons from a ESRX point of view, but the actions of the CMX board make me hope that the ESRX hostile bid wins so that Mac Crawford and his cronies can face the music!
Posted by timemert
at 10:40 PM CST
Updated: Friday, 23 March 2007 2:56 PM CDT
