CEBC IN THE NEWS

Twin Cities Business Leaders Agree to Principle Pledge

Published Tuesday, April 8, 2003 by the Associated Press.

ST. PAUL - Nearly 40 Twin Cities business leaders have joined in support of an evolving set of principles to help restore public confidence in American corporations.

David Koch, retired chief executive officer of Golden Valley-based Graco Inc., and three others - SurModics chairman Dale Olseth and retired chairmen Richard McFarland of RBC Dain Rauscher and Chuck Denny of ADC Telecommunications - organized the group.

The Twin Cities-based Center for Ethical Business Cultures is serving as its administrative arm.

"It isn't that the CEOs need to satisfy just their boards or their shareholders," Koch said. "They also need to satisfy the public."

The focus is on four areas: executive compensation, balancing short-term gain with long-term value, corporate responsibility and corporate governance.

The group also outlined two themes in regard to executive pay - excessive compensation and pay for mediocre performance.

Executive pay "has grown significantly faster than compensation for the average worker, and some CEOs were compensated generously while their companies failed," the statement said. Stock options "are important," it added, but should be based on long-term company performance.

The statement also called on companies with a CEO who is also chairman to either split the jobs among two executives or go to a "lead director" structure. A few local companies with a combined CEO/chairman, notably Medtronic and Target, have adopted the lead director concept.

Ron James, president and CEO of the center, said that while there have been swift legislative and regulatory responses to corporate scandals, business leaders have been too silent.

Meanwhile, the public is expressing dissatisfaction in opinion polls and by pulling money out of the stock market.

"In the absence of a business voice, the public paints all businesses with the same brush," James said.

Two months ago, retired Medtronic CEO William George charged that too many businesspeople have been "worshipping the wrong idols." During a critique of corporate leadership at a Westminster Town Forum meeting in Minneapolis, George called for a new generation of leaders to speak out against CEO pay excesses and questionable corporate practices.

James said the center, which is affiliated with the business schools at the University of Minnesota and the University of St. Thomas, will work with the group to further develop the principles.

Information from: St. Paul Pioneer Press

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