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Jul 11
2010

Arms' length may not be enough for investors

Posted by SherylNash01 in shareholdersshareholder activistscorporate governancecareer/management

SherylNash01

Shareholders recently voiced fresh dissatisfaction with director R. Bruce LaBoon, who is also "of counsel" at Locke Lord Bissell & Liddell, a law firm that provides services to the company.

In its proxy statement, the company cliams that the "attorney fee arrangement with Locke Lord is negotiated on the same basis as arrangements with other outside counsel and is subject to the same terms and conditions."

But that wasn't enough to satisfy investors when it came to LaBoom's re-election to the board, as fifty eight percent of Sterling's shareholders voted to withhold them in his case. Shareholders evidently feel that despite the company's arms-length dealing with his firm, the relationship has the potential to undermine LaBoon's independence and ability to effectively monitor management.

This isn't the first time LaBoon's independence and commitment to oversight has been called into question. In 2007, 48 percent of shareholders withheld their votes from him. This time around it didn't help that Sterling Bancshares'  annual meeting this year was held at the Locke Lord officce and that LaBoon reports the law firm's address as his address on his Form 4.

While Annalisa Barrett, a senior research associate with The Corporate Library, says the situation isn't all that unusual. "We see situations like this often -- presumably, the boards feel that they have sufficiently considered the potential for a conflict and have decided that, in this case with the individual person, it is not a concern," Barrett said.

 But such situations are drawing more attention these days than they normally would.

LaBoon, a former director of JP Morgan Chase and Texas Commerce Bancshares, sits of Sterling's executive, corporate governance and strategic planning committees.

 

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