Thursday, December 18, 2014

The Corporate Conveyor Belt in North Carolina: Our Governor has a Meltdown

The Corporate Conveyor Belt in North Carolina:  Our Governor has a Meltdown

The facts are straightforward.  Our current governor served on the board of Tree.com, the parent of mortgage broker Lending Tree, and he received cash and stock for his service.  A month after he became Governor in 2013, he resigned.  The board paid him $171,071, representing stock that had not yet vested.  According to press reports, the Governor didn’t make the proper disclosure on his Statement of Economic Interest, which must be filed with the State Ethics Commission.[1]  Representative Mark Sanford (ex-Governor of South Carolina) was also on the board and received the same treatment when he resigned to take his seat in the House.



In the current business and political environment, this isn’t much of a story.  Companies put politicians on their boards all the time.  If they’re not earning speaking fees, Democrats and Republicans alike build up their bank accounts by serving on corporate boards, while they lay the groundwork for their next campaign.    Moreover, it’s not usual for senior executives and members of the board to help finance the campaigns of their politician colleagues.  It’s how the system works.

Governor McCrory’s response to the Associated Press story is what makes this story interesting.  The Governor’s is furious.  Here’s his response:

I continue to uphold high ethical standards and follow the law. Unfortunately, the Associated Press failed to report that fact. The story is misleading, riddled with factual errors and flat out misrepresentations, and is a disservice to the public. It was written with malice and the intent to do harm without any factual consideration given. I'm proud of my private sector experience – it has helped me be a better governor focused on job creation and lead this state to one of the largest drops in unemployment in the nation.

His spokesman added,

The governor has done everything in a proper and ethical manner. This is a classic example of partisan drive-by journalism that deliberately misrepresents the facts. The AP is making reckless accusations through anonymous people about laws that they cannot cite (emphasis added).

The Governor is soliciting campaign contributions so he can mount a media response to A.P.

This is one story where you can look up the facts.  The Governor’s remuneration by Tree.com is contained in the company’s annual proxy statement and other SEC filings.  His state financial disclosure form is a public document.  Only two matters are in question: was the payment of his unvested stock an unusual benefit?  And, did the Governor fail to make proper and timely disclosure?

The privileged and connected are far more likely to be given a warm sendoff when they leave the corporate world or Wall Street, and head for public service (see, my recent News & Observer column on Antonio Weiss[2]).   While Governor McCrory and ex-Governor Sanford were independent directors for legal purposes, they were both insiders within the world that connects business to politics and government.  I’m pretty sure the acceleration of stock awards isn’t unusual among the influential.  However, if an average employee left her firm for government service, she’d have to leave her unvested stock behind.  From an ethical perspective, accelerating the Governor’s unvested stock doesn’t pass muster.  The Governor should have declined the payment.

As to the question of disclosure, the best that can be said is that Governor McCrory made as little disclosure as possible.  The Governor’s spokesman blamed unclear ethics forms for the Governor’s failure to furnish all the details.   I’m sure all sorts of high-quality lawyers and accountants represent the Governor, and they know how to fill out financial forms.  Whether required by the law or not, the Governor should have promptly revealed all the details of his compensation and relationship with Tree.com.  After all he is responsible for appointing the people who regulate Lending Tree. 

Rather than attack the Associated Press, the Governor ought to apologize to the public.  Instead of soliciting campaign funds to combat the AP story, he should to attend to the state’s growing revenue shortfall.  However, if he feels compelled to rebut the story, Tree.com paid him more than enough money to wage a media response without soliciting donors.   




[1] http://www.charlotteobserver.com/2014/12/16/5389249/carolinas-politicians-get-payouts.html#.VJMhFWTF99I
[2] http://www.newsobserver.com/2014/12/13/4396261/andrew-silton-stop-the-conveyor.html