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Sunday, December 16, 2007

Ind. Gov't. - "Bayh says wife's corporate roles hold no sway over his votes"

Sylvia A. Smith, Washington editor of the Fort Wayne Journal Gazette, has a long story today on Indiana attorney ("inactive in good standing", as are Evan and Birch) Susan Bayh's career as a professional board member. Some quotes:

Since leaving Indiana as a first lady, Susan Bayh has become a professional board member, earning more than $1 million a year in director fees for advice she gives to companies that make pharmaceuticals, operate radio stations, sell health insurance policies, offer online banking and distribute ingredients to fast-food restaurants.

In the past four years, Bayh collected more than $1.7 million in pre-tax income when she exercised stock options from two of the corporations. Her actual income from exercising stock options is higher, but the details of one transaction were not publicly reported.

During the same time, her husband, Sen. Evan Bayh, D-Ind., cast more than 3,000 votes, including some on issues of keen interest to the pharmaceutical, broadcast, insurance, food-distribution and finance industries.

Bayh said his wife’s business interests never influence how he votes, the bills he introduces or the positions he takes. * * *

The intersection of the Bayhs’ professional lives illustrates the touchy ethical situation some couples face when one spouse is employed by the taxpayers to watch out for their interests and the other is duty-bound to work for the financial interests of only a small group of people – the shareholders of the companies they direct. ” * * *

Last year, Susan Bayh served on the boards of six publicly traded and two privately held companies, putting her into a class described as “professional board member.”

For her work attending meetings and serving on board committees of six of the businesses in 2006, Bayh received $94,591 in cash payments and $816,436 in stock or stock options, the companies reported. A conscientious board member would have spent at least 32 weeks of full-time work on the business of serving on six publicly traded boards, according to an organization that trains directors and advocates for responsible boards.

Publicly traded companies must file annual reports with the Securities and Exchange Commission that disclose the compensation paid to board members. Privately held companies file no such publicly available reports.

Senators are required to file annual reports that list – in broad ranges – the financial holdings of themselves and their spouses. According to Sen. Bayh’s report for 2006, his wife’s stock and stock options in the eight companies were valued at $1.3 million to $2.7 million.

Susan Bayh’s income and assets from the boards are a major portion of the Bayh family’s net worth, according to her husband’s report. He said he and his wife have assets worth between $4.3 million and $15.1 million, not counting the couple’s $1 million Washington home, which is in Susan Bayh’s name.

Senators are paid $165,200 a year.

Susan Bayh’s position as a director for eight businesses puts her in the league of “professional directors,” a term used to refer to people who sit on multiple corporate boards and are not otherwise employed. * * *

Susan Bayh’s advice on how to direct businesses has been sought especially by pharmaceutical companies. She was a lawyer for Eli Lilly & Co., the Indianapolis-based pharmaceutical company, for five years while her husband was Indiana’s governor. Since 2000, she has served on the boards of eight companies that develop drugs.

She was first appointed to a public board seat in June 1994 when she was named to the Emmis Broadcasting board. Since then, she has been named to the boards of 14 businesses, primarily in the insurance or pharmaceutical industries. As of last year, she sat on the governing bodies of eight companies: Indianapolis-based Emmis Broadcasting and WellPoint Inc., the second-largest U.S. health insurance company; four pharmaceutical companies: Curis Inc., Dyax Corp., Nastech Pharmaceuticals and Dendreon Corp.; and privately held Golden State Foods of California and E-Trade Bank of Virginia.

Bayh previously served on the boards of Cubist Pharmaceuticals, Esperion Therapeutics, Novavax and LWWI Broadcasting.

In a very brief editorial today, the Journal Gazette writes:
While it’s not out of the ordinary for Washington power couples, the arrangement posed by Sen. Evan Bayh and his wife, Susan, warrants full transparency.

Sylvia A. Smith details Susan Bayh’s work as a member of eight corporate boards in a package of stories published today. The senator’s wife earned more than $1 million last year.

Melanie Sloan of Citizens for Responsibility and Ethics in Washington points out that even though there are no Senate rules barring a spouse from serving on a corporate board, there is still an appearance that the elected official could be voting to benefit a spouse’s employer.

Barring limits on spouses’ job opportunities, members of Congress should note that an upfront acknowledgment of the potential conflict and full disclosure is the best way to ensure that the public’s interests are not ill-served.

Here are details on six of Bayh's board memberships.

Here is another longish Smith story today, this one headed "Stock options pile up, pay off for Susan Bayh." This one begins: "Without billing any clients or cashing a paycheck, Susan Bayh collected $248,700 so far this year in income from one corporation."

In this story today, Smith compares the Bayh situation with other Washington two-career couples. Some quotes:

Washington is dotted with couples who pair a lawmaker and a lobbyist or a lawmaker and a board member.

For instance, Jackie Clegg, wife of Sen. Chris Dodd, D-Conn., is on the boards of Blockbuster, the Chicago Board of Trade and two pharmaceutical firms. Ruth Raduenez, wife of Sen. Tom Harkin, D-Iowa, serves on the boards of Conoco Phillips, United Technologies and Bowater. Joan Levy, wife of Sen. Arlen Specter, R-Pa., serves on Bancorp’s board. Sharon Percy Rockefeller, wife of Sen. Jay Rockefeller, D-W.Va., is on the board of PepsiCo.

“People put people on boards for a lot of different purposes,” said Diane Denis, senior associate dean at Purdue University’s business school. “Certainly one such thing would be connections.”

The spouse of a senator “could be a very valuable contact” for a corporate board, said Warran Batts, a University of Chicago adjunct professor of business and a retired corporate executive who has served on the boards of several major businesses.

But “there’s almost an inherent conflict of interest there, so the board and the individual need to police that relationship very carefully,” he said. “A lot of spouses are just as bright; one is just as competent as the other. They shouldn’t be penalized. But on the other hand, their position shouldn’t have the appearance of opening up doors that shouldn’t be opened up.” * * *

Bayh said his wife is an accomplished lawyer, having worked for prestigious law firms in California and Indianapolis. Susan Bayh declined to be interviewed about her corporate work.

Bayh described his wife’s professional career has having sometimes been thwarted by his political activities. For instance, he said, Susan Bayh had to change her practice area of corporate and security law when he became Indiana’s secretary of state and oversaw the state’s private securities industry. He said his wife then switched her specialty to utility law, which she had to give up when Bayh became governor.

Asked why the couple didn’t decide to ensure that questions of possible conflicts could never be raised, Bayh said, “The only way to avoid that would be to ask my wife to have no career.”

No matter what kind of law Susan Bayh would practice, he said, it would raise the same kind of questions.

“It’s sort of an avoidable part of being in the year 2007 with two-career couples. In my case, I just don’t think it would be fair to ask her to give up her career,” he said. “We tried to set up a system that can answer those questions, and I think that it does.”

Posted by Marcia Oddi on December 16, 2007 12:37 PM
Posted to Indiana Government