A report published yesterday by MCI’s US court-appointed corporate monitor, Richard Breeden, said the company’s shareholders must elect at least one director each year. It would also grant them the power to approve stock options, after an initial bar of five years.

The recommendations are among 78 outlined in the report, called Restoring Trust, that author Breeden said are intended to prevent the cronyism and compensation abuses of past MCI executives, and to install a system of corporate checks and balances.

WorldCom is compelled to implement the recommendations, as they are required under the permanent injunction issued by Jed Rakoff, a US District Court judge in the Securities and Exchange Commission’s (SEC’s) proceedings against WorldCom.

Summarising his report, Breeden wrote yesterday: CEO [Bernie] Ebbers was allowed nearly imperial reign over the affairs of the company, without the board of directors exercising restraint over his actions.

One cannot say that the checks and balances against excessive power within the old WorldCom didn’t work adequately. Rather, the sad fact is that there were no checks and balances, he added.

Restoring Trust… shifts the balance of power in corporate governance of MCI in the direction of a bit more power and authority for shareholders, Breeden said.

Under Breeden’s plan, shareholders have the opportunity to nominate their own candidates to the board of directors, who must be included on the management’s proxy statement, if they disagree with individuals proposed to fill vacancies. This will raise the potential for a contested election to fill openings, Breeden said.

Other changes mean directors are limited to a term of 10- years in office, full board meetings are required eight times per year and compensation, consulting agreements and payments of any kind to directors other than board committee retainers are prohibited.

Additionally, retention grants are banned, severance awards are limited and personal use of corporate aircraft and other corporate assets is prohibited.

MCI’s CEO cannot sit on other corporate boards and the company is required to have an audit, governance, compensation and risk management committees that must be free of the CEO. Also the independent auditors can only serve 10 years, before changing.

MCI chairman and CEO Michael Capellas welcomed Breeden’s report saying it establishes a roadmap that helps us build our foundation for the future.

Source: Computerwire