pnArt

It’s never easy to guess what what “the last straw” will be in corporate governance. Boards of directors and American shareholders are a compliant lot and they would rather lose millions, or even billions, of dollars, than vote out a sitting CEO.

Many reasons have been suggested for this. Frequently-cited is the “Costly Firing” explanation – finding a good CEO is hard; interruptions in leadership, especially during a crisis, can exact serious penalties; the new person might be worse - better the devil you know that the devil you don’t; firing a CEO could give the wrong signal to the market and send the stock plummeting, plus there will probably be a big severance package to pay and even the risk of legal action.

An alternative explanation for CEO entrenchment is the old-boy network - executives and fat cats looking out for each other, often with the knowledge that the board is complicit in the various decisions that drove a company into a wall.

But either way, sometimes enough is enough and tomorrow’s Bank of America shareholder’s meeting will be interesting.

I started buying Bank of America about a year ago when it was around $40/sh and paying a fat dividend. Over the years I’ve done well buying strong companies in wounded industries. On the day the markets opened after 9/11 I bought Southwest Airlines, for instance. And Bank of America was a pretty strong bank, and well-positioned, so I bought more as it fell.

But then a funny thing happened. Last September, with Wall Street firms falling to the ground like autumn leaves, Bank Of America acquired Merril Lynch, virtually overnight. An article in the January 28, 2009 issue of Business Week reported that BofA had only 24 hours to review Merrill’s books - and this with a staff called in at 2AM after working a 14-hour day on another crisis.

Last week the reason for this became clear. In testimony to investigators from the New York Attorney General’s office looking into fishy bonus payments, BofA CEO Ken Lewis said that he was pressured by Hank Paulson and Ben Bernanke to make the purchase - and to keep quiet about his reservations.

Let’s reflect on that for a moment. Under law, a CEO is required to disclose to shareholders any information that might materially affect the value or prospects of the company. Not only did Lewis break the law, but according to his testimony he was urged to do so by the two most senior government officials involved in the US economy - the heads of Treasury and the Fed. For the record, both deny that they urged Lewis to cover-up.

But now that Lewis has admitted in sworn testimony that he failed to meet his legal obligations and that he bought a company that he suspected would drag down shareholder value, I cannot fathom why we should keep him on. I proxy-voted my shares against him for the chair a month ago, before the latest news,  and several major institutional shareholders have since indicated their intention to vote against him tomorrow. If he survives tomorrow it’s likely the lawyers and prosecutors will get him before long anyway, but the sooner BofA starts its spring cleaning the sooner it can get its house in order.

( artwork copyright © Peter Nelson )

For non-classical music the streaming subscription services such as Rhapsody provide a rich source of content at a nearly adequate quality level. Recent improvements in the Sonos search tools make it easier than ever to search Rhapsody even without a computer booted, and almost every popular song I could ever want seems to be accessible. But I still relentlessly build up my own music library.

Why?

Four reasons:

Ownership I like to own my stuff. I don’t want my access to music to depend on my fleeting financial fortunes or decisions made in corporate meeting rooms or the success or failure of Rhapsody’s business model or the reliability of my network connections or whether all the unions between here and there are happy with their contracts. My own music on my own harddrive (with suitable backups, of course) is the key to sleeping well at night, and maybe even enjoying some bedtime music on my way to dreamland.

Portability I can listen to my own MP3’s anywhere I want - at work (where most companies don’t allow streaming), weeding in my garden, in my car on long drives, traveling overseas, or out for a run.

Searching/Tagging The MP3 tagging scheme seems to have been first designed by geeks with a degrees in musicology from the back of a matchbook, and it’s since mutated into more strains than the flu virus. But its sheer amorphousness and lack of definition makes it clay in my hands, and I’ve used the tags to create schemata that allow me to search, recognize and organize my music easily. All of this is lost when I have to rely on some third-party to notate the music I’m hearing.

Audio Quality Most music services stream at 128 kbps. While there are slight quality differences between formats – MP3, AAC, RealAudio - there is no format where 128 kbps is artifact-free for close listening. It’s fine for casual music doing chores around the house or background music for dinner, but listen closely with good headphones or earbbuds and at times you will have no doubt that it’s compressed My lossy-format standard is MP3, between 192 and 320 kbps VBR. By ripping the music myself I get to choose the codec and the parameters, and I get to adjust loudness and gapless settings as I see fit.

The vast majority of my music is transcoded from CD’s I own. This addresses all four of the issues above. In recent years I’ve been buying used CD’s, partly because they’re cheaper than new CD’s and partly to thumb my nose, within the bounds of the law, at a record-industry that remains in denial about what century this is. They don’t make a penny when I buy a used CD.   In even more recent years I’ve been buying MP3’s online from Rhapsody or Amazon, as their selection is finally starting to broaden to the point of practicality.

I have not been tempted to use P2P file sharing. I’ve been amazed at the rationalizations used by that crowd to convince themselves that what they’re doing is not wrong. It’s striking how an adolescent sense of entitlement can energize such creative thinking.  A few file sharers admit what they’re doing is illegal but try to ennoble it as a kind of civil disobedience for a greater cause.  I can accept a civil disobedience argument in support of a great moral struggle – say, ending Jim Crow or apartheid, or achieving colonial independence.   But civil disobedience in the cause of pampered American or European teenagers getting more free stuff is too much of a stretch.