Bert Spector, Washington Post - Trump wasn’t a genuine CEO. That is, he didn’t run a major public corporation with shareholders and a board of directors that could hold him to account. Instead, he was the head of a family-owned, private web of enterprises. Regardless of the title he gave himself, the position arguably ill-equipped him for the demands of the presidency...
Public corporations are companies that offer their stock to pretty much anyone via organized exchanges or by some over-the-counter mechanism. To protect investors, the government created the Securities and Exchange Commission, which imposes an obligation of transparency on public corporations that does not apply to private businesses like the Trump Organization.
The SEC, for example, requires the CEOs of public corporations to make full and public disclosures of their financial positions. Annual 10-K reports, quarterly 10-Q’s and occasional special 8-K’s require disclosure of operating expenses, significant partnerships, liabilities, strategies, risks and plans.
Additionally, an independent firm overseen by the Public Company Accounting Oversight Board conducts an audit of these financial statements to ensure thoroughness and accuracy.
Finally, the CEO, along with the chief financial officer, is criminally liable for falsification or manipulation of the company’s reports. Remember the 2001 Enron scandal? CEO Jeffrey Skilling was convicted of conspiracy, fraud and insider trading and initially sentenced to 24 years in prison.
Then there is the matter of internal governance.
The CEO of a public company is subject to an array of constraints and a varying but always substantial degree of oversight. There are boards of directors, of course, that review all major strategic decisions, among other duties. And there are separate committees that assess CEO performance and determine compensation, composed entirely of independent or outside directors without any ongoing involvement in running the business.
Whole categories of CEO decisions, including mergers and acquisitions, changes in the corporation’s charter, and executive compensation packages, are subject to the opinion of shareholders and directors.
In addition, the 2010 Dodd-Frank Act requires — for now — regular nonbinding shareholder votes on the compensation packages of top executives.
And then there’s this critical fact: Well-governed firms tend to outperform poorly governed ones, often dramatically. And that’s because of factors like a strong board of directors, more transparency, a responsiveness to shareholders, thorough and independent audits, and so forth.
None of the obligations listed above applied to Trump, who was owner, chairman and president of the Trump Organization, a family-owned limited liability company that has owned and run hundreds of businesses involving real estate, hotels, golf courses, private jet rentals, beauty pageants and even bottled water.