Peter Redman, National Post FilesSeymour Schulich says shareholders are shut out of the process of selecting and compensating directors.

Judging from the slew of recent e-mails responding to my column on the topic, the current system of selecting and compensating directors has a lot of critics. Here's a sample of some recent comments.

Seymour Schulich, a legendary owner-manager and large benefactor, didn't hold back. In his view, the situation is straightforward. "Management is using shareholders' money to buy board allegiance," he said, noting that directors at some public companies are getting $200,000 to $250,000 per year for attending half a dozen meetings. Then, "with the aid of compliant consultants, management reaps outlandish compensation with little connection to performance. The real owners are shut out of the process," he said.

Schulich, who helped built Franco-Nevada into an home run for investors before selling to Newmont Mining, said that, in his opinion, "companies don't seem to work too well without a dominant owner."

Overall, Schulich said, "there's more money to be made running an honest, modest-pay company than these kleptocracies. Large-company equity ownership is becoming a loser's game. Shareholders are going to start voting with their feet."

One Canadian-born executive recruiter based in New York said the matter of director compensation "is quite complex and intricately connected to many other board deficiencies that need to be adjusted ahead of ever having the hope of improving the director-compensation situation."

In his view, "the current method of selecting, recruiting and ultimately electing directors is somewhat flawed. Prospective directors must be approved by current directors as well as the CEO. It is simple psychology to see that anyone advocating change will never make it onto the board."

One Calgary-based executive, who works with boards in a professional capacity, said, "Thank you for bringing some attention to what has become a dysfunctional, mutually parasitic web of nonsense called governance. It conjures up an image of the old guys laughing and head-bobbing in the balcony on the Muppets [ Show] ... looking down on the audience of unsuspecting shareholders in the cheap seats. The mess we are in started at the top -- the boards of directors. Shameful," he declared.

A veteran Vancouver-based director said he is "absolutely aghast at what some boards approve, especially in compensation, and especially in the United States. If every board in this continent went to its CEO and said, 'Times are tough and your pay is down by 25%,' I would wager that the resignation rate would be close to zero." This director noted that "board accountability is not an easy question" and "importation of the kind of opposition politics that we see in Parliament would be very counterproductive."

Those comments echo what Tony Fell, former chief executive at RBC Capital Markets, said earlier this year in a speech at the annual dinner of the Toronto Board of Trade. Fell said the current global financial crisis "highlights a massive failure of corporate governance, the failure of boards to oversee management and the failure of management to oversee the business."

Fell added, "You can only have a good board if you have hard-hitting directors prepared to stand up and be counted. I have always found it curious why so few board members resign over matters of principle.

"Does every director agree with everything?" he asked, saying there is too much tendency on the part of directors to "go with the flow."

bcritchley@nationalpost.com