Janet Cowell, pick your boss: The public or shareholders

The Observer editorial board

N.C. Treasurer Janet Cowell is expected to join her second corporate board Tuesday.
N.C. Treasurer Janet Cowell is expected to join her second corporate board Tuesday. jsiner@charlotteobserver.com

Charles Elson studies corporate governance for a living and is one of the nation’s experts on the subject of boards of directors.

He has almost never seen a situation like the one involving N.C. Treasurer Janet Cowell.

“Very unusual. I’m not familiar with (anything like) it,” Elson told the Observer editorial board on Monday.

Tuesday, shareholders of specialty insurance company James River Group Holdings will gather in Bermuda to vote on adding Cowell to its board of directors. That follows Cowell’s joining the board of ChannelAdvisor in February. The state Ethics Commission approved, but Elson and other critics say Cowell’s arrangement is improper, and we agree.

“It just creates potential conflicts of interest that public servants need to avoid,” said Elson, director of the University of Delaware’s Weinberg Center for Corporate Governance. “As a public servant you represent everyone; when you are on a board, you represent a narrow class of people and there may be conflicts that arise.

“It’s best to save board service for a time when you’re no longer a public servant. To me it’s very clear cut.”

Cowell, a Democrat, will make $125,000 a year for her service on the two boards, plus $175,000 in restricted stock. She makes $125,676 as treasurer.

Cowell says as treasurer she will recuse herself from any decisions involving the two companies and from anything that could be viewed as related to her corporate board service.

Even so, News & Observer reporter David Ranii shed light on the kinds of conflicts Cowell could encounter as the first N.C. treasurer in memory to serve on corporate boards.

Ranii reports that Andrew Silton, a former chief investment officer for the state pension fund administered by the state treasurer, believes the state Ethics Commission inadequately explored the potential problems.

Silton points to at least three troublesome areas:

▪ Wellington Management manages more than $4 billion for the state pension fund and other plans. It is also one of the largest shareholders of James River. So Cowell would have to assess Wellington’s performance for the state while working on its behalf at James River.

▪ Adam Abram, CEO of James River, is lead independent director of Yadkin Bank. The treasurer’s office had $7.2 million in deposits there as of Dec. 31. And Cowell chairs the state banking commission, which oversees bank regulation.

▪ Fidelity and D.E. Shaw are large James River shareholders, so it would be difficult for Cowell to hire them as money managers for the state.

As concerning as any specific conflict Cowell might encounter in the final eight months of her term is the precedent she sets for future treasurers and other public officials. The potential pitfalls are everywhere.

The two men running to replace Cowell split on the issue. Democrat Dan Blue III would take a similar approach as Cowell. Republican Dale Folwell has pledged not to serve on a corporate board while treasurer.

We urge Blue, and Cowell, to recognize they can only serve one master at a time.