The stiffs of the board

Traditionally, a board of directors is supposed to watch out for the interests of the shareholders, and make certain that the business is being properly run. So why, in REFR's case, does its board of directors sit complacently by as the company racks up its 39th consecutive year of unprofitability?

The answer lies in the makeup of the board. REFR's board has just five members: Robert Budin, Joe Harary, Victor Keen, Dr. Albert Malvino, and chairman Robert Saxe.

Right away we see a huge problem in terms of conflict of interest. 40% of the board, including the chairman, is made up of the two people who benefit the most from the status quo! That is certainly no way to get things on the right track for the investors.

And what of the other three members of the board? Robert Budin, we know relatively little of. Among other things, he is the chairman of the audit committee (which has no other known members). His role appears to be primarily interfacing with the outside auditor (KPMG) and ensure that the quarterly and annual reports are, if nothing else, technically accurate. REFR's reported results are dismal enough for it to be presumable that there are no accounting irregularities going on, so Mr. Budin's role in the company is generally not considered controversial.

Victor Keen is another matter, as he is on the REFR payroll with the title of Corporate Secretary. His presence on the board means that a majority of the board are direct company insiders. This state of affairs is widely considered a red flag, as far as corporate governance is concerned.

Finally, the last and quite possibly flashiest member of the board, Dr. Al Malvino. A sufficient biography of this person would (and most likely will) cover several posts. For one thing, he maintains a website containing a lot of his personal views, including one page devoted to the science behind SPD.

But far beyond being knowledgeable about the science of the technology, for several years, prior to joining the board of directors, he was a tireless advocate of investment in REFR. He is known to have posted on the Yahoo! REFR board until the alias George_Soros99, and would frequently post lengthy treatises explaining in excrutiating detail every aspect of REFR and ultimately reach the conclusion of that REFR was simply a miraculously great investment that would enrich anyone wise enough to agree with him.

Links to sample posts by Malvino:

The "PRO-CON" series:
#1 #2 #3 #4 (after 94 "pro"s, Malvino finally gets around to the "con"s, which in this iteration number three.)
#5 #6 (the "neutrals")

The "Fact or Fiction" series:
#1 #2 #3 #4 #5 #6 #7 #8 #9 #10 #11 #12 #13 #14 #15

Needless to say, Dr. Malvino can hardly be considered "independent", either. If nothing else, he has a huge ego stake in being proven right all along, and making radical changes to the company would be tantamount to an admission that all of the above was just twaddle. (Not that this can't, in many cases, be done quite thoroughly by now. More topics for more future posts!)

So we have a management with no incentive not to fail, and a board of directors with little to no interest in holding their feet to the fire. Why would any shareholder put up with this state of affairs? That's coming up...