Board of Directors??
Enron, WorldCom, AIG, Lehman, Merrill Lynch, Big 3 automakers, bank after bank…and on…and on. Failed, and failing, companies all—and the employees and shareholders (not to mention the public at large) would like to string up all the executives of the failed companies to the nearest “hanging tree.”
Yet, I have seen very little mention of the roles played in these failures by their Board of Directors. The buck does not stop with the CEO; it stops with a company’s directors. A board of directors oversees the assets of the company for the good of the shareholders. More specifically, the board of directors is the highest governing authority within the management structure at any publicly traded company. It is their job to:
- Select a chief executive to whom responsibility for the administration of the company is delegated.
- Evaluate his/her performance regularly and set compensation (including bonuses) accordingly. (We can hardly blame a CEO for taking a huge bonus from a failing company when it is handed to them by the board of directors).
- Govern the organization by broad policies and objectives.
- Ensure adequate financial resources (where were the boards before the bailouts?).
- Account to the stakeholders for the products and services of the company.
- Provide for fiscal accountability. Yes, this is one of the primary duties of the directors. In fact, the Sarbanes-Oxley Act introduced new standards of accountability on the board of directors for any company listed on U.S. stock exchanges. Under the act, internal control is now the direct responsibility of the directors…for all the good that has done in recent weeks and months
The executives of the failed and failing companies in the U.S. are often just incompetent, or self-serving (a few are criminals), but the boards of these companies is where the blame should ultimately lie. Directors of public-traded companies receive substantial compensation for sitting on a board, and many of them have certainly been derelict in their duties…or lazy…or stupid…or all of the above. Many of them serve primarily to rubber-stamp the actions of the CEO (the person they hired), without demanding that he/she perform successfully.
Someone needs to hold the Board of Directors, of these failed companies, accountable for the poor performance of their respective CEOs. If no one in government cares, then it needs to be the shareholders.
If you own stock in any company, do not let others select the board members for you—do your homework and vote for the member you think would be best for the company, and its shareholders. Better yet, become an activist and make sure the best people possible are nominated for your company’s board.
Now, where’s the nearest hangin’ tree………
China’s Continued Growth
I just read an interesting article about China’s economy in a recent issue of Newsweek. It is expected to only grow by about 7% in 2009, while the other Big 5 economies in the world are expected to slow to a near standstill—or worse. Of course, China is only a semi-free economy since the government still exerts a strong and stabilizing hand.
There are several reasons for China’s continued growth presented in the article, but I found one thing especially interesting—most of the government leaders are engineers; they know how to work from a plan.
Could we have too many lawyers in Washington…and not enough engineers?
What do you think?
Pay Raises for Congress
Well, I guess it is appropriate for members of Congress to give themselves a pay raise this month—after all, it will only cost taxpayers a mere $2.5 million. After the billions (soon to be trillions?) Congress has been handing out, this is simply “pocket change.”
Of course, it might not set too well with the millions of American workers who are giving up their cost-of-living raises in an effort to save their jobs—if they still have them.
If you think this might not be a good time for your elected officials to take a pay raise, you might let them know how you feel.
Back to Work
The inauguration is over and President Obama started his new job today. Pundits galore have emphasized the tremendous challenges he is facing, so we are all aware that he has a big job ahead of him. In his approach to some of his tasks, I heard (then) President-elect Obama say, a few days ago, that he wanted to retain certain tax cuts to help small businesses, because “…they are the backbone of our economy.” I like that—our President understands what makes our economy run and where recovery and future prosperity will come from. That’s the way it has been in prior recoveries, and that is the way it will be in this one. Now is not the time to raise taxes on small business.
Unfortunately, the President must deal with a recalcitrant Congress, and Congressional leadership that promote their own agenda. Nancy Pelosi clashed with President Obama’s stand for small business even before he took the oath of office. She made it clear that she wanted to raise taxes now, not reduce them. I am afraid that President Obama’s job will not be to lead an august group of Congressional members to implement well thought-out plans for recovery—his work will be more like (as I’ve said before) “herding cats through a forest.”
If, for a moment, you can visualize the process of “herding cats”, you will quickly realize that the job will take a lot of herders. That’s where we can (and must) be of help to the President. I think it is the responsibility of every small business owner to tell our elected representatives in Congress, that we (small businesses) are the ones who will lead the economic recovery. Furthermore, that more restrictive rules and regulations (including hampering the normal functions of sound banks), and increased taxes will only make our jobs that much more difficult…and take that much longer.
President Obama “gets it”—why can’t our elected representatives?
“So Help Me God”
Have you read about the lawsuit filed by Michael Newdow, trying to force President-elect Obama to leave out the phrase “so help me God” at the end of his oath of office? Obama has spoken much about God over the past months, and it seems reasonable that he would want to ask for divine guidance on the most momentous day of his life—especially considering the trials he will be facing when the oath is completed.
I had always thought that the Presidential oath, as laid down in the Constitution, included the phrase “so help me God.” It doesn’t. The Congressional oath for Congressmen and other government employees does, but for the President, the Constitutional oath of office ends by swearing to “preserve, protect, and defend the Constitution of the United States.” That’s all. It appears the phrase “so help me God” is an elective addition of somewhat recent vintage. No one seems to know exactly when it was, or was not, used, but it appears to be a twentieth century addition.
Likewise, the use of clergy to give the Invocation. Historians believe Franklyn D. Roosevelt (as he was facing war) was the first to invite an outside clergy to give the Invocation. Dwight Eisenhower used four clergy, and Billy Graham prayed at eight Inaugurations. Now, however, public prayers by Christian clergy at a Presidential Inauguration appears to be a problem for some.
It will be interesting to see what the courts decide, and what President-elect Obama will say as he closes his oath of office.
Planning–Do I Have To?
It seems, of late, that I have been running up against the idea that planning is a waste of time. All too often, I see the admonishment to “just-do-it,” instead of taking valuable time to write down a “plan.” Besides—so we are told—plans quickly become obsolete, and entrepreneurs do not have time to keep them up to date.
Thinking about this, I recalled some studies on the subject of planning that I ran across some time ago. These studies have been published many times in many places, but I thought they were worth repeating here. The first one is from a study sponsored by the Ford Foundation:
- 23% of the population has no idea what they want from life and as a result they have very little.
- 67% of the population has a general idea of what they want but they don’t have any plans for how to get it.
- Only 10% of the population has specific well-defined goals, but even then, 7 out of 10 of these people reach their goals only half the time.
- The top 3%, however, achieved their goals 89% of the time.
Why is there such a drastic difference between the top 3% and all the others? It doesn’t stop with this one study either. Let’s look at a couple of other studies:
- Some years ago, Yale University conducted a study that found 3% of Yale graduates had more wealth, years later, than the other 97% combined.
- Harvard Business School did a study on its students 10 years after graduation and found that only 3% of them were financially independent.
What is the significance of this 3% number that keeps popping up in various studies? Well, it is quite simple really…in every case of the successful 3%—they wrote down their goals!
Dreams and wishes are not goals until they are written on paper as specific desired results. In some real sense, writing them down materialize them and brings them to life. The experts claim that the act of writing makes an imprint on the brain that helps set the direction of actions by a person.
Therefore, it stands to reason that as we visualize our enterprise, if we write these thoughts down in an orderly fashion, as goals or action steps, the better our chances are of successfully achieving them.
The question you need to ask yourself then, is “Do you want to be one of the 3% who fulfill their goals in life, or will you be among the 97% who generally fail?”
“Life will not go according to plan—if you do not have a plan.”
—Gary Ryan Blair (“The Goals Guy”)
Do you think writing a business plan is a waste of time? Let me know what you think.
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