Board of Directors??
Published by Bob Foster
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………
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5 Responses to “Board of Directors??”
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Great post, Bob! Thank you.
Judith Ellis’s last blog post..Being Dick Cheney
Thanks Judith. I am amazed that the American public is mad at the greedy and incompetent CEOs, but totally ignore the people who created them. Maybe I was raised on another planet!
Bob Foster’s last blog post..Board of Directors??
No, Bob, not at all! Many are ignorant as to whom they should direct their ire, while others lay low for the ire to pass being stashed with their cash. Craziness!
Judith Ellis’s last blog post..Being Kid Rock
I agree that BODs are often forgotten when it comes to the failure or success of an organization, it is not supposed to be that way. Organizations need to evaluate their Boards and on this topic I read a presentation developed by an executive coach, Med Yones, which gives you the corporate governance best practices and the duties, roles and liabilities of the Board in order to be able to evaluate it. For further information see http://www.ceocoach.us/ceoseminars/ceoseminars_boardofdirectorsgovernancebestpractices.pdf
thanks for share