Effective boards

For a long time directorships on corporate boards have been merely sinecures, rewards to retired politicians or perhaps friends of the corporation’s chief executives.

It is not surprising then that boards have been negligent in assisting a corporation. It is becoming clear that there should be important changes in the composition of those boards.

The directorships too often required little or no work, but commonly they entailed handsome financial compensation or prestige. For too long then, they have been comfortable clubs, more often than not, for men.

It has been revealed that directors sometimes received outrageous financial benefits. Some automobile companies provided a new car each year. Others were granted club memberships, season tickets for sports events, unlimited travel expenses, or perhaps $100,000 annually merely for attending 12 board meetings per year.

Rarely do boards do anything but rubber stamp the chief executive program. This nonsense sometimes extended to non-business organizations. For example, this columnist’s alma mater, Yale University, approved a salary twice that of any other post-secondary institution and authorized the expenditure of $17 million to modernize the home of the university president.

Sometimes boards turned a blind eye to the corporate malfeasance, as with Enron, where illegal activities occurred. Boards did not do their homework. What is so disturbing to note is that over the past few years so much corporate power is concentrated and remains unchecked by compliant boards. Then too, the composition of boards leaves a lot to be desired. One large organization had on its board a former prime minister with a sullied reputation, and although it was a mining company, it had no engineer or commodity experts on board of directors.

Corporate power in North America appears to be male dominated and concentrated. Board members sit on as many as 25 boards. Can anyone do an adequate job on so many boards? Often the chief executive picks as a director the head of another corporation, who then reciprocates by choosing as a director the executive of the company that selected him.

There should be more progress in making a corporation more diversified and less dominated. According to a study by McMaster University, men tend to base their decisions on rules and traditions. Women’s instincts make them better problem solvers. They generally rely on “complex moral reasoning.” By weighing the a broader range of factors and implications, women fared better at making consistently fair decisions when competing interest are at stake. Also, their companies go bankrupt less frequently.

Hence, let us hope that corporations change their ways – something that will benefit all concerned.



Bruce Whitestone