Serial ineptitude has been characteristic of too many corporate boards of directors, unfortunately for the companies involved. Examples abound.
Among the worst decisions by a board of directors occurred when Yahoo’s board turned down an offer from Microsoft that would have boosted the value of the firm many times above the current price. The board of News Corporation failed to prevent the hacking scandal that was rumoured and so devastated that firm. Here in Canada, Bell Canada took over Northern Telephone (Nortel), an acquisition that proved to be a major mistake.
Not long ago Walt Disney decided to combine the posts of chairman and chief executive. Yet corporate activists protested the merging of those two roles as a step backwards, entailing a return to the bad governance that occurred recently. The separation of responsibilities that took place was a result of a shareholders’ campaign to divide corporate functions. That is just another example of a board’s acceptance of almost all management wishes.
Nevertheless, many corporate governance reforms have been taking place over recent years. Those changes were supposed to empower non-executive directors in their supervision of management. Before those reforms, boards were criticized as they would agree to anything the chief executives proposed, complicit in many counter-productive proposals.
Boards formerly were selected as a kind of reward to retired politicians or other celebrities, a comfortable retirement position.
Nowadays, according to a study by management consultants, Booz & Co, the average corporate chief executive remains on that job for only 6.6 years, from 8.1 previously. An abbreviated tenure is disruptive to a corporation. The blame for that falls primarily on the laps of “independent” directors.
In Europe, primarily in Germany, corporate boards of directors must include representatives of unions and the general, interested public. Those groups have been eager to ensure good boards and management.
It has been suggested that boards of directors be evaluated, both the performance of individuals, and the success of the board in working with the company.
Possibly some keen directors would welcome that process; clearly shareholders would applaud such a process.
In this troubled economic era, we should have the best possible board of directors for all of out public companies.