“Here’s a conversation you’ll never hear: ‘Yes, I get paid $475,000 a year. I play golf with the C.E.O.; he’s a personal friend. I go to interesting places for board meetings, I am around interesting people, and I would never say one word that would jeopardize my position on the board.’”
– Frederick E. Rowe, president of Investors for Director Accountability
Gretchen Morgenson takes on one of the most crucial factors of our decennis horribilis in the stock market: the failure of corporate board culture.
In her Fair Game column in the New York Times this morning, she exposes the fact that despite having been on the board of banks and mortgage companies that blew up, many professional board members have simply “skated away” and joined the boards of other companies.
The lack of accountability, intelligence and dedication on the part of many board members led directly to the explosion in outsize risk-taking and obscene compensation arrangements. You can draw a straight line between board members ignoring high risk, high reward behavior to the failures of Bear, Lehman, Merrill, Wachovia, Countrywide, IndyMac, Citi, AIG etc.
So where do these generally asleep-at-the-switch board members go after a company they’ve served implodes?
From the NYT:
YOU might think that board members overseeing businesses that cratered in the credit crisis would be disqualified from serving as directors at other public companies.
You would, however, be wrong.
Directors who were supposedly minding the store as disaster struck at companies like Countrywide Financial, Washington Mutual or Fannie Mae have not all been banished from other boardrooms. In many cases, directors just seem to skate away from company woes that occurred on their watch.
They continue to get work as directors at other companies.
Three large public companies provide excellent examples. They are Sunoco, the oil company; Paccar Inc., a truck manufacturer; and Tetra Tech Inc., a management consulting and technical services concern. Each of these companies has two directors who, until recently, were on the boards of institutions that were centrally involved in the mortgage meltdown.
Inattentive, captured board members who were supposed to be the shareholders’ advocates within the company are right up there in my pantheon of those responsible for the crisis and its never-ending aftermath. I put lax corporate boards right up there with the ratings agencies, the Greenspan Fed, Wall Street’s risk/ bonus culture, the unregulated derivatives market and the mortgage securitization factory.
Nice to see Ms. Morgenson shine a flashlight into this dark corner of Corporate America.
Read the whole article: