Wanted: A Better Board of Directors
Conference Speakers Argue Good Corporate Governance is Worth the Cost
How do we turn corporate boards of directors from lap dogs into guard dogs?
The comparison may be humorous, but the challenges it represents are serious. When The School of Management’s Institute for Excellence in Corporate Governance (IECG) held its eighth annual national corporate governance conference Oct. 7, participants considered how to give corporate boards more bark, more bite and more effectiveness.
Moderated by IECG Director of Special Projects and Development Dennis McCuistion, the daylong event, “Money Well Spent: How Effective Boards Create Value,” featured interactive discussions about boardroom practices that increase directors’ productivity and organizations’ performance.
“Without good corporate governance at every level of every large corporation in America, mistakes will be made which will cost everybody else in America,” McCuistion said. “Board members need to not only be qualified, but they need to stand up, they need to ask the right questions, and then they need to take action long before the problems happen. Board members who are unqualified are a problem, but board members who will not take action when they know the right thing to do are even a bigger problem.”
Opening speaker John Gillespie, co-author of Money for Nothing: How the Failure of Corporate Boards Is Ruining American Business and Costing Us Trillions (Free Press, 2010), highlighted some of the problems caused by ineffective board members while addressing the question: “What corporate governance changes are raising board effectiveness in the 21st century?” He discussed a variety of cases and the related lessons he learned while researching the book he recently published with co-author David Zweig.
Gillespie offered several solutions for making boards more effective. He proposed splitting the chairman and CEO posts, allowing extraordinary general meetings to be called by shareholders, allowing real proxy access, creating a new class of professional full-time directors, getting training for board members, creating a $50 million consortium from a 0.01 percent fee on equity trades, opening the nominating process, getting better diversity within the boardroom and communicating with shareholders.
“The most important ways to reform boards and have them do the jobs they’re suppose to do to grow shareholders’ investments,” Gillespie said, “are to have shareholders inform themselves and demand change and for directors to provide the checks and balances that they’re supposed to provide.”
Panelists included board members, lobbyists, compensation consultants, experts on governance practice, attorneys and top-level executives. They discussed shareholder rights, CEO compensation, institutional investor practices and Washington’s impact on the nation’s economy.
Luncheon speaker Steve Moore, Wall Street Journal editorial board member and senior economics writer, delivered a wide-ranging discussion “Washington, D.C., Politics and Economics in the Aftermath of Dodd-Frank,” the recently enacted Wall Street Reform and Consumer Protection Act.
“To me the most important issue for our nation, going forward,” Moore said, “is this one: What country on this planet is going to be the global economic superpower? For all of our lives, there’s only been one economic superpower — the United States.”
Moore explained that, at least since the end of World War II, the U.S. has set the pace in technology, has outgrown every other country and has created 60 million jobs.
“Now, for the first time in the last 75 years, we do have an honest-to-goodness rival,” he said. “China is focused like a laser beam on competitiveness. They’re obsessed with it.”
Moore concluded by stating the problem in blunt terms. “That’s our central challenge — how do we make sure we remain competitive?” he asked. “We’ve been a force for good, not evil. I want our kids, not to be working for the Chinese, but the Chinese to be working for our kids.”
Other speakers included Public Company Accounting Oversight Board member Charles D. Niemeier, who discussed regulatory structure changes, and James Millstein, chief restructuring officer of the U.S. Treasury Department and former managing director of Lazard Freres & Co. The two argued the pros and cons of the feasibility of instituting a new class of professional board directors.
“This conference confirmed a lot of things that I already knew,” said conference attendee Sydney Smith Hicks, executive chairman of the board at DeviceFidelity Inc. “When I hear about the depth of the chaos in Washington, D.C., it’s depressing, frankly. But it makes me ground my view that I have to make plans around it. It’s not going to get better, or more stable. There’s no sense in making business plans holding out for better tax laws — you’re not going to get them.”
Carl Mudd, IECG director in residence, characterized the speakers and presenters at the conference as “outstanding. I wanted to spend more time with each of them asking questions because they’re the people who are either making the decisions or are in the know.”
“Corporate governance and the responsibilities of boards was the overriding theme of the conference,” Mudd said, “but in today’s environment, with congressional involvement, the rapid changes in laws, the various professional organizations having to respond prior to or subsequent to those laws being written, it has become much broader now than just the director level. It had all aspects of why we’re in the condition we’re in and what we have to do to get out of it.”
John Gillespie, co-author of Money for Nothing: How the Failure of Corporate Boards Is Ruining American Business and Costing Us Trillions, opened the conference with a talk about problems caused by ineffective boards.
Key conference attendees included (from left) James Millstein, chief restructuring officer of the U.S. Treasury Department; Constantine Konstans, IECG founding executive director; Steve Moore, Wall Street Journal senior economics writer; and Dennis McCuistion, IECG director of special projects and development.
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