Taser Declares Independence

It's hard out there for a TASER (Nasdaq: TASR  ) shareholder. After 18 months of lawsuits, petty squabbles, poor disclosure, and murky science, the stun-gun king is aiming to right its business by granting shareholders independence. Over the past seven days, management has named two new outside board members: a former senior accountant from Arthur Andersen and a former lieutenant general with the U.S. military.

If that doesn't sound too impressive, don't worry. It isn't, on the surface. You need to know a little about TASER's history to understand the significance. For years, you see, the stun-gun maker had a seven-member board. Technically, four of its directors were independent:

  • Dr. Matthew McBrady, a finance and economics professor at USC, Harvard, and the Wharton School, among others.
  • Dr. Mark Kroll, a retired technology officer for St. Jude Medical (NYSE: STJ  ) .
  • Judy Martz, a former governor of the state of Montana.
  • Bruce Culver, CEO of a recruiting-software company he founded in 2001.

Here's the problem: I don't consider Culver to be independent. All of the evidence points to his being no worse than an old acquaintance of TASER chairman Phillips Smith, and probably an old friend. For example, he served with Smith on the board of Pentawave for 20 months before succeeding him as chairman in October of 2000. He's also been a TASER board member since shortly after the firm was founded in 1993 and, like Phillips, at one time lent the stun-gun maker money to keep the doors open.

If I'm right, then Smith and his sons, CEO Rick and company President Tom, have effectively controlled TASER from day one, all appearances aside. That's perfectly legal, of course. It's just that I'd prefer an independent board capable of dispassionately evaluating management's performance on behalf of shareholders. Indeed, it's one of the reasons I still don't own shares.

Frankly, I'm not sure whether these appointments will materially increase oversight. But it's still the first time in TASER's history that independent directors will outnumber insiders. (If, that is, you count Culver as an insider, as I do.) Hopefully, that'll help to deliver to shareholders the fireworks this stock has long lacked.

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Fool contributor Tim Beyers would rather suffer a TASER shot than a bullet. He hopes to never have to choose. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out which stocks he owns by checking Tim's Fool profile. The Motley Fool has an ironclad disclosure policy.


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