The purpose of a board is to provide oversight, supervision, and guidance for managers whose job it is to run the day-to-day operations of the business. Yet recently, they've seemed to be in league with greedy executives to take advantage of shareholders while running their companies into the ground. Maybe shareholders need to just get rid of the lot of them.
Shareholder activist Carl Icahn probably wouldn't go so far himself, since he sits on a few boards himself, including Imclone Systems
Sure, it's clear that such a move would make things easier for someone like Icahn, who in a former life was billed as a corporate raider instead of a "shareholder activist." But there is little dispute that many boards need shaking up, and some directors seem to be gettin' while the gettin's good.
The Wall Street Journal recently reported that many directors are fleeing from boards just when companies are struggling the most. As General Motors
Investors might just as well say don't let the door hit you on the way out considering the horrid financial shape they've allowed the companies to get into, all the while collecting generous compensation of their own. Charlie Munger has suggested directors not be paid at all.
Every company on the brink of disaster these days has glowing words in its annual report about the steadying hand corporate governance provides its wonderful board of directors. Read the opening paragraph from Citigroup's proxy statement on corporate governance:
Citi continually strives to maintain the highest standards of ethical conduct: reporting results with accuracy and transparency; and maintaining full compliance with the laws, rules and regulations that govern Citi's businesses. Citi continues to set the standard in corporate governance among our peers.
That and $45 billion in taxpayer money will get you a minimally secure banking giant. Yet former Treasury Secretary and Citi director Richard Rubin absolved himself of any responsibility whatsoever in the bank's troubles, saying his role was peripheral at best. For such work on the periphery, he's been getting paid about $15 million a year.
The Lehman Brothers 2007 annual report was also big on the gloss, noting "Lehman Brothers continues to be committed to industry best practices with respect to corporate governance." Where are you now, Lehman?
As bad as management behavior has been in steering these companies toward destruction, you'll typically find compliant boards of directors cheering them on, or at best looking the other way. If that's the case then, if that's what shareholders are paying good money for, then do we really need them?
A good first step might be for investors to withhold their support for all sitting board members up for reelection -- and supporting far stricter oversight on how directors conduct their business.