In light of the big severance contract Hewlett-Packard (NYSE: HPQ) handed to CEO Mark Hurd after his alleged ethical lapses and expense-account padding, it's a worthwhile exercise for investors to ask whether boards of directors are doing their job of looking out for shareholders.

Maybe in most instances they are carrying out their fiduciary responsibilities as careful stewards, but in too many cases they seem to be merely looking out for their fellow executives. After all, many board members run other companies with their own boards, and if they start bucking the chummy camaraderie, they just might find their own compensation and benefits challenged.

Poked with soft cushions
Executive employment agreements typically spell out, exactly, under what conditions compensation, bonuses, benefits, perks, and severance packages will be awarded. But too often, all that seems to go out the window and new agreements are written so that golden parachutes with platinum ripcords and palladium-lined crash helmets are handed out. It's more like the Monty Python skit where they're tortured with the comfy chair.

Hurd isn't the only executive to get a sweet deal upon exiting and leaving his company a shambles. Countrywide Financial CEO Angelo Mozilo reportedly got $115 million in severance despite his role in the mortgage lender's downfall and the subprime mortgage debacle, although he did give up $38 million worth of the package. And American International Group (NYSE: AIG) paid $47 million in severance to its chief executive after the insurer crashed and burned, taking a bundle of taxpayer cash for its troubles.

In the wake of the Enron scandal, it was revealed that Duke Energy (NYSE: DUK) made a series of "round-trip" trades that inflated revenues and volume. In the uproar that followed, the board rewarded its outgoing CEO with a $4.8 million severance package. KB Home's (NYSE: KBH) former CEO became embroiled in a stock options backdating scandal where the board found he selected grant dates most advantageous to scoring a big return. When he resigned, the board still felt obligated to give him $175 million in severance, pension benefits, and stock options.

Sayanora, see ya tomorra!
In a situation reminiscent of Hurd's, Boeing (NYSE: BA) CEO Harry Stonecipher resigned after being caught in a compromising situation, and the plane maker's board was similarly generous, allowing him to remain on the payroll collecting his annual salary for an additional six months, giving him a $2.1 million incentive bonus, and allowing him free use of the company car and corporate jet.

Several years ago, Pegasystems' (Nasdaq: PEGA) president abruptly resigned just before a poor earnings report. Since he voluntarily left, he should've given up his perks, but the board instead wrote a new agreement to give him full benefits as "if he were terminated without cause or resigned for good reason." The cost to shareholders? $325,000 cash, options worth about $4.5 million, an undisclosed "bonus," and full salary and benefits for a year. 

Sometimes there's no scandal associated with a departure, at least none publicly disclosed, but you're left scratching your head anyway. Recently, Molina Healthcare's (NYSE: MOH) general counsel was abruptly "terminated without cause" after 12 years on the job, but still given $750,000 in severance pay, a prorated bonus of $145,000, and a few other perks. Investors can rightly wonder what was behind the move.

Act like you care
In the years since Sarbanes-Oxley was passed, we were supposed to see a more careful accounting of shareholder money. Maybe we've seen a few more "material deficiency" notices included in filings, but has it really resulted in better stewardship by the boards?

There's a three-legged stool here and each leg is wobbly. Executives are not performing up to expectations; boards are rewarding management for misfeasance, malfeasance, and nonfeasance; and shareholders are shirking their duties when it comes time for proxy voting.

Our boards are broken and they need fixing. We can do more than just rail about excessive pay and outrageous severance deals. Every year you get a chance to decide who sits on the board of directors, and if your company's board is broken, vote the bums out!

Editor's note: A previous version of this article incorrectly referred to the CEO of Pegasystems rather than the president. The Fool regrets the error.

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Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.