Management Turnover as Change Agent

Thursday, February 5, 2009

Recommended Reading - Boards Refuse to Act Despite Poor Governance,

Douglas A. McIntyre wrote a piece for Time that attributed many of the recent problems top companies have been facing as a failure of the respective companies’ board of directors. McIntyre is very close to the truth. Boards have for too long just gone along and followed the lead of top management. It is now time for them to accept their real responsibilities to help guide management to make sensible corporate strategy and important business decisions. According to McIntyre,
… Each of these four companies ( referring to Bank of America, Citigroup, General Motors and Ford) has directors who chose not to ask hard questions and demand answers. How does a bank that was making $1 billion a year suddenly make $10 billion? How does a car company that nearly went out of business when oil prices rose sharply over three decades ago decide to reduce spending for the development of fuel-efficient vehicles?

Boards have some understandable reluctance to cross some lines if they may not have a tangible effect on company results. The Apple (AAPL) board clearly decided that Steve Jobs had some right to his privacy about his health. That may have been bad for investors. No one may ever know.

Several of America’s most famous companies have fallen on very hard times recently and investors might want to ask whey their boards appear to have done nothing demonstrable to help shareholders.

The short piece is worth a quick read.  Let’s hope boards get a chance to read the piece as well. 

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