Managing Leadership^®

The national discussion of the HP scandal is beginning to develop into reflection on the larger issues involved. Efforts to assign the incident to specific acts or to the characters of particular people, and to pretend that there are no wider lessons to be learned from the affair, are fading.

One recent article suggested that a positive side to the debacle may the that HP will wind up with a better board. That, unfortunately, seems unlikely – at least in the near term. There seems to be insufficient consideration among those closest to the situation of what actually happened, and what it means. Placing the positions of CEO and Chair in one person, for example, is really a step backwards and bodes poorly for the health of the company.

Other observers, however, are noting, as we have in this site, that powerful institutional investors are beginning to play an influential role on boards; a growing circumstance that, while still sorting itself out, is nevertheless seen as a generally positive sign for the rights of shareholders vs. those of management. Note, for example, this article, also (as is the previously linked item) from SmartMoney.com, which remarks not only on this phenomenon, but on how it has been brought upon CEOs by their refusal to consider “outsiders’” ideas for reform – “outsiders” from management, that is; a category that evidently includes a company’s owners.

Better still is a BusinessWeek Online discussion of how many of the problems between CEOs and boards can be ameliorated, resolved, or even avoided by the evidently radical expedient of communicating. To highlight the issue, the article focuses on start-up companies with boards dominated by VC firms, and uses the obvious tensions that can arise to elaborate broader points about the importance of mature, ongoing dialogue between boards and CEOs; it also emphasizes (although apparently not intentionally) that the burden for ensuring this, while shared, falls more heavily on the CEO, partly because it is so often the CEO who resists communicating honestly with the board. We will be returning to this general subject in future posts.

Best of all is a set of pieces in today’s Wall Street Journal which cover the topic in varying ways. First is an item which, although it is in the blow-by-blow category, does a good job of providing a deeper understanding of the way the personalities involved in this issue represent distinctly differing and opposing ideas of how boards – and indeed corporate governance – should work. If you’re pressed for time, the same issue is covered briefly, from the personality conflict angle, in a ZDNet article, but the WSJ one is eminently worth reading for an appreciation of the deeper issues.

Next is a report on a poll addressing general confidence in the state of corporate governance today. It reveals a lack of clarity regarding who is responsible for governance – boards, or management – a peculiar confusion that points to much of our difficulty in properly addressing the problem. Moreover, while over half the respondents are satisfied with the general performance of boards, a very strong minority is not. This, combined with another strong showing – nearly 40% – for those who believe that independent directors should be more prominently represented on boards, bodes well for continued pressure for reform.

Finally, the WSJ has published, today, a special report on corporate governance. It contains a series of articles, the general drift of which point out the growing assertiveness of boards over CEOs. We will be returning to this subject also, over the next few weeks.