Roundup: Balancing boards and bosses

That seems to be the approach most people take to the growing controversy over the way corporate governance is expressed, today - a debate that is especially heated in the US. Let’s take a look at some of the ways this attitude - of trying to find a way to reconcile the issues being raised - is presented.

Pay and practice: This topic generates as much energy as any in the overall subject. Here, a former US Secretary of Labor stoutly defends the remarkable pay packages of many CEOs as being tacitly endorsed by their shareholders, and generally reflective of the value they return to those shareholders. But, contesting that argument is this piece, which suggests that a lot of this money is going to bosses who are outright losers.

Indeed, there is widespread concern that many of these compensation packages induce managers to drive, or even just to report, the numbers in ways that buffer them from true performance-based measures. The Secretary’s faith in capitalism is commendatory - but it is not necessary to that faith to accept the tenet that the interests of managers and owners are aligned. As a rule, they aren’t.

Treading warily: The Changing Board and The Problems with Boards, by William Holstein for BusinessWeek, are interviews with two experts explaining their views of why we are in the midst of this debate, to begin with. Read them to see if they give you a clearer picture of the board’s specific place in the corporate chain of command.

Holding the CEO’s coat: That’s how many people see the role of boards - basically, to support the CEO’s agenda in every legal way possible. Indeed, these two pieces from BusinessWeek and the WSJ, seem to make the case quite strongly that CEOs can help boards perform better by - get this - being more honest with them and providing more information. The idea seems to be that rather than being dismissive of them on principle, or resisting recent trends exhibited by them toward insolent intrusiveness, the (real) boss should be generously benevolent toward them, coopting them into cooperation.

Juggling hats: There is a growing trend to try to resolve the contradictions inherent in the dual-hatting of the CEO as board chair. These two pieces from the WSJ (here and here) describe this development and its antecedents overseas. They are quick, however, to point out the potential for problems with this idea; a key one being that, while a separate board chair may be a helpful ally for the CEO, he or she may also drift into the problematic position of being assertive or disruptive.

But there are no problems with that at Home Depot, according to William Holstein, writing this time from his column at BNET. He describes how the dual-hatted Mark Hurd is building a board for the future.

But what, exactly, is the future of boards? It really doesn’t seem as though the experts agree. In fact, it must be said that many of them plunge right in to their arguments paying scant attention to (or deflecting attention from) their assumptions.

We’ll pick this up again on Monday. Have a great weekend!

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Today’s tips: Speaking of trying to sort out who sets the agenda for corporations, take a moment to view this thoughtful essay from this week’s The Economist, on corporate ethics. It is a lead in for a special report, in the same issue, on corporate social responsibility, which is an excellent discussion of the many facets of this development, viewed from the many relevant angles for considering it. Highly recommended. (And, by the way, a subscription is no longer required for content on The Economist that is less than a year old.)

Also, stop over to see this BusinessWeek piece by Sylvia Ann-Hewlett, the author of Off-Ramps and On-Ramps (see review here) - a sort of status update. This is an important and useful development worth keeping apprised of.

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2 Comments

Cam Beck wrote:

“In fact, it must be said that many of them plunge right in to their arguments paying scant attention to (or deflecting attention from) their assumptions.”

This is pervasive in today’s society, and I’m not sure why. I think (but cannot confirm) that this has something to do with moving away from a broad classical liberal education formed by the Trivium (particularly logic) and Quadrivium, and instead towards task-based or role-based education.

Self-government (and this includes the governance of a corporate board — and because of that, the actions and attitudes of the shareholders themselves) depends on our ability to reason rightly. And without the ability to identify, test, and challenge our assumptions, we lose our effectiveness and even become unable to wield such a privilege.

Friday, January 18, 2008 at 3:56 pm | Permalink
Jim Stroup wrote:

Hello Cam,

I can’t speak to the basis of the US primary education curriculum today, but I know that the general classic approach you speak of was the foundation of it when I went to school. I agree, in particular, that logic, and the ability to think critically, is an important intellectual tool to provide to people.

You’re also right on the money, I think, in saying that our inability to exercise our sovereignty effectively places us at risk of having it taken from us. That is exactly the point of this discussion of corporate governance.

Thanks for stopping by and sharing your thoughtful and pertinant comment!

Saturday, January 19, 2008 at 10:17 am | Permalink