Monday, December 19, 2011

Directors & Boards - Happy Anniversary

I am honored to be a part of the 35th anniversary edition of Directors & Boards  and especially pleased with this profile....Congratulations D&B and here's to 35 more years of great work! 


Separating the Top Jobs is a must

From “The Great Divide: To Separate the Chairman and CEO Roles, or Not?” [First Quarter 2010]. Robert Monks participated in this roundup of divergent views on a topic addressed numerous times over the years in the journal, and which began heating up again in the last several years as more companies moved to separate the roles. Monks founded Institutional Shareholder Services Inc. in 1985 and we have drawn upon his thoughtful approach to governance a number of times. In this passage from the article he reflected upon his experience as a director of Tyco International

It is a lonely job that is best done by individuals with a good sense of their worth, but this personality trait usually comes with a need for power and control. The individuals comprising Tyco’s board while I was there were probably typical of most boards. The members had no particular sense of governance, no sense of the dangers of absolute authority, and they took great pleasure in the company’s seemingly limitless expansion potential and rising stock price. They were not bad people. [Former Tyco Chairman and CEO] Dennis Kozlowski isn’t a bad person. He could have functioned well under a suitable chairman. The money he was convicted of stealing would not have been denied him by a properly functioning board and compensation committee. The board was fully aware of the value that Dennis brought to the company, and that level of compensation was part of the culture of the times. In the words of President Nixon, “Mistakes were made,” and a tragic result for all ensued.

Not all independent chairpersons are helpful, but institutionalizing accountability creates a constructive energy in the governance of corporations. The tragedy for both Dennis Kozlowski and Tyco was huge, and it was unnecessary. In order to protect against problems resulting from the abuse of power, separation of roles
December 19, 2011 in independent directors , independent chairman , Tyco , boards of directors  |  0 comments  | 

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