Integrity Matters
August 17, 2005
Too many lazy board members
Question: (E-202)
Dear Jim:
How can a column on integrity sustain itself for four
years?
Response:
Individuals and organizations create the need to emphasize
the obvious. "I feel like a doctor in the middle
of a measles epidemic." No, it is more serious
than that. "I feel more like a one-armed paper
hanger with hives." Open up any newspaper or simply
listen to the news. Rascals are rampant and integrity
is missing.
Not so tongue in cheek, writing for the New York Times,
Floyd Norris on Friday says that "inept boards
need have no fear" - at least, not yet. He
cites Krispy Kreme. This corporation's poorly performing
board of directors approved an investigative committee
to assess its ineptitude. But the investigators, despite
citing lax and tardy board oversight, concluded weakly: "There
is no basis to believe that any outside director did
anything that he or she 'knew or believed' was
clearly in conflict with the best interests of the corporation
or approved a transaction from which he or she received
an improper personal benefit."
Such a low standard is all the law requires, the committee
concluded.
Another of my sources of information reports that fewer
talented individuals are eager, or even willing, to serve
on boards of directors. Financial liability is the issue.
Strong, well-educated and experienced professionals do
not need to be subjected to the risks related to shareholder
lawsuits. Pressures have become incredible for individual
members of boards to make certain their organizations
are meeting ever-growing and more complicated compliance
standards. Trust and integrity are at the heart of the
matter. And, what has been reported at Krispy Kreme and
other firms lowers confidence in boards of directors
who purpose is to protect shareholders and stakeholders.
The dilemma is clear. Lazy folks, who want to be on
boards, are not protecting corporate assets, thereby
ignoring their fiduciary responsibilities. Competent
individuals are reluctant to accept board appointment
and face an ever more hostile public that has reasons
to believe that all too many in high places are behaving
irresponsibly.
Most board members are doing their jobs effectively or
they set themselves up to receive media coverage. But Irresponsible
board members erode trust in capitalist markets that underpin
our society, forcing regulators to add more rules. Integrity
restores trust.
