I'm sure I wasn't the only one who was stunned to read how corporate CEOs and their corporate boards who's incompetence set the world wide financial meltdown in motion were left in place by a system of corporate governance that has grown so feeble in recent decades that even catastrophic failure is now treated as an acceptable outcome.
Board Stiff
When Citigroup and Bank of America held their annual meetings last month, shareholders were in an understandably surly mood. Even as the companies’ C.E.O.s apologized for past failures and vowed to do better, shareholders blasted the executives for their incompetence, and talked about the need for dramatic change. Yet, after all the venting and repenting was done, something weird happened: every member of each bank’s board of directors was reëlected to office.
This may seem odd, but it was all too predictable. In the apportioning of blame for the financial crisis, corporate boards of directors have remained remarkably unscathed, even though they effectively approved the strategies that immolated so many companies
Any system that ignores a catastrophic failure of this magnitude isn't working in the best interests of the shareholders, or all the stakeholders in the larger society. Accountability along with any checks and balances has largely been eliminated from our systems of corporate governance by both shareholders and governmental regulators.
Hopefully Obama's plan to re-regulate banks will go a long way toward correcting the deficiencies in Governmental regulation of our financial institutions. But it stops short of changing the dysfunctional ways our corporations are structured in this country. Most American corporations function like little dictatorships under an all powerful CEO, with corporate boards of directors who act as a rubber stamps for those CEOs, as a kind of corporate junta.
The way our corporations are now structured their leaders lack any mechanism to insure accountability. Members of corporate boards are chosen by the CEOs, and they are beholding for their highly compensated part time positions to those CEOs. Many board members are selected for their celebrity, or their ability to act as corporate boosters, and not for their knowledge as an industry insider. These factors contributed to the don't rock the boat corporate cultures that produced the financial collapse, and the worst recession since the Great Depression.
We can't afford to preserve a status quo that produces catastrophic results like these. We need to reform the way our corporations are structured to reintroduce some accountability to the corporate aristocracy. We need to insure that decisions aren't made inside a bubble of a self reinforcing feedback loop that most corporate boards have become.