Corporate directors under the microscope

Over the years, one of my biggest gripes concerning corporate America has been the lack of accountability on corporate boards of directors. While golden parachutes and bonus payments to executives are well publicized – and rightly so – often those targets of public anger, I feel, are misplaced. After all, those executives negotiated and signed contracts. Through repeated – and often, bombastic – news accounts, the average Joe on the street can probably name a few executives that have received the payouts, but I would wager that none of them can name the directors sitting on those companies’ compensation committees that granted the payouts in the first place, and therein lies the problem: directors work in relative anonymity, and outside of a few big shareholders, they are largely unaccountable to the numerous stakeholders in the business.

So I cheer this morning’s New York Times article, written by Graham Bowley, profiling Ruth J. Simmons, Brown University’s president, who sits on the board of Goldman Sachs. After her ten-year run on the Goldman board, it seems students and faculty at Brown have finally cottoned on to how the wheels get greased in corporate circles, and she has come under increasing criticism, particularly in the wake of the massive bonuses paid out by Goldman.

I won’t recount here her compensation from Goldman for her services – it’s all in the Times article – and I certainly don’t have a beef with paying directors well. After all, it’s a big job. My issue is that many of the folks who sit on the boards of companies across the country don’t really do anything. Most provide neither oversight nor strategic thinking. I can’t accuse Goldman’s Simmons of being a corporate slacker; I have no direct knowledge of her or her aptitude for corporate board work. But let’s consider her work schedule, and you tell me how much quality time she spends as a board member. According to the New York Times, Simmons is the president of an Ivy League institution, in and of itself a pretty demanding job. Then there’s the Goldman directorship, another huge undertaking. And then, if I’m reading the Times correctly, she has held concurrent directorships at both Texas Instruments and Pfizer Inc. I’m sure Simmons is a real peach, but let’s face it, there’s no way a person can do all four of these jobs well. It would be a real stretch to do just two of them.

Simmons’ multiple directorships are not at all an outlier in corporate America; many folks take on multiple assignments, but I can’t imagine that there is a truer barometer demonstrating what little is expected of these people.

Extra kudos should go to the Times for delving into director-level reporting. In terms of compensation and corporate culture, the board is omni-important, and yet, directors are hardly ever called to account for themselves by the press or by government bureaucrats. Instead of congressional committees that drag executives into the halls of Congress for tongue-lashings, more attention should be thrown on the awful track record boards of directors have in minding the store, and this attention should come from regulators, not a bunch of petulant undergraduates and their academic handlers.