March 12, 2002
Ever heard of being responsible? ...
The Securities and Exchange Commission held a public forum recently in New York City.
Participating were such old pros as Warren Buffett and highly-placed individuals like the chairman of the New York Stock Exchange and the CEO of the accounting firm of Deloitte & Touche. For those of you not familiar with such things, Deloitte & Touche has every bit the clout that Arthur Andersen held until the recent Enron failure.
The subject was the responsibility of CEOs, and certainly, there was a ring of familiarity about almost everything that was said.
CEOs with even legitimate financial problems have been known to blurt out, "I'm not an accountant." And if they didn't know it before, any Board of Directors should know, that's their cue to start worrying.
Many excellent recommendations came forth from the panelists concerning both CEOs in general and the Boards themselves.
--
Warren Buffett suggested that the CEO consider himself the "chief disclosure officer," and he enjoined directors to understand that they can control the performance of the CEO by withholding their votes. But the conversation was lacking on one essential point: the underlying premise was that the Directors were competent to serve.
It may be the company these professionals keep, but the spawning of all those dot.coms, all requiring boards, had an interesting effect. People who didn't have the first notion about a properly-run business, or what it meant to be a director, could be found serving on boards.
While very large boards do well by attracting a complement of individual disciplines, the increased responsibility of each member of a small board is obvious.
With the dot.com boom, two things grew like topsy: the number of people who thought they could be CEOs, and the number of people who believed they understood what it meant to sit on a Board. Of course, all this came at a time when the main exercise was first spending venture capital money, and then spending the money raised when their organization went public.
They would tell me, "I got stock for being on the board. After less than a year, it was worth 5 Million dollars! These board gigs are great."
--
In times past, I personally have served on small and inexperienced boards. To my amazement, I would find myself explaining to my fellow board members their roles and responsibilities, their relationship to the CEO, and other basics of board service.
I've watched board members conduct impromptu meetings with the staff, haphazardly disclose personnel data and be completely unable to read a financial report. And this is all from the very people who are charged with safeguarding the appropriate conduct of the organization.
Being a Director is not primarily about making money for yourself or enhancing your resume, although all effort needs to be appropriately compensated.
Still, the fact that many people don't get it continues. I'm now seeing resumes in which people list their prior board seats as essential features -- even for clearly disastrous companies.
We need to get a grip on CEO's and Boards, and while the legal consequences are in order, that's all after the fact.
I'll go with Warren Buffett again: "It's much better to have the CEO disciplined by his owners than by courts."
I'm Moira Gunn. This is Five Minutes.
