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Evaluating the 'Doofus Factor' In Corporate Governance
PolygamousRanchKid writes with this quote from an article in the Economist:
"The directors of Yahoo! were 'so spooked by being cast as the worst board in the country' that they fired Carol Bartz as chief executive 'to show that they're not the doofuses that they are.' That was Ms Bartz's typically blunt verdict, offered to Fortune after she was dismissed with a phone call by the internet firm's chairman, Roy Bostock, on September 6th. She would say that. Yet Ms Bartz's criticisms of the board have been sympathetically received. Firing a chief executive by phone smacks of hasty, panicky decision-making. And Yahoo!'s board already had a poor reputation, having turned down an offer from Microsoft that valued the firm at several times what it is worth today. It is not just Yahoo!'s board that is feeling the heat. The directors of HP, another stumbling Silicon Valley giant, have been accused of serial ineptitude spanning the appointment and dismissal of Carly Fiorina as chief executive, the firing of her successor, Mark Hurd, and the selection of his replacement, Léo Apotheker. ... There is growing demand for boards to undergo a formal evaluation process, to assess both the performance of each individual board member and how they work together as a group. The European Union is considering new regulations that would require an independent evaluation of the board every three years."
A significant amount of research has been conducted that demonstrates monetary incentives that are too high actually severely decreases the effectiveness and productivity of a person to levels even lower than when monetary incentives are too low. I have no doubt this happening to corporate CEO boards across the western world. Any of these corporations could hire perfectly competent CEOs from business schools for 1/10 their current pay. But like frat boys they all sit on each others' boards and give each other multimillion dollar raises, bonuses, and parachutes, all at the investors' expense.
And fire them!
There was a recent Horizon programme (BBC) which said that psychopaths are 4 times more likely to be in the boards of businesses etc., than in other jobs.
Not surprising. I knew these people are good at manipulating, on my website I named a bunch since 2003 related to airtravel industry and Schiphol in particular, and that is actually what they are often picked for. To manipulate in the media etc. I'm not sure if this was just a recap of old research or new, if new then these researchers are not too bright (then again, what can you expect in the social sciences).
One of these researchers said it was hard to find the psyochopaths. Oh really? I can pick them out almost instantly. A good tool is reversible arguments. E.g. one such a-hole working for a dutch airport that wanted to expand said of those who were opposed and stopped it multiple times in court that 'a few times is ok, but this is ridiculous'. The same can be said of those a-holes of that airport. There plannes had been blocked by the courts, and yet these a-holes kept going against it and making new plans and/or getting the judgement overturned. So, he did exactly what he accused the opposing party of because it was unacceptable.
Try it! Look at someone you think is the biggest a-hole you ever saw (which are typically psychopaths who care nothing about anyone except themselves), and try looking for a reversible argument. I bet you will find one ore probably multiple.
Once we get rid of these people in boards of companies, perhaps life will improve.
Oh yes, the programme also said that these psychopaths can manipulate, make themselves look good to some people, but their performance is crap... Doesn't surprise me again, reminds me of former Schiphol director Cerfontaine, who has never amounted to anything, never did anything useful for any company even if the guys who hire him think so.
Even worse actually is that such morons (don't call them clever, they are not, as I said, with a few things to look out for you can easily push through their bulllshit-artistry), are even gettign honorary jobs at universities, perverting students...
...Most boards and CEO's score a doofus factor of 11. And, they are darned proud of that! It shows true innovation.
They were right - the revolution did not get televised. It was posted on YouTube instead. All in 120 characters. SLOOSH!
I firmly believe that starting with Carly HP's stock has been purposed trashed so it could be shorted and then pop back up when the "problem" is removed. Once you get that big you can no longer raise your stock by leaps and bounds, it's time to play yo-yo with the stock price and hope you don't sink the ship.
But if you do there's still ways to profit from it...
Cwm, fjord-bank glyphs vext quiz
Interesting considering that board members are elected BY stockholders, and are supposed to represent their interests. Let them vote for the craziest folks they dare, as long as they vote for them. It seems silly that you would subject board members to arbitrary tests when they've won the acclamation of their shareholders.
Of course this highlights a big problem with corporate governance, namely that boards are elected by stockholders, but a combination of stockholder disinterest and large institutional and mutual fund investment in firms has led to the composition of the board ballot being decided by the CEO and management.
There's no such thing as a free lunch. If you don't want "doofuses" on your board of directors, don't vote for them. Setting up some sort of independent review system is simply going to present stockholders with another stream of information to ignore. If you believe in democratic corporate governance you have to let people vote for who they want, and accept the responsibility for what happens to the business. The fact that Carol Bartz did a pretty lame job running AOL, and that the company has been on a death spiral ever since the Time Warner merger -- and for practical reasons will probably never figure out how to make their combined business a going concern -- has a lot more to do with the poor performance of the firm, notwithstanding the board.
Don't blame me, I voted for Baltar.
They don't run companies effectively because they aren't really in charge of the company. Most board members do completely different things as day jobs. Some are on five or six boards. You cannot effectively run six multinational companies and also have a day job at a seventh, though you can surely succeed at pulling in seven salaries.
For example, when there were some shady stores about Cisco coming out earlier this year, I looked up their board to see who I could contact. Oh, one of them is the President of Stanford University. How much time do you think the President of Stanford spends keeping tabs on Cisco's corporate affairs, making sure that the company is run properly? Another one is, uh, Carol Bartz, until recently the CEO of Yahoo being discussed here. How much time do you think Carol Bartz took out of her Yahoo day job to make sure Cisco was being responsibly governed? Yet another Cisco board member; Michele Burns, CEO of Mercer, the world's largest H.R. consulting firm. Do you think she spent lots of her free time, when not running Mercer, to make sure Cisco is doing things right?
No, in practice, the boards don't have any idea what's going on, the CEOs all sit on each others' boards anyway, and the boards therefore leave things to the CEO, ignorance-is-bliss style, until someone forces them to care, either because the stock price is tanking, there is bad media attention, or unwelcome attention from prosecutors.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
Actually the courts have restricted the nomination of directors on the corp proxy statement to those nominated by the incumbents. Unless you have a lot of money you can't win a proxy fight. The club protects itself with nominating committees picking only those good ole persons who fit their mold. The SEC tried to let 5% of shareholders nominated director candidates on the corp proxy, but the incumbents said it would be the end of the world and went to court and won that the SEC did not do the job right. So a shareholder (small) really can only sell. Now if you have 15% of the company or more you can probably get the boards attention. Today board elections remind me of elections in the old soviet union, one candidate in most cases. So corp america is really an ole (boys and girls) club.
direct engineers at my past employers for about the last 10 years have had to undergo evaluations every year. this has never weeded out the bad engineers. it only succeeds in lowering the moral of all of them.
James Carville, who was Clinton's right hand man just wrote advice to Obama, on how to look more compentent. His advise was to do lots of firings to appear in charge and for them to be scapegoats.
It works for past presidents like Reagan, Clinton, and Bush Jr. Surely, the board did this for the same reason to appear like they are doing their jobs etc. Many in upper management reading this can relate to newer guys coming and firing people in order to appear all scary and powerful to their new employer.
Most of the smart people who pay attention can see right through this.
http://saveie6.com/
Icahn really wants a new board and threatened the existing board he would do just that if they didn't fire Yang and quickly sell its assets to Microsoft. He has the dough to get a new board and I wonder if he is wiling to do just that with Yahoo?
I am really surprised it is this hard to find a new board. I wish it were easier to do so as many are useless and should go.
http://saveie6.com/
I've worked for several medium-sized and large-sized companies, and interacted with executives and board members in diverse industries. One things I've learned is that the experience, intelligence, or effectiveness of those individuals does not seem to be the reason they are in the position. The single determining factor appears to be their ability to persuade the person hiring them that they are qualified.
If I posit that executives select "defensively" -- so that their peers or subordinates are less qualified then they are and therefore less likely to take their position -- over time the quality of executives will decline, with the result being the predictable present condition.
To prevent this, we need objective measurements for executive and board qualifications, and compensation structures that incent "good" behavior where good = "best for the company."
At the end of the dot-com boom, people thought the market 'had matured' and I had my doubts. Well, they did get over the gold rush of buying everything they saw and acting on every idea anyone had, but the players that remained felt they had accomplished something and believed they knew it all. But in reality, the dot-com bust signalled the pre-adolescent period of the market -- approximately the same age kids begin to understand what death is.
Many of the players are still reacting to the changes of the market and few are leading. Yahoo lost its command of the market long before the dot-com and have been sustaining themselves on their old glory and people's reluctance to change their chat and email addresses. They don't listen to their users and often abuse and discourage them when they use their services in ways yahoo hadn't anticipated. Their teenage arrogance made them feel they knew it all and had it all under control and when they finally saw they didn't, well... the reactions and results speak for themselves don't they?
HP and Yahoo just look like a pack of fools and I think many will agree that they simply are. And while Google encourages fandom in all forms by its users and customers, HP and Yahoo have a record and reputation for discouraging, suppressing and even litigating against their users. (Only the MPAA and RIAA can actually sue their customers and expect to survive... not so much Yahoo and HP and their ilk... they don't have a true oligopoly in such a fluid market as 'the net')
Why is it that sacking peons as fast and impersonally as possible makes you a strong, visionary, leader who is willing to make tough decisions; but sacking your CEO good and hard makes you a panicky dumbass?
I'm just an amateur and I attest to this.
If you can spin mirrors of chaos at 170 words per second you collect groupies. Simple as that. Then people see that the groupies are "on to something" so the second level crowds join.
My first Journal Entry ever, in 8 years! http://slashdot.org/journal/365947/aphelion-scifi-fantasy-horror-poetry-webzine
If you're going to paste this in every story, the least you could do is replace 'cosmonaut' with 'confidant' to make the lyrics correct. I've heard some seriously bad mistaken lyrics in my time, but this has to be one of the worst.
and it's name is Dell. The co-CEO walks away with millions and leaves the company wallowing in the low teens. Pays a small fine that was a fraction of his profit from the company. Destroys morale and splits town.
Remember when that flight attendant pulled the emergency line, told everyone to fuck off and quit in a most convincing style?
He was a bit of a hero in many peoples minds. The Yahoo! CEO! deserves at least as much of this as him; but the underlying problem remains the same.
Holding a BOD to any sort of responsibility is a great theory; but it runs against current practice. Often, the appointment is be a reward for sychophants, rent boys or sadsacks. Changing this could be a major upset of corporate organization.
they look out for one another, competent people at the bottom know more. however since the competent people are not in the fucking "club" they stay there at the bottom and everything falls apart. the fuckers still get out with tons of money and stories to make them look good. it's a fucking big boys club, it's fucking disgusting.
Check out the search history for "Carly Fiorina" on slashdot and you'll find a slew of articles leading up to this one:
2002: Fiorina says HP may get out of the PC business.
2004: The Uncertain Promise of Utility Computing
2005: HP CEO Carly Fiorina to step down.
. . . An Engineer's view of Carly Fiorina's Leadership (Story later retracted by TechnologyReview on the grounds that they can no longer vouch for it. Interesting.. )
. . . HP and Apple Separate; Apple gets custody. (OOPS!)
2006: Forbes now thinks Carly saved HP
. . . HP regains throne as top PC maker
2007: Ex-HP CEO Carly Fiorina hired by Fox News
2011: This article, which suggests, again, that Fiorina was perhaps making the right moves all along.
As much as the geek crowd hated to see what was happening to HP, it definitely that perhaps Cloud Computing and handhelds were the go too thing after all and that the execs that fired her just couldn't see The Big Picture. One for sure though, is as sad as it was to see the engineering innovation go, it's even sadder to see the company struggling to recover from the series of "oops" that sent it into it's current downward spiral.
The eternal struggle of good vs. evil begins within one's self.
Isn't the function of the Board to oversee the running of the company by Upper management? The board nominally works for/represents the shareholders. Who would the proposed new oversight committee represent? What happens when we decide that this new oversight committee isn't doing it's job properly? Do we appoint yet another committee to oversee the committee that oversees the board that oversees the upper management?
I don't think the CEO of a company has it as simple as many make it out to be, if any business school graduate could do it for a fraction of the price they would be doing it. There are plenty of companies out there and if anyone with a degree could do the job they would all be leading those companies into becoming much larger and more successful companies.
Has anybody ever worked for a company where the senior management/executives weren't useless douchebags?
Apple and SnOracle employees are pre-considered counterbalancing and need not chime in.
"The European Union is considering new regulations that would require an independent evaluation of the board every three years"
Sounds like a bureaucratic solution to me. In the olden days they just waited until a mismanaged company went under. Nowadays you need additional people and laws to prevent inefficiencies. I'm wondering whether the bureaucratic solution will cost more than the gains from spanking the CEOs will bring in.
Je me souviens.
I honestly believe that the root cause of all this is the casino we call the stock market. People no longer buy stocks for long term gains; instead, speculators and HFTers trade in the very short term.they're gambling, not investing.
This means that the shareholders have a short term interest. As the BoD's duty is to the shareholders, they are actually doing their job when igoring the long-term and focusing on the short. Thus, you see idiotic actions focused on share price rather than value creation.
The right answer might be to make all stock purchases a minimum of 2 years or something, I don't know.
that would make them about twenty times smarter than the cowardly corporate whores like you that continue insulting everyone around by repeatedly making claims that have been proven to be false time and time again.
In this current down economic climate (referring to the time period 2008 to 2011) neither boards of directors, nor management nor the government looks good.
Sort of incidentally (following on a college education that had about 4 semesters of American history and American culture classes) I have been puzzling about the American corporation and reading the occasional book on the subject. The first thing I feel these books show is that American corporations are creatures caught within the economic and cultural currents of the time. Sorry but I am naming the titles from memory.
The last book on the list is The Decline and Fall of the American Auto Industry, published around 2009 a few months after the General Motors bailout. Here is a book that principally tells the story of the decline of General Motors Corporation with vignettes of decisions and policies forced upon top management and the GM board of directors from about 1970 down to the bailout. These are the years where General Motors could do everything except build a good small car. At the board of directors level, the choices kept being matters of avoiding the more awful.The board of directors finally wound up with a General Manager whose speciality was promising things would be better. The problem that was never ever solved (and still isn't solved in my opinion) is how to make a 4 cylinder engine as good as the 1700 cc Honda (and keep it in production even if it costs a few dollars more.). No board of directors can solve that problem.
The next two corporation books are: My Years with General Motors by Alfred P. Sloan (mid 1960's) and the 1950 vintage classic about General Motors, The Concept of the Corporation by Peter Drucker. These books are the classic duo about a big corporation and a really gifted and eloquent Chief Executive Officer. The only problem is both books were written in the middle of a 40 year richest in the world expansion of the mass production automobile. In the present down economy,the same high quality people sitting on the Board and occupying the top management simply do not look as good... no matter what they do.
Regarding your wish for a new way of doing business, I would say look back at the 1980's... The Regan Presidency Years... where job security began to evaporate. That was the era when the conglomerate corporation began to operate. This is when the process of buying up smaller corporations and doing obscene things to their balance sheets and business plans began. A social history of this era up to the present (not focused very clearly on Corporations) is The Great Inflation and It's Aftermath by Samuelson.
So one way of looking for a new way of doing business is to ask, how can we change the economy of scale back so that stable, quality, relatively low profit and low debt Corporations are not subject to being bought up, stripped of their cash, move the manufacturing to contract offshore factories, loaded with debt and resold on the stock market to investors. Recent corporations worthy of study are Sunbeam, Mr. Coffee and Kidde (fire extinguishers).
They get cash and stock, so what is the worst that can happen to them? If the company goes down the tubes they still have the cash, and even if the stock goes down it is still free money. I think this is true for failing companies like HP or soaring companies like Apple.
And as the original post points out, when a board does act they are usually irrational. Their decision process is about as useful as a Magic Eight Ball.
Directors of big publicly traded companies are like landed aristocrats in a socially stratified feudal society. Once they join the wealth class they are given more wealth and power because they are the ruling class. Who gets to be a board member? Someone who as already made it. The ruling elite skims wealth out of the economy to stuff into their own pockets, and thus maintain their strangle hold on the economic (and often political) life of their country.
You want a recent example? Just read what the Wall St. Journal says about Warren Buffet when he says that the tax rate for the wealthy is too low. It's like he went into a church and got up in front of the congregation and said "There is no God." They react with a combination of contempt, condemnation and condescension. It's like the crazy rich uncle showing up and talking about flying saucers from inside the hollow earth. The only reason they cut him any slack is that he so successful and rich that they can't ignore him.
When it comes to describing how wealth and power accumulate at the top, Marx was right. He was wrong about everything else, like Hegelianism, the end of history and the workers paradise, but he was right about how the ruling class will sacrifice anything to keep their wealth and privilege.
What is the difference between how Wall St. behaves and how Gaddafi ran Libya? Not much. The US power elite is much more slick, and they have much better PR, and they have some understanding that it's more cost effective to not starve the peasants. A rancher get more meat from a well fed cow that is not sick, but that is in the rancher's interest, not the cows.
If they think that starving the populace will get them more wealth and power, they will. In fact, they are. In the US you can make a lot of money in the immediate term by putting people out of work rather then by investing for the long run. So ship those jobs overseas, merge what remains into a few dominant companies to form cartels, and squeeze the existing wealth out of what remains. If you're rich enough, you can justify anything by insisting that your wealth proves you are righteous.
Of course, this only works for a while. In the longer run it ends up like the situation in many South American countries. A tiny minority with most of the wealth, a very modest size middle class, and a vast majority of dirt poor peasants. Then politics devolves to a seesaw between right wing nationalistic elitists who protect the wealthy and loot the economy (Argentina under the generals) and left wing despots who nationalize everything and buy off the peasants to stay in power while destroying the productive economy (Chávez's in Venezuela).
It may seem like a long way from useless boards of directors, but that is a trick used to keep the cows quite on the way to the slaughterhouse.
Why is Snark Required?
Aren't investors continually evaluating the board, as reflected in the stock price? Look at graphs of these companies' stock prices before and after each of these perceived dumb moves, what more can a bunch of bureacrats tell us two and a half years later?
Reminds me of a few teachers I know (at levels below college) who were driven up the wall by lazy/misbehaving students [the causes of that problem are another discussion]
Maybe _teaching_ at the college level is better that working on nonacademic staff [one of the aforementioned teachers moved to a college tutoring job and says that he likes helping people that actually want to be helped.
I listen to both RIAA and non-RIAA stuff if I like the music, tangential business/politics nonwithstanding.
I'm rubber you're glue, bounce off me and stick to you, na na na na naaa na.
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
> There is growing demand for boards to undergo a formal evaluation process, to assess both the performance of each individual board member and how they work together as a group
Fuck, that would be a world first. And now for the politicians...
This really should not have to be a concern of the government. As other posters pointed out, board members are hired by shareholders, and can be voted out by shareholders.
Unfortunately, this lovely-sounding situation somehow doesn't actually work. Possibly because most of the shares that actually get voted are held by large organizations like banks, mutual funds, pension funds, etc. - whose votes may be driven by intercompany politics.
Even if the voting worked, the selection of board candidates that you can vote for is severely restricted. Joe the Shareholder will not be taken seriously - the only viable candidates are those proposed by the company management and the other board members. There are lots of backroom deals: you be on my company's board, and I'll be on yours. Among major corporations, the circle of corporate board members and CEOs is a small, select group that takes care of its members first.
Government regulation is almost always a bad idea. What other possible solutions are there?
Enjoy life! This is not a dress rehearsal.
Hell, I'm only 21 and I'm already getting tired of office work.
Immediate supervisors and co-workers have generally been fairly easy to deal with, but seemingly-illogical aspects of the organizational bureaucracy frustrate me to no end.
I admit I have some bad habits that don’t make things any easier (“easily distracted” and my FUBAR sleep/caffeine habits come to mind).
I also admit that more experience/acclimatization could be helpful, that I may find a better specific environment, and that I likely can’t escape yet anyway.
However, I’d feel so much better about a successful dealer business in my collectibles hobbies of choice. I like what I’ve done on the side, now only to scale it up
(Your specific field of endeavor is different, but in many aspects I feel the same way.)
I listen to both RIAA and non-RIAA stuff if I like the music, tangential business/politics nonwithstanding.
You're not wrong about that TED talk. :)
And did you exchange a walk on part in the war for a lead role in a cage? - Pink Floyd.
How about we start rounding these people up and "removing them from society."
It's called "the justice and prison system".
Problem is, for those sociopaths to be even noticed by the system above, they have to be highly active in the presentation of their disorders to the public.
AND of certain age AND preferably of lower intelligence - cause the smart functioning psychopaths either won't get caught OR they will get away with it.
As for meeting hundred of them in your lifetime and surviving...
You're probably meeting hundreds of members of opposite sex daily - are you having sex with all of them, whenever and wherever you meet?
Mit der Dummheit kämpfen Götter selbst vergebens
Books recommended in the parent comment:
The Decline and Fall of the American Automobile Industry (1983)
The Decline and Fall of the American Automobile Industry (1983)
My Years with General Motors by Alfred P. Sloan (1964)
My Years with General Motors by Alfred P. Sloan (1964)
The Concept of the Corporation by Peter Drucker (1946)
The Concept of the Corporation by Peter Drucker (1946)
The Great Inflation and Its Aftermath: The Past and Future of American Affluence (2008)
The Great Inflation and Its Aftermath: The Past and Future of American Affluence (2008)
Many years ago, I realized that the larger and more layered a hierarchy is, the more insane it is. As TFA and most posts have pointed out, the board does not do what a board should do. The President/CEO is generally (generalizing, here) outward-facing, mostly concerned with how the organization is perceived. Vice-Presidents are... well, vice-presidents - some are good but many are either competing to be the next President or are too scared to do anything that they are not already doing. Middle management are often simply paper shufflers, maybe trying to do a good job but not important enough to really change anything. Lower managers can actually see what is happening in the company, but their view is so at odds with the view of upper management that they are powerless.
In short, those on top don't know what is happening, those close to the action are ignored by those at the top, at best, or act only out of fear or ambition, at worst.
Interesting story: I was a "super-consultant" (read: contractor) at a large, old tech company in Texas back in the '90s, working as part of a team to install a major system. I was working on some bit of code, realized that the approach I was taking was not going to work, and said something like "This is never going to work!". Seconds later, just as I was starting a different approach, the girl in the next cubicle - an employee and my main contact - called me into her cubicle and... said basically that she could not believe this, that my behavior was totally unacceptable... Her reaction would have been appropriate if I had stood on my desk and yelled "This stupid project is never going to work and this stupid company should never have started it".
Short version: expressing any doubt about anything in the company, even the bit of code I had been working on for ten minutes, was totally forbidden.
The message seemed to be "You are happy about everything that happens in this company or you are fired."
"When the going gets weird, the weird turn pro" -- HST
I'm worried that we are on the slippery slope when we start deciding what someone "deserves" to make (as in "let's pass a law prohibiting this group of people from making more than $x"). That is how we got here in the first place - i.e. limitations on salary encouraged "stock options" as compensation
If a CEO creates a positive corporate culture, provides real leadership, and actually does what is "best" for the company - you can't pay them enough. If the CEO is making decisions based strictly on how the stock market is valuing their company - you can't fire them fast enough.
Yahoo!'s board (http://investor.yahoo.net/directors.cfm) looks like a reasonable bunch of people that have made a few mistakes (none of them look particularly confrontational - and they do look a little "nerdy" - neither of which is a bad thing).
On the other hand, Carol Bartz comes across as such a reasonable, mature, people friendly person that I am SHOCKED that they fired her over the phone ;-)
It ain't what they call you. It's what you answer to. http://mylyceum.us/
Explain the linkage between stock price and engineers' salaries, paying particular attention to the mechanism whereby artificially depressing the former reduces the latter. [10 marks]
Confucius say, "Find worm in apple - bad. Find half a worm - worse."