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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...
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.
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.
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Sadly when you are dealing with a doofus corp you can't even hire from within because middle management is usually dipshits as well.
I had one client that I told I didn't have time to be their admin after setting up their system, but I'd put them in touch with a couple of competent admins that were rock solid, take their pick. What did they do? Some PHB decided 'they cost too much! i know a guy who's a wiz at computers! I bet he could do it" and I bet the admins out there can already see where THIS is going.
Well I get called back in a little over a year after their "wiz" got caught looking at porn and running a Q3 server when he was supposed to be working and they were having "little problems"...little problems my Irish ass. this genius had GOT RID OF THE DESKTOPS that I had bought because they were 'too weak" and built gamer desktops piecemeal from tigerdirect, so give up making images or deploying anything as NOTHING matched, got rid of my standard Sonicwall for a bunch of those shitty blue DLink routers and was using a bunch of HOME CONNECTIONS from various ISPs. Somebody want more speed? he'd hire another ISP. Needless to say I had to shitcan the whole thing but the PHB had already gotten his bonus and moved on so didn't get the blame.
And it is THAT, that right there, that to me marks the dufus problem in a nutshell. it is upward failure where doing dumbshit yields a quick gain followed by a HORRIBLE outcome, but the gain gets the dufus moved up or a "selling point" on his resume and he/she is out of their before the excrement hits the bladed cooling device.
I mean how many guys here have dealt with a company butchering IT and then they acted amazed when the shit falls apart? or tries to get too much done with too little and the first real problem is a trainwreck of biblical proportions? That is why I got out of corporate, got tired at beating my head against the wall while dealing with shit that went right off the stupid meter scale. Hell I have a buddy still in who actually got drug to regional HQ by a PHB that wanted him fired because, and I quote "You have NO RIGHT to tell me who I can speak to! You WILL let my emails through from Melissa through or you're fired!" That's right folks, he was fighting FOR the right to get infected! Lucky the regional head knew a tiny bit and watched the news so he knew what the Melissa bug was, otherwise he could have been fired.
I just can't take that level of dumbshit anymore, I just can't. At least with SOHOs, SMBs, and Home Users, they KNOW they don't know shit and that is why they hire me, so that I can tell them what to do and help them be smart and safe. With corporate there always seemed to be someone who knew just enough to be dangerous as hell, and had just enough power to serious fuck the whole works. Some guy who thinks he knows IT, or some bean counter who think the gear will last another two years when they cheapskated and bought cheap shit in the first place that started dying when the warranty went, just ignorant dumb stupid ass...ugh. If you still do corporate? My prayers are with you friend, may you have a strong stomach and have an immunity to headaches.
ACs don't waste your time replying, your posts are never seen by me.
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?
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.
hairyfeet opined:
THAT, that right there, that to me marks the dufus problem in a nutshell. it is upward failure where doing dumbshit yields a quick gain followed by a HORRIBLE outcome, but the gain gets the dufus moved up or a "selling point" on his resume and he/she is out of their before the excrement hits the bladed cooling device.
What you have just described is the fundamental career philosophy behind the MBA. To state it another way, the default MBA business strategy is: "Ramp up short-term profitability by whatever means is necessary/convenient, regardless of long-term consequences for the company, because by the time those consequences arise, you will have been hired away to work at a different company, at a higher pay grade, and dealing with those consequences will have become somebody else's problem.
The problem for the Western economy is that, ever since the Reagan administration (or the Thatcher administration, or the Mitterand administration, or ... but you get the picture), MBAs have progressively grown in influence to a position of utterly dominating corporate governance in every country outside of China. It is they who are responsible for exporting the bulk of Western industrial production to developing countries, it is they who were responsible for creating and marketing poisonous mortgage-backed derivative securities (and thereby crashing the global economy - a process that is only now reaching its middle, rather than ending), and it is they who dominate corporate boardrooms.
It's not so much that they are psychopaths. It's that they have been trained to be psychopaths by the most prestigious business schools in the Western world. And this all in the name of delivering maximum value to shareholders.
The problem with the MBA philosophy is that the only shareholders that matter - because they are by far the largest shareholders - are institutional shareholders: insurance companies, pension funds, banks, and so on. And these shareholders' investment portfolios are run by - you guessed it - MBAs, who have absolutely no loyalty to anyone or anything except themselves. They'll kick a fundamentally-sound stock to the curb in a heartbeat, so long as their spreadsheets tell them that a company down the block is offering higher short-term profits, regardless of how unsound that new company's long-term outlook might be, because they don't invest for the long term.
Which, incidentally, is why Wall Street and its fraternal counterparts have been experiencing day-to-day mood swings like a bipolar teenager with PMS. In fact, that phenomenon is a result of the MBA-mediated migration to algorithmically-based automated trading systems, which, by intent completely ignore long-term value in favor of short-term gains produced by, essentially, day-trading on a massive scale.
And, short of outlawing MBAs and hanging all existing holders of the degree, I see absolutely zero chance that this utterly broken system that rewards only MBAs will - or, for that matter, can - change for the better any time in the forseeable future.
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