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Why Bad Directors Aren't Thrown Out
An anonymous reader writes "For publicly-owned companies, the CEO gets most of the spotlight. If the company is successful and the stock goes up, the CEO gets the credit. If the company stumbles, the CEO gets the blame. But an article at the NY Times points how the board of directors for most companies seem to get a free pass, even when their decisions or their CEO selections consistently go wrong. 'Last year, there were elections for 17,081 director nominees at United States corporations, according to the service. Only 61 of those nominees, or 0.36 percent, failed to get majority support. More than 86 percent of directors received 90 percent or more of the votes. Of the 61 directors who failed to get majority approval, only six actually stepped down or were asked to resign. Fifty-one are still in place, as of the most recent proxy filings.' The article uses Hewlett-Packard as an example; the past several years have seen poor CEO choices, the abominable Autonomy acquisition, and billions in write-offs for other failed endeavors. Yet HP's directors were all re-elected."
Sure, corporate interlock isn't as bad as it once was (don't believe anybody who claims it doesn't exist anymore) but the real reason is that the whole system is an asshole club based on friends and schmoozing. We don't have a mechanism to put good people in charge, and the people running things don't want it that way.
There isn't much social mobility in this country. Directorships and positions like them are just part of a big scam to perpetuate dynastic transfer of wealth.
The system is rigged.
... and this differs from the US political system ... How?
Director elections are stacked in favor of the incumbents due to the way the elections are structured. The directors nominate candidates for the board, usually through their governance or nominating committee. It's in their interests to keep the status quo and nominate themselves to be the only choices on the ballot. Nearly every corporate ballot (proxy ballot) has just enough director nominees to fill the available slots so there really isn't a choice. Corporate governance is a slow process and companies don't really want a lot of turnover on the board. In most situations this is a good thing, for investors and for the company as a whole.
However, this process does have the effect of protecting directors when things go south as it takes a real grass roots movement from stockholders to get other names nominated for the director slot. Most commonly you'll see this when a large holding company decides to pool their stocks and distributes an alternate proxy.
"We make our world significant by the courage of our questions and by the depth of our answers." Carl Sagan
This is in fact the real questions:
* How the Nokia board slowly changed to the point it elected a CEO that bring Nokia to his fall.
* How can the board allow disruptive and destructive action from the CEO without limitation or even a reaction ?
Could it be because capitalism is just an excuse to get the idiots at the bottom to think that Aspiration Will Get You Up There while those at the top are just a bunch of layabouts scratching each others' backs and mostly giving not a fuck about anything beyond making enough money to buy another yacht before they receive their golden parachute?
The world runs thanks to careful centralised regulation and provision of education and research combined with small, agile businesses - and in spite of behemoth corporations.
they're your ruling class silly. Your masters. They own you. Sure, you could do something about that. But you'd need a lot of power. Somethin' like a government body. And that'd be socialism (cue dramatic music).
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This sounds a lot like why corrupt politicians who impose bad policy constantly get reelected and appointed to office. For instance, we still have people like Rumsfeld, Kissinger, and the rest of that wrecking crew exerting their influence, damn near fifty years on. Must be a psychological issue.
“He’s not deformed, he’s just drunk!”
The late Ed Wood says "hi".
And also "braaains", but in a stilted and really rather pathetic tone.
How can I believe you when you tell me what I don't want to hear?
Ostensibly we live in a free society, but that doesn't meant that our elites, with the connivance of Hollywood, propagandize to suit their elite interests. The stories they tell always fit an elite, self-serving narrative.
The greatest lie of our age, is that hard work is rewarded. So when things are unfair, we blame ourselves for not working hard enough, which is convenient for the rich, who are born into power, marry into it, or at least make the right friends.
This also explains the existence of the Tea Party, and why stupid and gullible people fight so savagely for the interests of the elites, and against their own -- they've drunk the Kool Aid, and honestly believe that each and every one of them are potential future billionaires, if it weren't for teh liburls, gays and leftists.
We do NOT live in a meritocracy -- far from it.
In The Trial of Socrates, I.F. Stone wrote, "The "destruction" Socrates predicts for the bad ruler is little or no consolation to the ruled." All you have to do is recall the destruction of Germany, first at the hands of the New York Fed and the Versaille Treaty, then at the hands of the Nazis, to know how true this really is. After WWII Germany was in ruins... but hey, they we were rid of Hitler!
Stop investing in feudalism and start leading your life like it mattered, and you wouldn't have to listen to the inevitable crap as if it were news. We don't have to continue to swallow the same old crap from conservatives whose paramount consideration is there own wealth & power.
This isn't news, it's history repeating itself in the endless loop of greed, avarice and will to dominate rather than learn. Apparently, glory is a concept that reincarnates itself to the detriment of most anyone who thinks they deserve to live more grandly than the previous asshole.
Yes. The idea that "If the company stumbles, the CEO gets the blame" IS news.
If the company does great, the CEO gets a bonus for having made great decisions.
If the company does poorly, the CEO needs a bonus to make the touch decisions.
If the company does about even, the CEO needs a bonus 'to retain top talent'.
Sleep your way to a whiter smile...date a dentist!
The problem is that most investment these days is done on a short term basis, people rarely hold their shares long enough for more than the next quarter to matter. I personally hold for much longer, and I refuse to buy into a company where the people running it need to be replaced. If I lose faith in them, then I sell my shares.
I suspect that's a lot of what's going on, if you don't have faith in the board of directors, chances are you sell your shares. And as such, it would be expected that in the overwhelming majority of cases the board would get to keep it's job.
For people who aren't in it for the long term, I'm sure they're even less likely to care much less vote the bums out.
Of the 61 directors who failed to get majority approval, only six actually stepped down or were asked to resign. Fifty-one are still in place, as of the most recent proxy filings.
61 - ( 51 + 6 ) = 4
The other four were dragged out and burned at the stake by irate shareholders. Encourage this response and I'm certain the other BoD members will straighten their acts out. You only need to make a few examples.
Have gnu, will travel.
So I make a very ordinary salary as a software engineer, but could probably raise it by 25% by changing jobs but not venturing too far outside my comfort zone.
However, I've got friends who went from earning roughly as much as I did, to quadrupling what I'm making, simply because they play fast and loose: lying about past salaries, standing job offers, etc, to get raises; and taking jobs they're not always qualified for, simply because they're good at bullshit.
What this is REALLY saying, is that they're doing well because the free market values liars and bullshitters. The people who are the most profitable to employers however, are the people whose personalities and personal moral code precludes them from earning too much, allowing employers to get a bigger spread between 1) what they pay employees, and 2) what those employees contribute to their bottom line.
The reality is a bit more complex than I make out (bad directors persist, because big institutional investors want stability and don't want to rock the boat; nepotism (sometimes a good thing!!); information asymmetries everywhere, etc., etc.). Simply put, being a slimy, lying cunt pays -- and not everybody can be a director, because not everybody has the stomach to do what they need to do to get there.
You make the article's point - after all that has happened at HP over so many years as close as they got to consequences for the board was "cam (sic) very close to being thrown out" (your words).
Nothing else needs to be said, I rest my case.
It was a dynamic market, and they didn't see Smartphone Apps becoming the driving force.
There is only one diagram you need to understand (from this informative article to see that this is bullshit. When Steven Elop came into Nokia, Nokia's Smartphone market share was increasing . Nokia may have had a problem coming five years out, but at the moment they were doing fine.
The irony of this was that, if Elop had just left Symbian and Meego alone, he would probably have had a better chance of driving Windows phone to success than he has now. Just look at how current Nokia phones are a generation behind the competition in terms of weight and features and think how much better they could be if Nokia just had the purchasing power for decent components. Have a look at how the user interface of many of their phones doesn't feel like anyone ever tested using it. Think what a difference it would have made if they didn't get rid of all their UI experts who would have been able to identify and start to fix all the problems in Windows 8.
=~ s,(.*),<sarcasm>$1</sarcasm>,g if any_point_you_wish();
To further illustrate your point, about what would have happened had Nokia not adopted Elop's Nokia/Microsoft partnership, allow me to quote from the same source you cited have already cited, (mobile-industry analyst Tomi Ahonen)
http://communities-dominate.blogs.com/brands/2013/03/preview-of-the-smartphone-wars-bloodbath-year-4-smartphones-galore-this-year-will-be-pretty-stable-w.html
You can't be ahead of the curve, if you're stuck in a loop.
He was doomed before the board chose him.
And WP was doomed before Nokia chose him, just read the market share progression. All the Microsoft great promise of a brighter future with WP7, WP7.5, WP8 tuned to be just big lies: the market share simply continued to decrease.
The drama is that Nokia was in the way of fixing there problems, allowing transition from Symbian to Meego with Qt, when the new CEO destroyed almost anything. At the time of this disruptive action, there was a lot of speculation about how a quick ans total switch to WP could possibly success. Now, two years later, WP7, WP7.5, WP8, and almost WP7.8 later, and 13 Lumia phones later, the ridiculous 2.5% market share very clearly show how big was the mistake. Not counting the manufacturers that have recently reduced if not throw away there WP product range.
Corporate boards glad hand the execs for the same reason as boards and executives in utterly unrelated lines of large businesses hang together as a lobby if one is threatened by labor/regulation/public vilification that would help the others: class solidarity. They by-and-large see the interests of their peers as identical to their own, even when they're objectively not. An excellent recent example, fighting attempts by the US Federal government to bring the major banks to heal after they nearly dragged the world economy into a depression.
Luke, help me take this mask off
doing t1 support for five different clients at the same time. Right now they are implementing the LEAN methodology, but so far haven't told us what exactly this means. Well, we where told no more overtime. The only info I've been given is this ridiculas print out comparing our new policy to "lean meats, such as chick, turkey, pork, and fish." Luckily for me, there IS a question on it "What is the LEAN process?", however the answer is describing how an employee will come around to my desk "wearing squeaky clown shoes" to bring me meat. We're all hoping that this is just a joke, but these days one never knows. Maybe the meat comes from the former employees downsized via LEAN.
...when it's traditional to use pH?
tone
but you're just being naive. There's a million reasons why it doesn't work. For one thing, you're ignoring how horrible things were 250 years ago for everyone except a lucky few. For another, America won it's revolution with lots and lots of French help, and countries don't do that any more. The rulers work together. If you want a future, the working class have to work together sensibly for it. That means using the only tool with enough power to stand up against old money: Government.
Sure, you might screw up and create the same sort of beast. But you're not going to make a worse beast. It's the same demon by a different name. Meanwhile at least you have a CHANCE of a better world. I'll take a one in a million chance against hopelessness any day. And I don't think they odds are nearly that bad.
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and think, this could have been Nokia in 2011 when the N9 on MeeGo launched.
And think, if that had happened, then Tizen would have has a chance. But instead Microsoft inserted malware into Nokia's corporate structure and Tizen will flop just as MeeGo flopped. Tizen also could have had a substantial leg up if Intel had spent less time castrating Moblin to only work on Intel hardware — none, in fact, since they had no need whatsoever for their own distribution — and more time working on the interface, which was quite good and which could have been even better. It was trying to accomplish what Android accomplished with the interface, and it had a lot of promise, and then it was abandoned.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
I've been investing for 40 years, and I've never known who is on the board of directors of a stock I own, other than for exceptions like companies I worked at. I guess most folks are like me, rather than like you. So, the fact that CEOs get attention makes their tenure attract or repel shareholders, whereas who is on the board has no such effect (except for perhaps day traders and other nuts).
Now, why boards don't fire directors is another matter. I guess they don't fire them because they would have to take time out of their golf games and counting their millions of dollars to find a replacement. Also, due to the regression to the mean effect, most bad directors will do better next period, so it probably makes sense. With that effect in mind, the right thing to do is fire the successful directors...
Go to Heaven for the climate, Hell for the company -- Mark Twain