Posted by Larry Doyle on August 10, 2009 6:00 PM |
With a few recent exceptions (Citigroup and BofA), it strikes me that we have witnessed very few questions of accountability directed at the boards of many companies in our country.
Board positions are not supposed to be purely cushy, figurehead type positions for friends of executives; serious corporate governance at the board level is a critically important role in a robust capitalistic system.
Where are the checks and balances at this level?
I am reminded of the neglect, if not malfeasance, of corporate boards in reviewing The SEC Robbed Shareholders, written by Michael Maiello of Forbes.
Maiello addresses recent fines imposed by the SEC against Bank of America and General Electric. He writes:
The Securities and Exchange Commission is supposed to see to it that corporate managers don’t take advantage of the shareholders they’re supposed to represent.
While I have limited confidence in corporate managers, I would only hope that those overseeing these managers, that being the boards of directors, may be more accountable. When will shareholders truly be able to get a fair say in the election of board members? When will our regulatory bodies truly hold these individuals accountable? When will the media expose the closed, if not incestuous, nature of the relationship between senior management and the board?
Maiello does yeoman work in highlighting the travesty imposed upon the shareholders of BofA and GE. He asserts:
The SEC has made a real mess of things. In both cases, the commission settled for amounts so small that they can’t be said to deter executives from using SEC filings to mislead investors.
The other problem is that small as the fines are relative to the violations that the SEC alleged, they are also borne by the wrong people. Corporate executives, not shareholders, are responsible for the content of SEC filings and they should be the ones who pay for lapses, inaccuracies and omissions.
While the SEC is remiss in these specific cases, the fact is before situations such as these get to the SEC, they should be addressed at the board level. The board should be fully aware of potential legal issues and address them forthwith. In the process, board members will have to extract themselves from the pocket of management and represent the rights and interests of shareholders. If they don’t, then they should be exposed for neglect of duty.