posted on Sep, 29 2006 @ 09:18 AM
In the News
Hewlett Packard. One of America’s par excellence companies. An old company, well, old for IT companies. Intelligence Technologies. HP is presently
rated as capitalized at $98.5 billion. Founded in the garage of David Packard in association with William Hewlett, in 1939, in Palo Alto. HP’s first
major customer was Walt Disney Studios, with a new sound system employed in the movie, Fantasia.
Former CEO Patricia Dunn, was voted out of office by a unanimous Board of Directors after an incipient scandal was leaked to the press. Ironically,
the scandal involved HP’s Ms. Dunn hiring investigators to track the source of earlier leaks. Nearly a dozen of HP’s top executives and staff
including the company’s top lawyer, have not only resigned, but have taken the 5th Amendment when hailed before Congress to testify. That’s
called “stonewalling.” Not usually done if you have nothing to hide.
Singular testifier Ms Dunn has offered 33 pages of written testimony and her own oral responses to questions put by the Congressmen. She claims “I
didn’t know” as her major line of defense to the illegal investigative techniques used by the well known executive background checking firm, SOS.
Security Outsourcing Solutions. You have to wonder how a woman gets to the very top in the industry, and now, “doesn’t know” one of the more
mundane aspects of the job. Hmm? One as yet unexplained tidbit of personal data Ms Dunn sought was the medical records of 49 year old Mark Hurd, who
it turned out, is her successor. Of what possible use could this private material be to her?
For a long time, I have toyed with an idea how to restore democracy to the Board rooms of America’s cooperate giants. For brevity, the Fortune 1000.
Briefly, directors were most often people who had demonstrated their talent during their working life, and were ready to slow down. Semi-retired.
They were tapped to lend their expertise to any thriving business. This relationship served the business well by giving them what amounted to
“inside” information without the attendant ethical or legal complications that could be involved. Frequently, the pay was more like an
honorarium. Not significant. Boards often met quarterly. The management would seek the advice and consent of the Board for actions taken and for
plans in the future.
Then wise-acre management found the human weakness. Getting something for nothing. The pay for directors rose and rose until it is now a full time
occupation for the well placed. Ex-generals and admirals go to the Boards of defense contractors. And who will they meet there? Former congressmen,
especially those who sat on committees charged with oversight of the corporation. Every contract with the US Government has a person designated to be
the liaison with the contractor.
All too often - I think - that person will retire and to straight to the company he was supposed to be overseeing on behalf of the taxpayers. We call
that the revolving door, which also relates to bringing in a banker to be Secretary of the Treasury, who then leaves to go back into private banking.
Or a top official of ADM - Archer Daniels Midland - to be Undersecretary of the Department of Agriculture. Boards of Directors are now filled with
such luminaries. Pay is outrageous. Six figures are not uncommon. Plus perks that can be of even greater value, such as 3 weeks in a Swiss chalet t
the height of the season. And a corporate jet ride to and from. Limos at the airport to the chalet. You get the picture. A life not for ordinary
So is this pampered Director likely to find fault in the CEO? Or more flagrantly but no more destructive of corporate character, what about the pay
and bonus for the top management? I mean if you are making $100K for durn little work - staff give you ‘reports’ on the issues before the Board -
and ‘suggested’ ways to vote, so why not give these guys a bonus? Like the ExxonMobil CEO who got $400 million just to quit? A significant sum
even for E/M.
First, there are too many people who now sit on more than one Board. These are frequently celebrities in their own right. Winning football coaches and
other sports figures. Prominent movies actors. War heroes. Radio and tv personalities. None of these processions would disqualify a person, but
neither do they necessarily add expertise to the company.
I want to license every director of any of the Fortune 1000 plus maybe the top 25 companies in every state that are not included in the 1000.
Directors would be required to attend CBE - Continuing Business Education - classes heavy in ethics and legalities of dong business. Persons could not
serve on more than 1 major corporation or 1 or 2 minor corporations. Pay would be the same as the average wage paid to the company’s employees. No
fills or perks beyond free greens fees at the closest public golf coarse and lunch at each board meeting attended. If the person fails to attend 2
meetings, that is his or her resignation. Anyone involved in questionable business practices would be suspended pending the investigation. Pleading
the 5th means you are out of the director game. We just don’t have the time or interest in shady shenanigans. Finally, directors would serve one
term of 5 years and not be eligible for another directorship for 5 years. No one is indispensable.
I believe we might move towards a genuine free and open Free Market if we had real Boards of Directors.