Boardroom Reflections

After a year of being knocked off balance by compensation, investigation, and recrimination, our recently completed Boardroom Census revealed that directors have regained their footings. While there are always plenty of reasons to lose sleep, they are now mostly outside the boardroom and the courtroom, thankfully. 

We asked our readers, for instance, what they think is the most appropriate area of focus in the year ahead. The prevailing sentiment was to push for more rational governance regulation. This view could reflect a regulatory pendulum still swinging to the extreme, or it could be that bells are ringing for the bull market and directors understand that reducing compliance costs may be in order.

We also found out that board directors have flocked to the Internet. They report spending on average one to two hours a day surfing, newshounding, and e-mailing. Good thing, then, that we just launched our new web site, www.directorship.com, which will be the most up-to-date and dynamic place for board directors to congregate on the Web.

Predictions

To borrow a phrase from football coaches, 2008 will be a year of rebuilding. We have been through some serious boardroom landscaping due in part to SOX and, more recently, to options backdating. This year will be an opportunity to reunite the management and the board, and we predict compensation will move to the backburner due to reforms (we hope) and perhaps a weaker market economy (we hope not).

Another concern is the Balkanization of the boardroom. With an emphasis on specialized skills in the committee apparatus, we see more and more power migrating away from the full board—good for technical issues but not good for strategy and sound decision making. Boards should be careful to continue to bring major issues to the full board where the conversations are more likely to wander into all corners, some uncomfortable and some unpopular, all of which are healthy for corporate governance.

Don’t Cry for Me, Jane MacElree

Nothing so astonishes the mind as the specter of dowagers such as Jane Cox MacElree, the single largest holder in the Bancroft family (the controlling shareholders of Dow Jones), crying over the billions they will receive from the sale of The Wall Street Journal to Rupert Murdoch’s News Corp.

At $60 a share, the company is worth twice as much to Murdoch than it was, just recently, to the Bancrofts. In trying to derail the deal, these well-meaning, well-educated—but not overtly business savvy—patrician shareholders really do not understand what a favor Murdoch is doing them. They claim to be concerned about maintaining editorial independence which on the face seems like a reasonable objective.

Consider, then, that in the event the Murdoch deal fell through, Dow Jones and its classy class A shareholders did have a plan B in mind for its vaunted independent journalists. And that was to drastically cut the newsroom, continue to shrink the newspaper either in size, as they recently did, or page count, and in effect, to settle for a major reduction in quality. Nothing undermines independent journalists like the loss of their journalism jobs. Only under a brilliant entrepreneur like Murdoch could the paper and its Web  properties hope to reinvigorate themselves. The fact is the Journal is a great brand and a not-so-great business. This is where Murdoch will surely come in handy.

Uncivil Prosecution

Finally, while we can’t and won’t defend the actions of Black, Kozlowski, Ebbers, Skilling and the myriad others who now, or will soon, be wearing orange jumpsuits (whatever happened to stripes?) We do observe a tendency in the sentencing ritual that feels, well, overwrought. These men and others like them have paid a large penalty even before the sentencing phase, in the form of a total repudiation of their careers and life’s work; loss of social, familial, and business associations; and the forfeiture of their entire net worth. In cases where a genuine fraud is perpetrated, it is fitting that the government additionally provides for a stint in the joint. But for our prosecutors and sentencing judges to act out of Nifong-like (Duke University lacrosse case DA) false populism and sentence CEOs and other executives without considering the sum total of their sacrifice as part of the sentence, is to deny the due process that is given daily to hardened criminals.