September 26, 2005
What Does It Take to Fire a Bad Board of Directors?
It is easier to fire a CEO than to fire an incompetent board of directors. The article today in the NYT (C1) on the board of Hollinger International is sobering. Conrad M. Black is under criminal investigation for cheating Hollinger shareholders. He was pushed out. The guts of the old board that let Conrad misbehave, per the findings of a subcommittee of new independent directors of the firm itself announced over a year ago (!!), and that agreed to pay $50 million to settle a shareholder suit, is still in office collecting $50,000 a year in fees ($3,000 per meeting). It included Richard Perle (former assistant secretary of defense and philosophical darling of the right), Henry Kissinger (yes, that one), Richard Burt (former ambassador to Germany) and James Thompson (former Governor of Illinois). One realizes how little control shareholder have over board selection and retention when you see something like this. I would favor an immediate shareholder vote on retention, at the firm's expense and with detailed information, whenever a special board subcommittee announced findings of board inattention or whenever board members pay to settle a shareholder suit. Companies ought to include such a procedure in their bylaws; a federal rule should not be needed. Something, anything is better than this system of board retention.
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