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Why Bad Directors Aren't Thrown Out 205

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."
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Why Bad Directors Aren't Thrown Out

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  • by Anonymous Coward on Saturday March 30, 2013 @02:04PM (#43319331)

    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.

  • Nokia CEO ? (Score:5, Insightful)

    by jcdr ( 178250 ) on Saturday March 30, 2013 @02:12PM (#43319373)

    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 ?

  • oh oh oh i know (Score:5, Insightful)

    by Anonymous Coward on Saturday March 30, 2013 @02:19PM (#43319393)

    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.

  • Ruling class (Score:5, Insightful)

    by rsilvergun ( 571051 ) on Saturday March 30, 2013 @02:24PM (#43319419)
    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).
  • Re:uhhh... (Score:3, Insightful)

    by nametaken ( 610866 ) on Saturday March 30, 2013 @02:32PM (#43319473)

    You should read the article, because it doesn't resemble how the US political system works at all. If it did, these feckless board members would be removed all the time.

  • The Big Lie (Score:5, Insightful)

    by benjfowler ( 239527 ) on Saturday March 30, 2013 @02:43PM (#43319527)

    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.

  • Re:The Big Lie (Score:2, Insightful)

    by Anonymous Coward on Saturday March 30, 2013 @03:03PM (#43319591)

    You got it!

    I'm about 4 years out of college with my first real company. I founded it and it's doing great so... I probably am fighting my own future interests here although I totally agree. I have employees who are being paid crap wages. I'm doing well because I understand the market, am willing to take risks, and exploiting my employees.

    In my defense at least some of them aren't worth what I pay them. However I do have at least one person who should be making $60 USD / hour whose making $15 USD / hour. Another employee I started out at $8 and is now at $8.50. If he was smart he would go out and get paid $60-100 / hour. He sucks but it doesn't take a rocket scientist to exploit other people. He only needs to go through the right motions 80% of the time.

  • Re:This is news? (Score:5, Insightful)

    by davester666 ( 731373 ) on Saturday March 30, 2013 @03:04PM (#43319593) Journal

    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'.

  • by benjfowler ( 239527 ) on Saturday March 30, 2013 @03:22PM (#43319681)

    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.

  • Re:The Big Lie (Score:4, Insightful)

    by Anonymous Coward on Saturday March 30, 2013 @03:37PM (#43319763)

    A million dollars really doesn't mean what it used to. Note the GP's chosen word; BILLIONAIRES. A millionaire is arguably just upper-middle-class due to inflation and other economic effects, particularly if you're talking about someone with low-seven-figures total net worth, depending on the part of the country you're in. If you invest well, over the course of a decent upper-middle-class type job, I could totally see lots of self-made millionaires at retirement age. This doesn't mean the game isn't rigged for the upper-upper-class, as GP is arguing.

  • Re:uhhh... (Score:5, Insightful)

    by femtobyte ( 710429 ) on Saturday March 30, 2013 @04:47PM (#43320209)

    If boards worked like the US political system, there would be two distinct groups of board members: about half wearing neckties, and the other half wearing bow-ties.

    Every few years, people would say "those folks wearing bow-ties are completely screwing everything up. Let's kick them out, and replace them with the necktie wearers."
    A few years later: "those folks wearing neckties are completely screwing everything up. Let's kick them out, and replace them with the bow-tie wearers."
    And so on...

    Meanwhile at the country club, the necktie and bow-tie wearers are enjoying scotch and cigars together, gently ribbing each other for wearing the wrong goofy neck-decorators.

  • Re:The Big Lie (Score:5, Insightful)

    by sjames ( 1099 ) on Saturday March 30, 2013 @04:51PM (#43320233) Homepage Journal

    Everyone loves a rags to riches story, so most of the 'big successes' will play that story up for all it's worth. They'd rather not admit that they went from moderately wealthy with connections to extremely wealthy. Dig deeper and you'll find their rags of childhood were made by Gucci most of the time.

  • by Rich0 ( 548339 ) on Saturday March 30, 2013 @10:08PM (#43321981) Homepage

    The other big injustice is that most people can't actually vote their shares at all.

    The average person puts their money in a mutual fund of some kind. Unless that fund is dedicated to a single stock, the fund manager will vote the shares. You can have enough money in the fund to own 1000 shares of every stock held by the fund, but you won't get to vote any of them. Oh, and the same goes for your pension, assuming you're lucky enough to still have one. Even though you earned the money by working, your employer will hold onto it, vote the shares it is invested in, and if you're really lucky they might even give you what you've earned when you retire. Then again, they might just declare bankruptcy and you can get in line.

    That's a big part of why the status quo prevails - almost all the votes are cast by institutions.

    Half the problems on Wall Street boil down to "other people's money."

The intelligence of any discussion diminishes with the square of the number of participants. -- Adam Walinsky