Why Corporate Boards Seldom Do Their Jobs Well

Directors largely responsible for missteps, but keep their jobs

By Wesley Oliver, Newser Staff

Posted May 28, 2009 2:42 AM CDT

(Newser) – Recent shareholder meetings at Citigroup and the Bank of America devolved into morality plays—wronged shareholders berated executives, executives apologetically vowed to improve—with a rather curious epilogue: every member of the board of directors was reelected. The reason is that corporate boards are often filled with under-informed, over-paid yes-men who rarely pay any consequences for bungles, James Surowiecki explains in the New Yorker.

Reform that includes new regulations, more independent directors, and greater diversity hasn’t helped. Shareholders have little say in director nominations, independent directors sometimes lack experience, and too often celebrity dominates (Tommy Franks is a BofA director). Worse, board members are part-time employees. “If the last few years have shown anything, it’s that protecting shareholder interests is a full-time job," notes Surowiecki.

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In the apportioning of blame for the financial crisis, corporate boards of directors have remained remarkably unscathed. (Shutter Stock)

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Directors are paid both too much and, paradoxically, not enough: too much in that a directorship is often a cushy gig; not enough in that their compensation isn’t sufficient for them to be hurt if the company flounders.
- James Surowiecki, the New Yorker

Changing the way boards look matters less than changing the way they act. - James Surowiecki, the New Yorker

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Why Corporate Boards Seldom Do Their Jobs Well