Tribalism on the Board

Whether boards of directors are responsible to shareholders or not can be debated. More clear, is director responsibility to the best interests of the corporation. When bad decisions are made, or lead to negative consequences, we all understand that nobody is perfect, but we hold boards to a high standard. This is fair because, in theory, an assemblage of smart people decreases the likelihood of poor choices.

In this spirit, directors of public companies should have their voting records made available to the public or at least to registered shareholders on issues of substance like executive and director compensation, mergers and acquisitions, non-standard accounting practices and anything else that might be considered worthy of shareholder note. Perhaps any item that requires a note to the financial statements could be included. If shareholders are to select board members, we must be given the tools to assess and evaluate directors effectively.

That governance is lacking in boardrooms is obvious. The current financial crisis is a direct result of U.S., UK, and European bank boards who did not understand the most important duty they have; the safeguarding of their corporations. Directors may argue that their voting records should be kept secret either because board solidarity is important (hogwash) or that the CEO may be constrained by such disclosure (also hogwash). As shareholders, we hope that dissent and discussion will keep management's feet to the fire and forge the right balance between short term needs and long term goals. If we don't see evidence of this discussion, how can we properly vote for a slate of directors based only on reputation. Boards continue to rely too much on the old boys network.

Tribalism is no excuse for bad governance.