When I read the following excerpt of Michael Fertik’s post Elizabeth Holmes and the Burden of (Social) Proof, the name Conrad Black immediately came to mind:
“Holmes did what many entrepreneurs do, often with positive effect: brought together smart, known people to build the board and leadership team. She surrounded herself with an original board configuration guaranteed to lend gravitas and surface-level credibility to the company, including former Secretaries of State Henry Kissinger and George Schultz, and former CDC director William Foege.”
Why do we constantly buy into names and images as opposed to facts and doing our own homework?
Note the following excerpt re Black’s board, and who’s name was also listed as a director:
Indeed, the roster of independent directors reads like the politically plugged-in guest list at an American Enterprise Institute dinner—not the managerial crowd you’d find at a Business Roundtable function. There’s former Secretary of StateHenry Kissinger (a director since 1996), who would seem to have little insight into the business challenges facing a newspaper company—think newsprint prices, union contracts, the impact of the digital era on newspapers. (Strategic bombing of media competitors, after all, is typically not an option.) He evidently agreed: While the Board met four times in 2002, the proxy notes that “Mr. Kissinger did not attend 75% or more of the aggregate of the total number of meetings of the Board of Directors and the total number of meetings of the committees on which such director served.” In other words, in exchange for his $35,000 director’s fee,Kissinger attended at most one meeting—and possibly none.
Of course we all know what happened with Black’s Hollinger International empire. If you have forgotten or are perhaps too young to remember, you can read about Black and his fall from grace on Wikipedia; https://en.wikipedia.org/wiki/Conrad_Black
Sadly, and like Larry King – who has done late night infomercials for everything from BreathGemz Breath Fresheners to Omega XL Fish Oil Pills – the latter within the context of a legitimate news interview – many are simply selling their names and associated creditability.
Celebrity boards do not bring any real expertise or creditability to a corporation and its products or services. At least we should not automatically assume that they do.
We have to become more scrutinizing as investors and consumers, otherwise scandals such as Hollinger and Theranos will continue to prove the old adage that if we don’t learn from history, we are doomed to repeat it!
Not Everyone In Procurement Agrees With Me . . .
Vivek Sood, who is an Investor, Managing Director – Global Supply Chain Group, Keynote Speaker – “Mr Supply Chain” and Awarded Author, did not necessarily agree with my above assessment.
In a comment Mr. Sood shared on my original LinkedIn post, he said the following: “Why blame the board for management failures?”
“It is, and I quote one of a myriad of sources, “the role of the board of directors to hire the CEO or general manager of the business and assess the overall direction and strategy of the business.”
Furthermore, and quoting yet again another source, “the board is directly responsible for protecting and managing shareholders’ interests in the company.” In short Vivek, being a member of a board – a real board – carries with it a great deal of responsibility beyond being a showcase of famous names.”
In making the above statement, I believe that boards are not there to serve the wishes of the CEO, but to hold them accountable.
While Theranos is an extreme example of a board’s failure to live up to its fiduciary responsibility, I fear that this scenario is far more common than we would like to think or believe.
What is your take?
What role do you believe a Board of Directors should play in overseeing the best interests of a company and its shareholders?
Check out my other posts on Theranos here: https://procureinsights.wordpress.com/theranos-and-procurement/