Robert C. Pozen proposed “A New Model for Corporate Boards†in a Wall Street Journal op-ed piece on December 30, 2010. Add to the dashboard school yet another feeble quantitative measure that promises to provide the glorious solution to the reality that most corporate boards don’t work.
Mr. Pozen, as so many others before him who have tried to address corporate governance weaknesses, misses the big picture on boards. Indeed, the big picture is precisely what weak boards fail to provide. For decades, consultants, academics, and activist groups have tried to put artificial numbers gauges and facile criteria for what an effective board looks like. For example, Enron was once hailed for its “strong” board. Corporate governance dashboards on directors’ ages, limits on years of service, size of the board, and now professional directors are all easily measurable but contraindicated when we look at failed companies and their boards.
The latest research indicates that the boards of failed companies are those that are comprised of directors who, while independent in the statutory sense, are conflicted by their philanthropic or personal interconnections. Mr. Pozen is correct with his advice on compensation — excessive compensation compromises director independence. However, Mr. Pozen’s proposal will lead us down another path of weakness.
You don’t need an expert in financial services (as Mr. Pozen suggests Citi lacked) to pick up the Wall Street Journal circa 2004-2006 and read up on Fannie, Freddie, and a looming crisis.  A person who follows business, as opposed to managers who are immersed in details, will be an effective sage. Likewise, you don’t need an expert in toys to sit on the board of Hasbro in order to understand that loading-dock shenanigans are being used to inflate sales. If you have business experience in any sector, you know to where and how to look for that flurry of activity at the end of the month, quarter, and year that points to declining sales and a nonsustainable attempt by management to keep the numbers up until the news is better.
What companies need in board members are a curious mind and a backbone: the ability to spot emerging micro and macro issues that affect the company and the guts to raise the questions about them at the board meeting.  Superficial measures for these two qualities do not exist. Happily, competent executives of all ages and who hail from all industries do indeed exist. They can provide the pairs of outside eyes and the big picture management needs to steady the course — therein is the secret to effective governance.
About mmjdiary
Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD.
The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards.
Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio.
She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News.
In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles.
Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
