The Hindu Business Line : When boardrooms bode doom...

WHAT are the values and qualities that directors must possess? How to develop an environment in the boardroom to encourage scepticism and serious discussion?

Is it possible for the CEO and the board to understand each other? To answer these questions, here is Paul P. Brountas's Boardroom Excellence, published by Jossey-Bass (www.josseybass.com).

The book provides "a commonsense perspective on corporate governance", and that may seem doubly anachronistic because commonsense is not that common, nor is corporate governance fashionable beyond mere talk about it.

But the foreword is by Paul S. Sarbanes, of SOX fame, so you can't ignore the book. "There is an urgent need for greater public understanding of just what caused the crisis in corporate governance, of the reforms that corporate management and directors must now adopt, and of the expanding opportunities for shareholders to make their views heard in the boardroom," he writes, stressing the timeliness of corporate governance discussion.

"Was it always this bad?" asks the author in chapter 1. He lists 20 troublesome factors concerning boardrooms that contributed to scandals.

These include lack of independence, tolerance to "a major shift in the balance of corporate power to the CEO", failure "to create and maintain an atmosphere of excellence in the boardroom", failure "to review the CEO's and other senior executives' performance critically", and so on.

If you see these things happening around you, don't dismiss them as a mere coincidence, because they may just be the warning signs of greater debacles to follow.

In chapter 2, the author talks about old-fashioned words such as `loyalty, care, good faith, and candour' as director's duties. Loyalty requires directors "to act in good faith" avoiding "any conflicting personal gain". Care requires a director to be informed. "It is the right, and the obligation, of every director to be informed." To ask for info and not to get the same is not care, please note. Candour requires directors to ensure that whatever info the company provides to shareholders is "materially complete and accurate".

Directors come in all shapes and sizes. Brountas gives a list of `the undesirables'! `The fast reader' comes `totally unprepared' for his task, because he begins studying the whole sheaf of board papers (sent to him days ago) only when the meeting is about to begin; he may end up wasting everybody else's time, asking questions about things that are there in the bundle. `The endearing friend' is `the CEO's sycophantic former college roommate' and never crosses swords with the chief. `The sleeper' uses meeting time `to catch up on his sleep'; do you know how to wake him up? `The rapper' tends to dominate the board discussions and `has a view, opinion, or comment with respect to each matter discussed at the meeting'; perhaps, he has a louder voice too compared to the rest. `The Internet traveller' uses the meeting to power up his laptop, answer e-mail, surf the Net and check stock market quotes, apart from being busy on cell phone. `The know-it-all' has `the answer to every question and solution to every problem'; and you can never satisfy him.

Then comes a tricky question: "How does a director know when a corrupt CEO is lying to the board?" Know the answer from Brountas, so that you can nail the lie!

BooksOfAccount@TheHindu.co.in

More Stories on : Accountancy | Books | Books of Account

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Rabi prospects

World Development Report — An agenda for peace and prosperity

Demography and P&P sector — Age bomb, a trigger for outsourcing

First law of business is to know the law right

Out of mind to be out of `site'

No concept, only paper

When boardrooms bode doom...

More cess

Uphill task