There should be more discussion about corporate directorships, something that ultimately affects how companies function and, in turn, our economic welfare. Also, the workings of a corporate board should be changed and the appointment process to boards should be re-examined.
With few exceptions, directorships are assigned by the company’s chief executive officer. That person may decide to appoint a friend or select someone who in turn will reciprocate by appointing him to the board of his own company, of which he probably is the president. That kind of “incestuous” relationship is all too common. Certainly, interlocking directorships should be curtailed. There is no reason for an individual to serve on a multiplicity of boards, which take time and effort to perform satisfactorily.
Then too, some companies want to curry favour with a political party. Therefore, a former cabinet official or even the party leader, upon retirement is appointed to a board. Witness the naming of former Ontario Premier Mike Harris to Magna’s Board.
Barrick Corporation, the world’s largest gold mining company, appointed former Prime Minister Brian Mulroney to its board. This columnist voiced strenuous objections, but was told that despite his questionable personal background, he could “open doors” for the company because of his prestige. The fact that he had no specific mining or engineering talent was ignored.
Automobile companies in the United States appoint well-known individuals to their boards, such as the former governor of Michigan. A directorship there is very rewarding financially as each director receives a new car annually.
The boards of our chartered banks are littered with designations of individuals whose qualifications are hard to ascertain. Board memberships should not be a sinecure. Most board members do not do their homework, so they come to board meetings merely to rubber stamp the plans of the incumbent corporate officer. It was stated that Hilary Clinton, the wife of U.S. President Clinton, was a director of both the Legal Services Corporation and Walmart Corporation, was the only director who read the material required for board meetings. No wonder outlandish salaries are easily approved. Also, directors, generally ignore proposals put forth at annual meetings by the shareholders who are not employed by the company.
According to David Milstead of The Globe Mail, “There’s an inherent docility in North American boardrooms. (Typically) board members have reached a certain level of social standing.”
There should be more union input in corporate affairs. In Germany companies require more union involvement in management affairs. If reforms were put in place in picking directors, such as unions or dissident shareholders, abuses would be reduced. Corporation and the overall economy would be the beneficiaries.