What Do You Think?

In the last two decades of my professional career we have had three recessions, one depression (current), one oil crisis, one oil disaster, a slew of natural disasters from Katrina to the Asian tsunami to multiple earthquakes, the fall of the Soviet Union, an internet boom (and bust), a real estate boom (and bust), two Wall Street crisis of confidence, 9-11, three major wars, a new Pope and the third impeachment of a US President in history. Throughout these events we have scrutinized many things about our global system of commerce, but one area has not come under much scrutiny... 


We have had government regulation in Sarbanes-Oxley, the Financial Reform Bill, government bailouts and a US Healthcare Bill that no one understands but is surely destined to bankrupt the richest country in world history (thats math, not opinion). We have had the emergence of China, India and Brazil as economic super powers, and the transformation of the US economy to a service economy thanks partly to globalization and the rise of the aforementioned nations. We have witnessed the creation of Dell, Google, Facebook, Amazon, eBay, Paypal and Alibaba. We have witnessed the rebirth of Apple, HP and IBM. Yet one area of our system has remained under the radar...


We have seen the creation of the Euro currency. We have seen gold prices rise from an average of $381 in 1989 to over $1,100 in 2009. We have seen the price of a cup of coffee go from 0.40 cents in 1990 to $2.87 in 2010. We have the iPod, the iPhone, Android, iPad, mp3s, on demand, DVDs, DVRs, Blu-ray, Google Earth, IMax and now 3D.


We have seen the rise of the Internet, bringing the world closer together and streamlining communication to the point of transparency never before thought possible. We have moved firmly from a connected world to a wireless world that allows access to more information from anywhere in the world, enabling people all over the world, regardless of geography, time zone, race, color or creed. We have created industries and economies fueled by technology and the internet. We have arguably accomplished more in 20 years than humans ever achieved in the past. Throughout all this development one area of our system that has been at the center of all this evolution has been virtually invisible...


What I am talking about is the role of the Board of Directors. In the wake of ex-HP CEO Mark Hurd's exit there have been a lot of articles and focus on what the CEO may or may not have done that got him axed - and make no mistake, you can call it a resignation but he was left no option but to exit stage left. However, I am more interested in the role of the HP Board, and Board of Directors in general. In my opinion the lesson of the recent HP chapter is not so much the role of Mark Hurd but the role of the HP Board. Where is the scrutiny of the Board? Where was the scrutiny of the Boards of Washington Mutual, Lehman Brothers, WorldCom, Enron, Tyco, Bernard L. Madoff Investment Securities LLC and BP? I don't recall any focus on the failures or accomplishments of these Boards when individuals were being paraded through the media and the courts.


What is a Board of Directors anyway? According to Wikipedia a board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. The body sometimes has a different name, such as board of trustees, board of governors, board of managers, or executive board. It is often simply referred to as "the board."


A board's activities are determined by the powers, duties, and responsibilities delegated to it or conferred on it by an authority outside itself. These matters are typically detailed in the organization's bylaws. The bylaws commonly also specify the number of members of the board, how they are to be chosen, and when they are to meet. 


In an organization with voting members, e.g., a professional society, the board acts on behalf of, and is subordinate to, the organization's full assembly, which usually chooses the members of the board. In a stock corporation, the board is elected by the stockholders and is the highest authority in the management of the corporation. In a non-stock corporation with no general voting membership, e.g., a university, the board is the supreme governing body of the institution. 


This means the board is responsible for governing the organization by establishing broad policies and objectives, selecting, appointing, supporting and reviewing the performance of the chief executive, ensuring the availability of adequate financial resources, approving annual budgets and accounting to the stakeholders for the organization's performance. While the legal responsibilities of boards and board members vary with the nature of the organization, and with the jurisdiction within which it operates, make no mistake the board has the decision-making authority, voting authority, and specific responsibilities which in each case is separate and distinct from the authority and responsibilities of owners and managers of the business entity. In short, the board is ultimately responsible.


Yet it is unclear to me what kind of accountability boards, and specifically, board members have. I have served on the board of a non-profit for the past two years and am fully aware of my personal obligations and responsibilities to the organization. It has been an incredible experience, but this is very different from serving on the board of a for-profit entity, especially one that has investors, shareholders, employees and customers. I am regularly approached to join the board or advisory board of smaller start-ups and organization and while extremely flattered I take the prospect very seriously. I turned down such a role recently because I did not have the confidence in the business and its management, and thus took a pass. 


What is the role of a board member? What qualifies someone to serve on a board of a company? We are told its not a 'job', but board members are both compensated and legally responsible for the success of the organizations they oversee. It is unclear to me how boards are assembled and function. It is not just a badge of honor to sit on such a board, it is a duty at the very top of our economic system, higher than CEOs and certainly higher than government officials. And this is not just an American thing, it is a global thing.


When I read about the HP board's decision to part ways with Mark Hurd I was both saddened and impressed. Mark Hurd is an incredible CEO and what he has accomplished both at HP and NCR, his former employer, are incredible. I was sad to see him go, especially under such concealed circumstances. The HP board must have had a very difficult decision to make, yet they made it in the interest of the HP shareholders, employees and customers. I am very impressed. This is how it is supposed to be. Which is why I ask what about the boards that have failed us in the past?


I would love to hear your thoughts about the role and responsibilities of boards. There is a lot missing on this subject in my humble opinion.