Corporate Governance

The following is a metaphor I use. While it is slightly facetious, there is much truth to it. But keep in mind, there are many CEOs, even some I have sparred with, that are exceptions. Often, their companies are undervalued not necessarily because of them but because there are restructuring opportunities that their boards stand in the way of. CEOs that I have interacted with like Dick Parsons from Time Warner, Jim Kinnear from Texaco, David Roderick from U.S. Steel, Bob Rossiter from Lear, and Bill Fatt from Fairmont among others ? do not fit the following metaphor. But unfortunately, there are too many CEOs in this country that the following does pertain to.

Anti Darwinian Metaphor

The way CEOs become CEOs in America is a travesty. This is one of our major problems. I use the anti - Darwinian metaphor. The survival of the unfittest.

If you remember if you were in college the fraternity president was always there for you. When you had nothing to do or when you were a little depressed. Feeling down. You go to the club and the fraternity president would always be there. You wondered when he had time to study which he probably didn?t do very much of in school. He was there to sympathize with you if your girlfriend didn?t show up or didn?t call you back and you obviously sort of liked the guy because the fraternity president was usually a likeable guy.

When the elections came up you would always vote for him. He had a couple qualities - the fraternity president. Politically, he was a survivor and he never made many waves. He did not promote controversy. Therefore when he went out into corporate America he was able to move up the ladder fairly quickly. Remember he survived, he didn?t make waves, and he wasn?t a threat. He kept moving up and up.

Eventually he becomes the assistant to the CEO. The CEO had the same qualities. He?s a survivor. He?d never employ anyone underneath him who might be a threat. The boards like these guys? this type of CEO. The boards generally don?t own any stock (another problem with our system). The boards don?t really care to hold CEOs accountable. Remember it?s a symbiotic relationship. These guys pay the boards very well ? they give the boards perks. The boards don?t care to hold them accountable because that might endanger the perks they love so much.

When the CEO retires the assistant becomes the CEO. And remember what I told you. He?s a survivor. He would never have anyone underneath him as his assistant that?s brighter than he is because that might constitute a threat. So therefore, with many exceptions, we have CEOs becoming dumber and dumber and dumber. We can all see where this is going. It would almost be funny if it wasn?t such a threat to our ability to compete and to our economy in general.