Corporate Governance

And now, some common sense from one of my heroes

By Nancy Rapoport

Here's what we're not realizing: there probably were some procedures in place for homeland security folks to use to keep Umar Farouk Abdulmutallab from getting on that plane to Detroit. I don't know if the procedures were the best ones we could have developed, but I'm going to guess that if (1) someone's own parents call and say, "watch out for our son," and (2) that son is already on a watch list, and (3) he checks in for a flight with no luggage and pays cash for his ticket, there were probably some procedures that could've kept Abdulmutallab off that plane. So what happened?

Procedures don't matter one whit if the incentives for following them (or the incentives for violating them) don't work. Whether it's travel security or corporate governance, all of the regulations in the world are worth less than the paper they're printed on if the people who have to execute them, day-to-day, have no accountability for performing them correctly.

That's why--and no, this is not a non-sequitur--I'm so pleased that Morgan Stanley's going to include clawbacks in the salary provisions for its top executives (see here). Clawbacks = accountability, at least if they're carefully applied.

So all of those idiotic new rules for airline travel, which aren't even designed cleverly enough to catch Abdulmutallab's plot,* mean exactly zero, compared to the incentives for the people creating no-fly lists, the people issuing or revoking visas, and the people working at TSA. Figure out the right incentives, while paying attention to the way that people make basic cognitive mistakes, and you might get some results. It's the people, not the regulations, that matter most.

*Let's see . . . . Nothing on our laps for the last hour of a flight, because terrorists never ignite bombs earlier? Check. No accessing carry-ons for the last hour, because terrorists never plan ahead? Check. No asking the type of security questions that, say, the Israelis ask before someone's cleared to fly? Check. Paying zero attention to behavior and plenty of attention to silly rules? Check. Yep. We're safe now.

Full post as published by Nancy Rapoport's Blogspot on December 29, 2009 (boomark / email).