Corporate Governance

Bear Stearns and the Board of Directors

By J. Robert Brown

We have already raised the question about the role of the board in the Bear Stearns debacle.  We pointed out that many of the directors had served together for over a decade, suggesting the likelihood of a high level of deference in overseeing the actions of executive management.  We also noted that the directors were well paid and, in 2006, attended only six meetings.

An article inFinancial Week pointed out that a number of the directors also served on multiple boards (three directors serving on four different boards).  In other words, their attention was split in many directions, suggesting limited time for Bear Stearns.  

None of these observations even hint at a violation of state fiduciary obligations.  Under the minimal standards set down by the Delaware courts, directors don't have to do very much.  To the extent that pressure builds to limit the number of other boards, to require a minimum number of meetings, or to limit the tenure of directors, reforms will not come from the state courts.  It will have to come either from the federal government or the stock exchanges. 

Full post as published by The Race to the Bottom on April 04, 2008 (boomark / email).