Why Boards Shouldn’t Be Stuffed With CEOs

Adam Piore has an interesting look

at corporate boards today. Two factoids jumped out at me:

About 71 percent of S&P 500 companies rank “active C.E.O.”

as the most important qualification for membership on their boards, according

to a recent survey by Spencer Stuart. The reason for populating a boardroom

with the chief executives of other companies is obvious: Companies want their

sitting C.E.O. to be judged by a roomful of peers who understand the day-to-day

challenges of the job…

Last year, the amount of hours the average corporate director put in was

about 206 hours, up from a little more than 100 or 150 prior to Sarbanes-Oxley,

according to Doreen Kelly Ruyak, executive director of National Association

of Corporate Directors.

Excuse my cynicism, but the reason for populating a boardroom with the chief

executives of other companies is obvious: the board-membership racket is a massive

game of you-scratch-my-back which leads to ridiculously overinflated executive


And I have no idea where Doreen Kelly Ruyak is getting her numbers from, but

if they’re true, all they show is that Sarbox might actually have been effective

in terms of getting directors to do their job, rather than simply rubber-stamping

executive decisions. (All in favor? Aye!)

In any case, it seems to be harder to find CEOs to sit on corporate boards

these days. Good! Maybe they can be replaced with – and I know this might

be shocking to some – shareholders? After all, an involved, major

shareholder will already be spending a lot more than 200 hours a year examining

how his investment is performing – so sitting on the board will involve

much less marginal extra work. And a shareholder is generally much less likely

to rubber-stamp executive decisions than is a fellow executive who’s overly

concerned about "the day-to-day challenges" of the CEO.

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