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The Fish Rots from the Head

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The Fish Rots from the Head

The Crisis in Our Boardrooms: Developing the Crucial Skills of the Competent Director

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Corporate scandals result when missing-in-action boards uncritically back celebrity CEOs or manage instead of lead.

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Recommendation

Is corporate governance in crisis? Look no further than the front page of your newspaper. You'll see a plethora of grubby stories concerning greedy CEOs, negligent boards, irate shareholders, downsized employees, cheated pension holders and ripped-off customers. Meanwhile, government regulators sharpen their claws and get ready to pounce. The public has become increasingly angry and cynical about corporate ethics, as the "perp walks" of pinstriped malefactors have become a nightly TV spectacle. Since it is directors who should ensure corporate accountability, transparency and probity – virtues sadly lacking in many boardrooms – directors are catching the heat. Bob Garratt insists that to clean things up, you must begin at the top. His insightful book details why boards have deteriorated and how they can improve. The title, a Chinese proverb, is an apt metaphor for the malodorous results of the governance mess. getAbstract recommends Garratt's informed exposé to corporate executives and board members who seek a thoughtful prescription for meaningful change.

Summary

The Board Member's Four Dilemmas

Serving on a corporate board is difficult because board members confront four sets of contradictory expectations:

  1. The board must exercise both prudence and entrepreneurial flair.
  2. The board must possess a detailed understanding of the organization in the present while maintaining the distance necessary to adopt a long-range view.
  3. The board must react to short-term needs while at the same time identifying broad emerging trends.
  4. The board must increase profits while also taking responsibility for such non-balance-sheet issues as employee satisfaction, governmental and legislative pressures and initiatives, and social needs.

From these four different dilemmas arise directors' four primary tasks:

  1. Formulating policy.
  2. Thinking strategically.
  3. Supervising management.
  4. Ensuring accountability.

Directors have faced these four dilemmas and responsibilities since boards first existed. However, new corporate dynamics – in particular, the rise of the celebrity CEO – have made directors' jobs even more challenging.

"Absolute Power Corrupts Absolutely...

About the Author

Bob Garratt is the chairman of a London-based firm that assists companies to develop professional and effective boards. He is also a professor of corporate governance at London University.

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