Yale Dean Suggests New Debate On How to Fix Corporate Boards | AccountingWEB

Yale Dean Suggests New Debate On How to Fix Corporate Boards

One voice is missing from the mix of regulators, attorneys, shareholder activists and business leaders who are trying to fix corporate boards — psychologists.

Jeffrey Sonnenfeld, associate dean at the Yale School of Management, suggests in Forbes.com that psychologists could add information about the "litany of pathologies" on corporate boards, which he lists as "groupthink, bystander apathy, diffusion of responsibility, inconsistent incentives, obedience to authority, atrophy and the like."

Sonnenfeld says that now is the time to move the governance debate away from new procedures and checklists and toward "intelligent thinking about people and their character." With this in mind, he offers advice on selecting directors:

  • Seek knowledge, not names. Corporations have hidden behind the impressive, marquee names of their board members, rather than seeking directors who are knowledgeable in their field.

  • Pay more attention to character than independence. While the push for supermajorities of independent directors gains steam, Sonnenfeld says "independent-mindedness is not the same thing as independence." Directors who know the business can prevent the chief executive from being the board’s sole source of inside knowledge.

  • Purge those with commercial or social agendas. Major conflicts are often political and personal, not financial.

  • Find people with a passion for the business. Overlook people who seek board posts for the vanity and power, but are indifferent about the company they want to oversee, Sonnenfeld says.

  • Avoid joiners. The Corporate Library estimates that a single board post requires 15 to 20 days a year of preparation and meetings. People who collect board memberships like trophies are spread too thin.

  • Beware false recipes by governance consultants. It’s now fashionable, Sonnenfeld says, to avoid directors who worked with troubled firms or those who are past retirement age. Some businesses are wisely seeking energetic older leaders to sit on their boards.
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