The Trouble with Directors
  • Publication Date:
    July 2011

The great irony is that where stellar performance by independent directors is most needed, it is least likely to happen and where great performance is least needed, it is most likely to happen. Essentially, board governance works like a driver’s-education course. Careful, dutiful new drivers take driver’s-ed courses. Impulsive, bad new drivers don’t, and so never improve. This is what economists call an adverse selection bias. Circumstances cause exactly the wrong drivers to select the option of taking a driver’s-education course. If we accept that boards exist to protect shareholders, then exactly the wrong companies have great, functioning boards.

The Conference Board Review (4 pgs)
Members: Sign in to see if this product is complimentary with your membership.
Non-members: Not available
(Email us to learn more about membership