Tuesday, December 07, 2004

McKinsey Quarterly Interview on Corporate Governance

What a GREAT article! It is a McKinsey Quarterly Interview with Jack Creighton.

Yes, it is an interview and not based on a large database of firms, but that said, it is still EXCELLENT!

Some of the highlights:

"I'd require companies to have two different individuals playing the CEO and board chair roles. To put it simply, this is a question of internal control. You don't have the same person writing the checks and processing accounts payable. We have checks and balances in the accounting department; why don't we have them at the executive level?

Business is also becoming more complicated and, as a result of Sarbanes-Oxley, more regulated. There is enough "CEO work" for a CEO to give up the chairman's role. Or to put it differently, I think those two roles, in a company of significant size, require more time than one person can supply."

The Quarterly: How else might a CEO benefit from having an independent chairman?
Jack Creighton: .... I really believe that some CEOs we've seen get the ax would not have been let go if there had been an independent chair to counsel that CEO, to pass on the board's negative thoughts and discussions in a nonaggressive, noncombative way. The chairperson could say, "You know, the board is concerned. I'm starting to see some groundswell here, and you need to take action."

"One thing you don't want is to have management begin thinking that the chairman is running the company. Officers and employees need to understand clearly that the nonexecutive chair functions primarily as a resource for the CEO, the board, and the company."

EXCELLENT STUFF!!! It is a fast, easy, and informative read! I highly recommend reading it!!

BTW If you do not subscribe to McKinsey Quarterly, you should! It is free and just a tremendous resource.

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