Tuesday, December 09, 2008

Holding CEOs Accountable - WSJ.com

Jonathan Macey has a great piece in the WSJ on the problems with many boards.

Holding CEOs Accountable - WSJ.com:
"As board tenure lengthens, it becomes increasingly less likely that boards will remain independent of the managers they are charged with monitoring. The capture problem is exacerbated by the incentives of managers to develop close personal ties with directors."
Sounds a lot like behavioral finance! Not willing to admit mistakes etc. One more look:
"Once an opinion, such as the opinion that a CEO is doing a good job, becomes ingrained in the minds of a board of directors, the possibility of altering those beliefs decreases substantially. All too often, it is only when an outsider takes an objective look does anybody realize the obvious: That the directors of a company are generally the last people to recognize management failure"
It is refreshing that Macey, like in his book "Corporate Governance: Promises Kept, Promises Broken", comes out for a market (and not a regulation) solution.
"We need to encourage market solutions -- not bureaucratic ones -- as the best strategy for addressing the corporate governance failures we face today. Hedge funds and activist investors like Carl Icahn are the solution, not the problem."

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