News Corp got Andrew Dominguez and Eben Esterhuizen to thinking about why boards fail. They came up with the following:
- No Repercussions: Shareholder lawsuits don’t pose much of a threat to an incompetent board. Most U.S. companies incorporate in Delaware, where state laws exempt board members from financial liability for their actions.
- Poor Data: Some boards receive too little or too much information – or just plain bad information. This often occurs when a company’s management is trying to manipulate the board.
- Lack Of Time: It’s actually quite common for members to sit on the boards of several companies–which means they don’t have the time to properly fulfill their fiduciary duties.
- Lack Of Expertise: Board members don’t always have the same level of expertise as management, especially in highly specialized industries, making effective government all but impossible.
- Dual CEO / Chairman Role: It’s actually quite common for CEOs to act as the chairmen of their boards–but this gross imbalance of power also puts the company at risk.
With a little help from the MSCI RiskMetrics Group, they arrive at the following list of S&P 500 companies with top-ranked corporate boards in addition to positive audit, compensation, and shareholder rights metrics.
- Exxon Mobil Corporation (XOM).
- Apple Inc. (AAPL).
- Microsoft Corporation (MSFT).
- International Business Machines Corp. (IBM).
- Chevron Corp. (CVX).
- General Electric Co. (GE).
- Wal-Mart Stores Inc. (WMT).
- Johnson & Johnson (JNJ).
- AT&T, Inc. (T).
- Procter & Gamble Co. (PG).
Board Risk: List of Companies With Low Corporate Governance Risk, Business Insider, 7/27/2011. Compare with 14 Rallying Large Caps With Low Corporate Governance Risk, Seeking Alpha, 7/29/2011 also based on RiskMetrics Group data.
- Apple Inc. (AAPL).
- Microsoft Corporation (MSFT).
- International Business Machines Corp. (IBM).
- The Coca-Cola Company (KO).
- Philip Morris International, Inc. (PM).
- Schlumberger Limited (SLB).
- Intel Corporation (INTC).
- Amazon.com Inc. (AMZN).
- Starbucks Corporation (SBUX).
- Public Storage (PSA).
- General Growth Properties Inc. (GGP).
- El Paso Corp. (EP).
- Symantec Corporation (SYMC).
- Nordstrom Inc. (JWN).
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