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http://milwaukee.bizjournals.com/milwaukee/stories/2004/05/10/newscolumn1.html
In part (© 2004 American City Business Journals Inc.):
Disney critic calls for testing board members
Mark Kass
The phrase "independent board of directors" has become the rallying cry in the corporate world lately as a result of several high-profile corporate failures that were missed by boards. Those oversights cost stockholders millions of dollars and landed several corporate executives in court.
But to Stanley Gold, the word "qualified" needs to be added to the job descriptions for those board members. In fact, Gold, president of Shamrock Holdings Inc., a Los Angeles investment firm, suggests that each board member of a public company be required to pass "a reasonable proficiency test" before being appointed to a board. The test would ensure the board candidates could read and understand financial statements, balance sheets and business plans.
Gold is best known for his high-profile board fight with Walt Disney Co., Burbank, Calif. Gold and fellow dissident investor Roy Disney, nephew of founder Walt Disney, led a campaign at this year's Disney annual meeting to oust chairman and chief executive officer Michael Eisner. At the March 3 meeting, 45 percent of the ballots were withheld from Eisner's reelection to the board.
"If doctors, lawyers and taxi drivers need licenses certifying their competency, then directors certainly do, too," Gold said May 3 at the Society of Business Editors & Writers annual meeting in Fort Worth, Texas, which I attended. "I am shocked by the number of directors who can not read or understand the financial statements that senior management gives to them."
Having served on eight corporate boards, Gold said he is disturbed at the lack of financial knowledge of some of his fellow board members.
"It became clear to me that most of them were singularly ill-equipped to manage the oversight of their senior executive team and their strategic direction of the company," he said.
"They all suffered from a lack of financial alignment with shareholders, a lack of ability to understand complex financial statements, a lack of experience in the industry of the company on whose board they sit, or a lack of courage, or a least a willingness, to challenge senior management when necessary."
Supporting shareholders
A director's first duty is to the shareholders, not the chief executive officer, Gold said.
"Board members, who are often successful in their own right, acquiesce to management for fear of revealing their basic incompetence," he said.
"Too often, directors forgo their independence and common sense for collegiality. Is it any wonder that shareholders have suffered significant financial loss? Is it any wonder that we have witnessed massive disconnects between compensation and performance?"
Forcing potential board members to take a proficiency test will not end all corporate problems, said Sarah Peck, a Marquette University finance professor.
"A lot of folks on boards can understand statements and ask questions, but if the senior management is up to some dirty tricks, it is going to be well hidden and still get by them," she said.
"A better idea may be to allow independent directors to hire their own accounting firm to look at the management's financial statement. This would serve as good protection against any problems."
Gold also suggests that corporate board members be required to meet twice with the company's largest shareholders and also with the employees and customers to get a true reading on the company's performance.
In part (© 2004 American City Business Journals Inc.):
Disney critic calls for testing board members
Mark Kass
The phrase "independent board of directors" has become the rallying cry in the corporate world lately as a result of several high-profile corporate failures that were missed by boards. Those oversights cost stockholders millions of dollars and landed several corporate executives in court.
But to Stanley Gold, the word "qualified" needs to be added to the job descriptions for those board members. In fact, Gold, president of Shamrock Holdings Inc., a Los Angeles investment firm, suggests that each board member of a public company be required to pass "a reasonable proficiency test" before being appointed to a board. The test would ensure the board candidates could read and understand financial statements, balance sheets and business plans.
Gold is best known for his high-profile board fight with Walt Disney Co., Burbank, Calif. Gold and fellow dissident investor Roy Disney, nephew of founder Walt Disney, led a campaign at this year's Disney annual meeting to oust chairman and chief executive officer Michael Eisner. At the March 3 meeting, 45 percent of the ballots were withheld from Eisner's reelection to the board.
"If doctors, lawyers and taxi drivers need licenses certifying their competency, then directors certainly do, too," Gold said May 3 at the Society of Business Editors & Writers annual meeting in Fort Worth, Texas, which I attended. "I am shocked by the number of directors who can not read or understand the financial statements that senior management gives to them."
Having served on eight corporate boards, Gold said he is disturbed at the lack of financial knowledge of some of his fellow board members.
"It became clear to me that most of them were singularly ill-equipped to manage the oversight of their senior executive team and their strategic direction of the company," he said.
"They all suffered from a lack of financial alignment with shareholders, a lack of ability to understand complex financial statements, a lack of experience in the industry of the company on whose board they sit, or a lack of courage, or a least a willingness, to challenge senior management when necessary."
Supporting shareholders
A director's first duty is to the shareholders, not the chief executive officer, Gold said.
"Board members, who are often successful in their own right, acquiesce to management for fear of revealing their basic incompetence," he said.
"Too often, directors forgo their independence and common sense for collegiality. Is it any wonder that shareholders have suffered significant financial loss? Is it any wonder that we have witnessed massive disconnects between compensation and performance?"
Forcing potential board members to take a proficiency test will not end all corporate problems, said Sarah Peck, a Marquette University finance professor.
"A lot of folks on boards can understand statements and ask questions, but if the senior management is up to some dirty tricks, it is going to be well hidden and still get by them," she said.
"A better idea may be to allow independent directors to hire their own accounting firm to look at the management's financial statement. This would serve as good protection against any problems."
Gold also suggests that corporate board members be required to meet twice with the company's largest shareholders and also with the employees and customers to get a true reading on the company's performance.
