Last Updated Mar 25, 2008 12:09 PM EDT
There's been a long-running debate among shareholder activists and corporate leaders whether "good governance" equals "good business," or merely consists of checking off the boxes of items that do-gooders insist upon. I must admit that I've been skeptical that good governance necessarily results in strong business results.
But in these cases, it's clear that failures at the top resulted in these businesses collapsing. Consider:
- Angelo Mozilo created a captive board that was his complete lapdog. At the height, directors were making $400,000 a year in fees and had the privilege of securing Countrywide mortgages for their pals, often within 24 hours. They were flying high. As a result, they never challenged what appears now to be a systematic pattern of shady practices. They were sleepwalking.
- At Bear, CEO James Cayne was off on the golf course at the very moment that his firm was loading up on some of the most exotic financial instruments ever created. It was the moral equivalent of building a toxic waste dump and then disappearing to Hawaii for a month--OF COURSE, something bad was going to happen. Why didn't Bear's board and upper management fix the Jimmy Cayne problem? I haven't seen a compelling answer to that question.
What do you think?