It's Not Just Yahoo: 5 Terrible Boards in Need of Fixing

Some think that Yahoo (YHOO) fired CEO Carol Bartz because big high tech company boards have run out of patience. But you might say that about companies in a lot of industries. BNY Mellon, Time Warner's magazine unit, Tim Hortons, and Standard & Poor's all recently dumped their chief executives.

Chucking the CEO is a normal reflex when companies are in trouble. That assumes the person at the top is responsible for corporate incompetence and idiocy. But that knee-jerk reaction too often skips over the board of directors. Sure, CEOs can suck, but a bad board is even worse: a disaster designed by committee. Here's our take on some of the worst boards in Corporate America today.

First up: Bank of America »

Bank of America
How many bail-outs can a company need? When you're Bank of America, the answer is always one more. The latest was a $5 billion investment by Warren Buffett -- a trifling amount, compared to how much the company sucked up from the government after the economic collapse that it helped to create.

But even now, no amount is enough for the incompetent management environment that the board has allowed to remain. The stock price premium that the Buffett dollars encouraged is already gone.

The great worry with BofA is liquidity -- does the company have enough cash to keep going? One big reason for this issue is that the board signed off on the purchase of Countrywide Financial, the mortgage lender that imploded along with the housing market. Still, the board couldn't refuse a bargain, even if it would, as my BNET colleague Constantine von Hoffman argues, become the worst business deal in history.

But it was an important step, because it got the company ready for its other big fiasco of purchasing Merrill Lynch, during which the company apparently lied to shareholders about the impending losses -- and didn't tell them, when proposing the deal, about $5.8 billion in executive bonuses. Yeah, it's so tough to believe. Or maybe the board of directors simply didn't know about any of these problems, which alone would be good reason to sack the lot.

Image: Flickr user Paul Lowry, CC 2.0.
Next: BP »

BP
To understand how broken the board culture and effectively is at BP, the only thing you should have to say is "Gulf of Mexico." The ecological, economic, and human disaster of the Deepwater Horizon oil spill was beyond comprehension. Even more stunning was the delayed and inept reaction of then-CEO Tony Hayward.

And yet, the company's board took even longer to understand the depth of the problem that it faced -- all because of BP's own cost cutting. But how could it, given BP's history of cutting corners, disregarding safety, endangering lives, and creating ecological disasters?

After all, BP led the botched cleanup attempts for the Exxon Valdez spill in Alaska. It was a BP refinery that exploded in Texas in 2005, killing 15 workers and injuring 170 others, because the company didn't take the steps necessary to ensure their safety. BP had to pay $25 million in fines because its pipelines in Alaska had two oil spills in 2006 due to "gross negligence."

Since 2005, BP had been responsible for 97 percent of the worst safety violations, according to OSHA records. The board shouldn't have been surprised that more of the same would continue. Or maybe it just didn't care, so long as the annual profits kept rolling in.

Next: Hewlett-Packard »

Hewlett-Packard
Few companies have had to replace CEOs as often as HP (HPQ). But then, few corporations have had boards with as long a dysfunctional history as that of HP.

For years, the company had been a kind of country club, one that never missed an opportunity to miss an opportunity. So the board hired Carly Fiorina as CEO. After she had made a mess of things, with revenue stalling even as Dell's accelerated and the stock price dropping by more than half, the board finally realized that something was wrong, sent her packing, and promoted Mark Hurd.

In the process, there were leaks of information to the press and board chair Patricia Dunn authorized spying on reporters and HP's own directors. She had to resign as a result.

Hurd turned the company around, but also single-handedly undermined HP's culture, wounded employee morale, and significantly set back innovation. The board never asked the hard questions that it should have -- until Hurd's sexual harassment scandal, as well as questions about financial proprietary. Another CEO out the door as the board thoroughly botched the process.

While the latest chief executive, Leo Apotheker, looks at major changes that are probably necessary for the company, he also spent time dodging process servers from Oracle (ORCL). Swapping a few directors was a feel-good exercise that did nothing to change the existing board culture.

Image: Flickr user John Pastor, CC 2.0.
Next: News Corp. »

News Corp.
News Corp.'s (NWS) board is like someone who buys drinks for an alcoholic. It enabled the excesses that are turning into scandals like the U.K. phone hacking.

But what else could you expect from a board that Rupert Murdoch has packed with loyalists that he can remove when he wants, because the Murdoch family has majority voting control.

Murdoch and his clan have treated the company as a personal financial playground for years. In fact, the only reason that GovernanceMetrics International, which rates board effectiveness, has consistently given News Corp.'s board an F is because there is no lower rating. Investors have given the pack of yes-men a pass since the company went public in 2004 because of the financial returns they saw.

Almost to prove the point, with all the scandals rocking the company, the board gave Rupert Murdoch a 46 percent raise in FY2011, so he made $33.3 million. James Murdoch decided to forgo a $6 million bonus because of all that bad PR -- but still kept an $11.9 million raise.

Image: Flickr user World Economic Forum, CC 2.0.
Next: Yahoo»

Yahoo
It takes a lot of chutzpah to walk away from a veritable mountain of dough for no compelling reason. But when someone offers a 62 percent premium for a lagging company and a board says no because it wants more, there's another word: stupid.

Yahoo's board, led by chairman Roy Bostock, did exactly that when Microsoft offered $44.6 billion for the company. "Oh, no, no, no," said the board, "Yahoo's worth so much more than that." So Microsoft waited and eventually got what it wanted through a deal that cost so little in comparison that Yahoo might as well have given it away.

You could almost understand that posture if someone at the company could really unlock that extra value the board believed in so hard. But if such a person existed, it wasn't on the board, whose strategic idea was to make Yahoo a series of starting points on the Web, which ignored that consumers used Internet services but had largely moved past portal concepts -- even if Yahoo hadn't.

Then the directors hired Bartz, made her the most overpaid CEO in the S&P 500, and let the company sag for 31 months before finally jettisoning her -- but only after a lot of the company's more talented people had already left, looking for someplace safe to work.

Image: Flickr user gaku, CC 2.0.
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