Governance Issues in Corporations

Speaker A I would say that the requisite is a wonderful theory and a wonderful framework, et cetera. But there are also forces that can blow it up. And the force that I find is most easy to blow it up is power. People who actually can blow it up will blow it up if it doesn't suit their purposes. So you have to be careful in how you do so. Ownership is power, hence it depends on the level of ownership, requisite level of ownership, what kind of troubles you'll have in trying to solve your issues. If the owner is really a level four, having all the power, there's going to be a time when he says I don't want that guy around because he's doing things I don't understand and this is the way you got to do this, and those kind of things. So that's where a lot of the things comes. Now then you have a board, which an owner might have, a board that he has assembled over the years, that might have some people that are quite capable and interesting to kind of do this. But in the end, a lot of people might not have the courage to implement what they think is right when they have an allegiance and a loyalty to the other part. So I have found boards generally are a historical accumulation of favors. I'm not sure that everybody wants people on the board because of their competence and because they might not be controllable. Some boards that are large public corporations have they look at recognition value of the names they have on it and a lot of those people might have a very good sense. But still there is the collegiality and maybe we'll give in on this and we can get that done and stuff like that. So the trade offs are there. So it's never that easy and straightforward to deal with that. So I would say on the ownership issue, there is a lot of exercise of power involved rather than the appropriate authority. And hence you do get interruptions in the flow that really shouldn't happen, but they do happen. It's more emotional than it is about getting the business in the right shape. So those things are part of the equation and you have to basically say, listen, I'm not the owner. In the end I'm managing and I think I can justify my managing part of it. But if it doesn't feed the ego of the owner in the right way, then maybe I'm dispensable. So that's just part of the capitalistic structure. There's nothing you can do about that. That's why governance is an interesting notion, because if it was requisitely applied, then people would have the capability of being on the boards, which is the one notion we don't get addressed on governance. And the governance is all about rules, compliance of rules that have nothing to do with the judgment necessary to be a good board member.