William A. Dimma,
Tougher Boards for Tougher Times: Corporate Governance in the Post-Enron Era
(John Wiley & Sons Canada, 2006)
William Cast, M.D.,
Going South: An Inside Look at Corruption and Greed, and the Power of the HealthSouth Message Board
(Dearborn Trade Publishing, 2005)
(John Wiley & Sons, 2006)
Pity the poor CEO or board member at a public company these days. Long gone are the good times when top executives could keep their perks — Gulfstream travel and swank apartments in New York or Paris, for example — largely secret from shareholders, regulators, and nosy journalists like me. Enron, WorldCom, Tyco, and a few lesser scandals changed all of that, and public companies now face stringent rules on disclosing both compensation and perks. Even companies that are famously unconcerned with public perception are suddenly going to great lengths to explain why perks like $1.8 million in security services for the CEO in 2006 (I’m not making this up) represent a legitimate business expense.
Of course, justifying questionable business expenses is really only a small part of the regulatory challenge facing many American companies. Several new books that explore subjects that loosely relate to corporate governance, or the lack thereof, demonstrate that Sarbanes-Oxley, the U.S. legislation passed in July 2002 and known as SOX, hasn’t entirely shut down the party. Compensation for some top executives seems to be approaching the stratosphere, and scandals, such as the options backdating issue, are hitting an expanding list of companies. And that’s really just the beginning. Nearly five years after SOX was signed, there is plenty of evidence that many corporate leaders continue to put their own interests ahead of their investors.
In the end, Sarbanes-Oxley and other measures will never be able to legislate greed out of existence. The lust for money or power or whatever drives corporate leaders to misbehave is endemic to the universe in which corporate potentates operate. These books are admirable attempts to illuminate that world and its effect on investors and other stakeholders.
An Insider’s View
Years ago, when I worked at a newspaper that was part of a large national chain, a fellow reporter and I used to joke about the book we’d write one day when we left the newspaper industry. We’d talk about the dysfunctional management, the yes-men (and -women) who coasted on compliments, and the fact that we were expected to declare on our time sheets that we’d worked 40 hours, even though we often spent 60 or more chasing down stories. I mention this not because I’m still interested in writing that book, but because it came to mind as I was reading William A. Dimma’s excellent new book on corporate governance, Tougher Boards for Tougher Times: Corporate Governance in the Post-Enron Era.
Mr. Dimma, the former president of Toronto Star Newspapers, joined his first corporate board in 1963 and has sat on 55 for-profit corporate boards and 40 or so nonprofit boards, the majority of them in his native Canada. As a result, he offers a real insider’s view of life in the boardroom — warts, fancy retreats, and all. You know he’s calling on personal experience when he reflects on today’s CEOs: “What we seem to have spawned, not universally but too often for comfort, are individuals who are amoral at best, immoral at worst. They are egocentric, grasping, cynical and manipulative.” The situation wasn’t always this bad. Thinking back to another time, Mr. Dimma writes, “Once management served shareholders first. Or at least more frequently than today. Now too many senior executives serve themselves first.”
But Mr. Dimma hasn’t given up hope. His book is clearly intended as a call to arms for directors. Indeed, Mr. Dimma contends that committed, engaged, proactive directors are the antidote to the problems plaguing corporations. He argues forcefully for a separation of power between the chairman and CEO. The idea isn’t revolutionary; a small but growing number of American companies have begun to embrace it, mostly under pressure from institutional investors. But what makes Mr. Dimma’s position compelling is that he is a longtime director advocating for the same sorts of changes that corporate gadflies have long called for.