Barriers to Transformation
Though many directors and executives recognize the
need for and advantages associated with a transformation in corporate
governance, our interviews suggest that both
CEOs and directors are reluctant to move down this
path.
CEOs express concerns that:
- Increased board involvement would be an internal and external
indication of loss of confidence in management.
- Independent analysis of management recommendations and actions
could complicate approval of their proposals, undermine their
authority and confuse employees.
- It is distracting and confusing to have others wandering around
their organizations.
Directors are worried:
- About upsetting the CEO,
- That the CEO or other directors do not want to change, and
- That proactive board involvement could alienate or lead to
the loss of key managers or the CEO.
There is also a general tendency for both CEOs and
directors to assume that:
- Other companies' failures were the result of incompetence,
dishonesty and other problems that do not exist at their company.
- Their company does not have major problems or exposures and
does not need to make changes to protect shareholder value.
History suggests that, while they may be true for
many companies, these last two assumptions can place shareholders
at far higher risk than would be the case if a more aggressive
and comprehensive approach to governance were implemented. |
