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Paul R. Portney

Paul R. Portney

Paul R. Portney is Dean of the Eller College of Management at the University of Arizona, where he also holds the Halle Chair in Leadership.

A Job for the Board

I'm not sure Wall Streeters are any worse than anyone else at seeing themselves the way others see them. And we must remember that big bonuses have been the rule there for a long, long time -- without much editorial-page, congressional or presidential outrage having been expressed in years past. So it's not surprising that John Thain and many others have appeared tone-deaf in their business-as-usual approach to divvying up the lucre.

What's different, of course, is that their companies have been hemorrhaging cash and -- much more importantly -- we taxpayers have stepped in to keep them solvent, and this despite their seeming obliviousness to the risks they were taking and the effect this behavior has had on our country's and indeed the whole world's economic fortunes.

How to prevent this in the future? Isn't this exactly one of the things boards of directors, especially outside directors, are supposed to do? Sure, they're also there to provide financial advice and perspective from the vantage points of customers, suppliers and other constituencies. But they're also expected (or should be) to say such things as, "Wait a minute, can't you see how this is going to look?"

Putting more backbone in board members can't solve every problem. Asymmetric information will always make it hard for even the most responsible board member to know as much about what's really going on as management insiders. But it's not too much to ask for companies to recruit directors with a sense of proportion and the courage to speak up.

By Paul R. Portney

 |  February 2, 2009; 3:02 PM ET
Category:  Economic crisis Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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