Want more board accountability? It won't come via litigation
Alison Frankel cited Lucy P Marcus’s article, It Is Time to Fix Our Boardrooms, in her “On the Case” opinion column for Reuters.
Lucy Marcus, a consultant, Harvard Business Review writer, and corporate director, posted an HP- and Yahoo-inspired cri de coeur Friday at HBR. â€œHow bad does it have to get before we come to terms with the fact that we need to fix the boardroom?â€ she wrote, in a piece entitled â€œIt Is Time to Fix Our Boardrooms.â€ Marcusâ€™s idea is that boards should fix themselves. Independent directors have to think hard about whoâ€™s sitting around the table with them, she said, and â€œassess whether the board and the individual directors have the skill and the will to rise to the challenge of future-proofing the organizations that they serve.â€
Marcus doesnâ€™t discuss the role shareholders should play in board reform, but the truth is that unless theyâ€™re Carl Icahn or CalPERS, they have precious little power over corporate directors. (Thanks to the Securities and Exchange Commissionâ€™s recent decision not to challenge an appellate decision striking down the proxy access rule, shareholders donâ€™t even stand much of a chance of ousting directors in favor of their own board candidates.) Ordinary investors should have maximum leverage over corporate boards when theyâ€™re gathered together in a class action demanding accountability. That vehicle does exist. Derivative suits, in which shareholders stand in the shoes of the corporation to bring class action claims against directors and officers, give investors an opportunity to blame boards for breaching their duties.
To read the rest of Alison’s column, please go here