Hu, Valukas, and Markopolos on Corporate Governance

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As the country emerges from the worst financial downturn since the Great Depression, directors, executives and other corporate governance experts gathered to honor the 100 most influential players in the boardroom and analyze recent mistakes and how they can be avoided at the NACD Directorship 100 Forum held Monday and Tuesday in New York City. The 100 honorees were commended at a dinner Monday night in a keynote address by Henry Hu, director of the SEC’s Division of Risk, Strategy and Financial Innovation.

Hu presented his “decoupling” concept, and explained how it relates to boards’ current challenges, especially as directors face the new Dodd-Frank Act. He pointed to the Act as the “most comprehensive change in generations… representing a new era for corporations and boards that introduces new challenges and new opportunities. It is important to get the balance between corporate governance and financial innovation right.”

The Forum’s second day featured Anton Valukas, court-appointed examiner in the Lehman Brothers’ bankruptcy, explaining the actions that the Lehman board could have taken to better prepare for the company’s failure. While Valukas does not believe that failure was preventable, he did explain that, had the board asked more important questions, the fall would have had less severe of an impact on the U.S. economy.
“In this case,” said Valukas, “one word would have made the difference: transparency.” (read Valukas’ full report here)

Also featured was Harry Markopolos, author of No One Would Listen, which details his ten-year-long investigation of Bernie Madoff’s Ponzi scheme, the largest in history.  Markopolos took a firm tone with the directors of the room, imploring them to “use your experts and don’t take numbers from management, for the sake of your shareholders and stakeholders. That’s your job.”

1 Comment

  • Mark Guay says:

    Asking great questions, coupled with transparency, will hopefully get you the raw data a director needs to make the right decision. But we also need to focus on the “qua” – its “relationship to” the core values of the company and implementation. Some boards approve their core values up front. Some boards get a second chance to address these core values by explicitly approving them [e.g. TYCO]. But more often than not, most boards simply assume they know what their core values are – until of course things go seriously wrong. Perhaps asking the simple question to directors each year “do you know what our company core values are and, if so, what are we doing to implement them?” The line between strategy and execution was what HBR called a “myth” in their article in July – August edition. Simply put, they say that to have directors deal with strategy and managers deal with execution is not a legitimate working business model [e.g. BP perhaps]. The alternative choice cascade model they propose works to resolve this systemic problem. Directors must dig deeper.