Where are The Boards and Directors?
This is a legitimate question.
What we hear from our clients that as new regulations are adopted, the pressure will shift to boards via revised corporate governance guidelines. This means tougher standards, enhanced expectations, and “ethics” which, in our view, will inevitably lead to more liability/risk for members of public corporate boards. Perhaps, this is warranted.
In the meantime, shareholder suits are increasing. We all know that it will take a while to ferret out the settlement or adjudication of these matters.
So, boards face distractions and uncertain era of liability where the rules of the game will be changing.
If we are right, then expect an accelerated turnover of board seats.
And, yes, it will be more difficult in the future to attract truly qualified individuals to serve as board members.
Our view is that, irrespective of the change in how companies are governed from a regulatory and compliance view, clarity of responsibility and “protections’ for those that comply must be part of the discussion.
If not, we are apt to have less effective boards populated by less than qualified members at a time when so much more is expected and required. This risk is one that is not acceptable, we submit, to investors in these companies for the efficient functioning of our capital markets.