LESSONS FROM THE BOARDROOM DRAMAS
American Express, IBM, and Westinghouse Electric. In just one week, boardroom turmoil has battered the chief executives of three corporate household names. Two, IBM's John F. Akers and Westinghouse's Paul E. Lego, were ousted, while James D. Robinson III of American Express still seems to share power, in an outcome that's muddied and confusing.
The shock of such drama is surpassed only by the wonder that it took so long to unfold. Where were the directors during the years when all three companies were losing money and market share? IBM stock alone tumbled by $23 billion in total market value between the summer and fall, a sum equivalent to the Clinton Administration's entire economic stimulus plan, but still the board stuck with Akers.
The answer lies in the composition of corporate boards. Too often, former chairmen remain as board members and backseat drivers, thus preventing strong remedial measures that might require undoing their old empires. This was the case at IBM, where three former CEOs peered over Akers' shoulder. In addition, combining the roles of chairman and CEO--thus opening the way for the CEO to pack the board and its committees--works against board intervention. And failure to appoint outside directors who have independent knowledge of the industry is yet another cause for a board's inertness.
It's clear what must be done. It took General Motors Corp.'s independent board members too long to act. But once they did, they cleaned house quickly and efficiently. An outside director was made acting chairman, and an experienced GMer was made CEO and given a year to shape up the company. What was good for GM would also be good for IBM, American Express, Westinghouse Electric, and any other corporation in dire need of change.