Corporate Governance

GM, the Bailout and the Role of the Board

By J Robert Brown Jr et al.

It seems that after the disastrous appearance of Rick Wagoner, the CEO of General Motors, in Washington to ask for a bailout without any real plan and flying back to Detroit on a private jet, has had one potential benefit.  The "mirror image" board at GM seems to have woken up.   According to the WSJ:  "Following Mr. Wagoner's poor performance in Washington last month, the board began meeting more and taking more seriously its obligation to investigate other options." 

But of course, GM was in deep trouble before Wagoner went to Washington.  The more interesting question is why the board wasn't more involved before he took the trip.  Had Wagoner gotten a grilling from directors about what was expected, he might have been better prepared once in Washington.  Of course, it would have required a board prepared to offer the CEO tough advise, a quality not obvious in this apparently "captured" board. 

In any event, there is one possible answer to the delay in becoming involved.  The anemic duties imposed on boards by the Delaware courts did not require any higher level of involvement.  Said another way, the lack of involvement met their fiduciary obligations.  This fact alone says something about the need to change these obligations.

As for lessons learned the last time around, the CEO of Ford won't be taking a private jet to the next meeting in Washington.  He'll be going by autombile, presumably a Ford.

Full post as published by The Race to the Bottom on December 02, 2008 (boomark / email).