Bailout

When boards are too independent

By Felix Salmon

We all love independent board members of public companies. But can they be too independent?

Townsend expressed concern that Massey has been ineffective at building consensus among directors who have proven themselves to be fiercely independent. “That has been an unintended consequence” of April’s shareholder actions, he said.

The problem, of course, is that of who will replace Ken Lewis as BofA CEO. Lewis had no coherent succession plan, and the board can’t seem to come to an agreement either.

Ultimately the important thing is not that board members are independent of each other but rather that they are independent of management. There are definitely many advantages to have the board broadly pulling in the same direction, and then hiring and firing the CEO accordingly. And I think we’re beginning to see, at BofA, the disadvantages of having an ineffectual chairman who has less money, power, relevant experience, or charisma than just about anybody else on the board: it’s a recipe for sclerosis and infighting.

Full post as published by Macroprudential on December 11, 2009 (boomark / email).