I couldn’t let Peter’s post pass (notice the alliteration) without commenting because I’m not sure I agree totally with the premise of the New Yorker article he referred to. I have served as a director of a NYSE company for 9 years and on several private company boards and have talked to many public company directors across the country. We need to be very careful about painting a broad brush when we talk about some of the things the public is unhappy about because of the subprime debacle and the auto industry implosion. The vast majority of public companies do not resemble the ones that are making the press. On the contrary, their boards are hard working, providing executive management oversight, and bringing valuable expertise to the table. They do not make huge amounts of money; yet, they spend hours in preparation for meetings, especially if you’re on the audit committee like I am.
The Venture Edge
Musings at the intersection of business and lifeAnother point of view on public boards and knee-jerk reform
Business Savvy
June 5, 2009
I’d like to recommend another point of view from a well-written article in Boardmember magazine (“Beware Unintended Consequences of Knee-Jerk Reform”). It cautions that because of public pressure, Congress tends to turn to the SEC and demand action. That action is typically undertaken without considering the consequences, as in the case of the current proposal to give the average shareholder more say in who represents him or her on the board. Two unintended consequences (there are more) that will come out of this proposal, should it become a regulation, are a huge increase in proxy solicitation expenses for public companies and fewer companies deciding to go public or list on a US exchange. It’s already starting to happen.
Now you may be sitting there saying, “I don’t have a public company, so I’m not affected by this.” You’d be wrong. If I had asked you a year ago if you could envision the federal government being the majority stakeholder in GM telling the company what cars it could and could not produce, you probably would have laughed. No one’s laughing today (except maybe Ford). Once Congress decides that it’s their job to oversee business, they won’t stop with banks and auto companies. Entrepreneurs position their companies based on trends and the direction those trends are taking. High growth ventures need to access the public markets for sufficient capital to grow. Every entrepreneur should watch carefully what happens in the public company world because it’s a precursor for what is coming for private business. Stay tuned.
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Related tags: public boards, reform, SEC
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