Investors need to be concerned when directors seem more like a chorus of cheerleaders than a boardroom of independent guardians.
The eyes of investors, which, heretofore, have been focused almost entirely on Apple CEO Steve Jobs, are now turning to the company’s directors. It is a long overdue scrutiny. Two years ago, in the wake of Apple’s stock option backdating scandal, we expressed concerns about the structure of its board, which at the time was a seven-man operation.
Since raising the point -and we were the first to do so- Apple has added one woman to the board. But it remains a small and rather weak example of modern corporate governance practices. It met only five times in 2008, a period when many companies were facing the likelihood of recessionary consumer pressures. Official records do not even properly name the officer who chairs the board. We all know that was Steve, but why the problem formally disclosing that fact?
The board seems to have taken little notice of the need for succession planning, even though the company’s founder and CEO has a record of serious health problems. The reason seems obvious: Steve did not want that process to move forward. All its appearances and statements suggest that the culture of Apple’s board is one of unswerving deference to Steve Jobs. Look at its January 5th press release concerning Steve’s first disclosure about his health and the wording seems more consistent with the actions of a chorus of cheerleaders than a boardroom of independent guardians. It’s pretty obvious that the board failed to do any due diligence before issuing this statement. Shareholders may well have been made more vulnerable to precisely the kind of sudden loss of value that happened yesterday as a result. (more…)