A focus on shortcomings in the boardroom and fixing a broken corporate governance model should be the next move.
In the wake of the striking and surprising losses at Lehman Brothers, we noted on Tuesday:
It is traditional to ask why the CEO, and perhaps other top managers who were responsible for these decisions, are still at their desks. Many at other companies have been booted out. CEOs at Merrill Lynch, Citigroup and UBS come to mind. Accountability at Lehman seems to have no real consequence or manifestation.
The ousting of company President and COO Joseph Gregory and CFO Erin Callan, announced today, is a good start but is hardly an acceptable conclusion to the changes needed. Now the focus should be on Lehman’s shortcomings in the boardroom and fixing a broken corporate governance model.
The boardroom needs new blood. Of the investment bank’s 10 independent directors, three are in their seventies and two are in their eighties. The executive committee, which consists of CEO and board chairman Richard S. Fuld, Jr. and 80-year-old independent director John D. Macomber, should be shelved. The finance and risk committee, chaired by 80-year-old Henry Kaufman, should get active. As first revealed by Finlay ON Governance, this committee met only twice in 2007 and in early 2008 even when risk was becoming the 800-pound gorilla in everybody’s Wall Street boardroom.
As long as the CEO is permitted to head both management and the board, allowing Mr. Fuld to effectively report to himself, it is doubtful that Lehman will make the changes it needs to ensure the discipline of accountability that is essential to the survival and success of any business today.