Brown University president Ruth Simmons has recently come under fire for serving on the board of Goldman Sachs. More than establishing any possible perfidy on the part of Simmons, this just shows how utterly useless boards of directors are. Other than hiring and firing the CEO (or, in the non-profit world, the executive director) and approving the overall activities at a very superficial level, they don’t do much. They’re certainly not going to exercise oversight or change the culture. Why? Because, even if they’re motivated, they show up a couple of times a year and read a massaged report. The people at the company are there, day in and day out; the board, even if they want to challenge the leadership, can’t run the company. They already have jobs. Besides, most of them don’t want to rock the boat. Gretchen Morgenson summed this up nicely:
Frederick E. Rowe, president of Investors for Director Accountability, a nonprofit shareholder advocacy group, said, “Here’s a conversation you’ll never hear: ‘Yes, I get paid $475,000 a year. I play golf with the C.E.O.; he’s a personal friend. I go to interesting places for board meetings, I am around interesting people, and I would never say one word that would jeopardize my position on the board.'”
Simmons left the board of Goldman Sachs, and her reasons are telling (italics mine):
In a telephone interview, she said she was used to lively debate around the university and that the public controversy surrounding Goldman had no influence on her decision to withdraw from the board. Instead, she said, she stepped down after 10 years because the job was taking up too much of her time, particularly in the wake of the financial collapse. Earlier, she stepped down from the board of Pfizer, but she remains on the board of Texas Instruments.
The role of directors, Dr. Simmons said, has been “redefined,” adding that the crisis “involved many more meetings, including telephonic meetings, and a lot of material to deal with.”
Allow me to translate:
Previously, they gave me hundreds of thousands dollars to visit a nice place once or twice a year. Now, they not only expect me to work, but to actually know something about the business I’m overseeing. No thanks.
And we wonder how Big Shitpile happened.
An aside: Simmons ‘earned’ over $4.2 million during the last decade from Goldman Sachs. To all the the people who get hot and bothered about taxing rich people, she didn’t earn it. She didn’t provide an essential service. Tax her at a higher rate.