Holding Boards Accountable

June 18, 2010
Nashville Business Journal
 

Are you frustrated about the ethical lapses in some of our corporations?  Are you upset about Toyota’s slow response to safety issues? Are you troubled by bankers taking bailouts and then lining their wallets with fat bonuses? Do you encounter ethical shortfalls in businesses you deal with?  Don’t just sit back – take action.

We are all stakeholders. Whether we are primarily employees, investors, business partners or members of the community, we all have some level of interest in business. In fact, you are likely already an investor in hundreds of companies through your 401(k) retirement plan, mutual funds and other investments.

It holds true, then, that we should expect businesses to operate under the highest standards—and most of the time the business community meets that level of professionalism.

The Board’s Role
To meet the standards stakeholders expect, a board of directors is the ultimate control mechanism for public—and most private—companies. Owners (stockholders) elect a board of directors to be responsible for oversight of the entire organization. This group selects the leadership team, approves business plans and oversees accurate accounting of all business activities.

In this role, the board is also accountable for both the operational and ethical performance of the organization. It regularly reviews basic operations, the CEO’s performance and the business culture as a whole. Every stakeholder should expect an honest effort by the board to do everything reasonable to ensure the success of the organization in achieving defined business goals.

The Right Path
Most of the time oversight by committee works. As a former CEO, I can tell you with a high degree of confidence that senior leaders in most organizations want to follow the right path. Quality boards of directors and first-rate leaders strive to embrace the highest level of ethical behavior. They do not bend in the face of temptation to take shortcuts. They set direction—the moral compass—and do everything possible to ensure the success of the entire organization. True leaders act personally and professionally with the highest degree of integrity because they know that is the only path to long-term success.

However there are times when leaders do not conduct business in an ethical manner, and in these situations, stakeholders cannot afford to sit on the sidelines. We all have an obligation to speak up and hold businesses accountable on behalf of all stakeholders. 

Collective Noise
No amount of government regulation will make a major difference in corporate oversight. The voice of the people will. In 2002, Congress passed the Sarbanes-Oxley Act to fix the ills brought on by Enron and other misguided corporate giants. Unfortunately, the ethical impact of the act on business has proven virtually non-existent. But businesses now spend billions on new bureaucratic processes that make American industry a little less competitive in the world market.

Don’t count on government. Use your own voice to make a difference. Boards of directors are much like politicians in that they pay attention to the collective noise, so don’t be shy about speaking up when you are concerned or see wrong-doing. You can write to an individual director or to the entire board; you can comment through a web site; or, if you own stock, you can attend the stockholders meeting.

Even if you are not a stockholder you can let your voice be heard. Search the internet using “board of directors with the company name” and you will easily find a path to comment directly to the board. This also works for foreign companies so don’t be shy about speaking out.

All leaders need commentary from every possible source in order to make intelligent decisions and lead organizations in the best direction. Good directors will want to hear from you. It is very simple. We all win when we follow basic rules of integrity and accountability.

 

Joe Scarlett, joe@joescarlett.com
Retired Chairman of Tractor Supply Company
Founder of the Scarlett Leadership Institute

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