Business.view: Misery in the boardroom
What directors of American firms should—and should not—worry about“NEVER before in the history of American business has the role of the corporate director been more important or more challenging.” This bold claim kicks off this year’s annual collection of “thoughts for boards of directors” penned by Martin Lipton, a legendary Wall Street lawyer, and two colleagues at his firm, Wachtell, Lipton, Rosen & Katz. They fear, above all, that the economic crisis has inspired a series of corporate-governance reforms that, contrary to their aims, will “impede the ability of boards to resist pressures for short-term gain and tie their hands at a time when the need for effective board leadership is particularly acute.”It is tempting to dismiss any criticisms of corporate-governance reform that come from Mr Lipton. He is, after all, an inveterate defender of incumbent managers against all attempts to make them more accountable to shareholders. Heavens, the man even invented the “poison pill” to help managers fight off hostile takeover bids by, for instance, issuing preferred stock to friendly investors. One of the many laments in this year’s 32-page list of “thoughts” is that the poison pill has lost much of its toxicity. “Many companies may find they are vulnerable as a result of the sustained attack by shareholder activists and proxy-voting advisers on takeover protections in recent years,” the authors complain. ...
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