The Boardroom Paradox

Why Smart Directors
Do Dumb Things

by Gregory Boudreaux, Ph.D.

3-D Cover for The Boardroom Paradox

    "A fast-read that gives all
     you need to know about Enron, 
     WorldCom, Hewlett-Packard
     and other recent boardroom 


The Boardroom Paradox

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Snippet from Book

Examples of audacious behavior abound. Consider these events involving the boards of corporations and non-profit organizations, both large and small:

  • In 2006, Senator Charles Grassley, chairman of the Senate Finance Committee, sent a letter to the chairwoman of the board of the American Red Cross, urging it to overhaul its board structure and renew focus on its mission of disaster relief. Senator Grassley described the board as dysfunctional and said that it must recognize that "'business-as-usual' cannot continue."

  • Members of the board of the Walt Disney Company were sued by stockholders for failure to exercise due diligence over a severance payment of $140 million to Michael Ovitz, who was hired and then fired by Chairman and CEO Michael Eisner. Ovitz received this severance payment after working at Disney for fourteen months.

  • In 2005, the Washington Post ran a series of articles detailing conflicts between the board and the president of American University, a Washington, D.C.-based institution created by congress in 1893. The conflicts involved the president's expense reports. Individual directors, when contacted by the newspaper, presented widely differing accounts of what the board had delegated to the president.

  • On May 24, 2006, the New York Times published a front-page article describing how the board of Home Depot granted huge compensation awards to the CEO, including $245 million over the previous five years, even though the company's stock had fallen 12%. The Times noted that the CEO and some outside directors had pre-existing business relationships, with the implication that the directors were not independent, as required by law.

  • In 2002, the Permanent Subcommittee on Investigations of the Committee on Governmental Affairs of the United States Senate issued a 60-page document entitled "The Role of the Board of Directors in Enron's Collapse." Enron, at one time the nation's seventh largest corporation, collapsed in a wave of accounting irregularities in late 2001.

  • On November 10, 2005, a full-page advertisement appeared in the New York Times with the headline "Long-Term Liabilities" placed over the pictures of directors of Sovereign Bancorp, Inc. According to the advertisement, the CEO and the directors "are creating more value for themselves than for Sovereign shareholders." Charges include excessive compensation, insider loans, and conflicts of interest. The ad urges other stockholders to contact the corporation and demand "a truly independent board."

  • In the fall of 2006, the public was riveted by the story that the chair of Hewlett-Packard presided over the wiretapping of members of her board who were suspected of leaking confidential information to reporters. Congressional investigators likened the events at HP to the Watergate scandal.

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About This Great Book

Boards of directors play a key role in guiding many of our most important institutions but they mostly act behind the scenes. The Boardroom Paradox shows how boards performed in recent corporate crises, including at Enron, WorldCom, Hewlett-Packard, and Disney. Corporate directors have legal duties that they must fulfill in the boardroom. But too often directors have been led astray, sometimes by greed but sometimes by social forces in the boardroom that actually hinder the directors' abilities to address real issues facing the organization.

Without sensationalizing the issues, this book provides a clear explanation of why corporations have a board of directors, what they are responsible for, and why they have sometimes engaged in actions that contributed to huge corporate meltdowns.

The Boardroom Paradox is a must-read for anyone who serves on a board of directors.


From A Review

. . . vivid use of real life case studies makes it come alive. It really is a spanking good read.

Hank Cox, author of Lincoln and the Sioux Uprising


From The Author

I have consulted with corporate boards and CEOs for over 25 years and have trained literally thousands of directors in workshops conducted throughout the United States. I know how boards work and how they get into trouble.

This is the background I bring to a study of some of the most significant boardroom crises in recent history. Real examples of how directors run up against red-flag warnings are shown and how they either address those red flags or mismanage the situation and make things even worse.

Gregory Boudreaux


Other Books By Gregory

The Effective Board Chair - The chair has the least understood job in corporate governance. Thousands of books discuss the duties of directors but few explain the role of the chair, the person responsible for helping the board make good decisions while avoiding petty bickering or mindless groupthink. This handbook, The Effective Board Chair, gives essential lessons of immediate value to new chairs and experienced practitioners alike. more...


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