The National Association of Corporate Directors reports the median pay of a Fortune 200 director at $228,058, a tidy sum although not nearly enough if a derivative suit is filed against the board.  NACD does not report on any relationship between compensation and frequency of litigation.

Commentary on the survey attempts to make the point that weak boards of directors tend to lead to corporate catastrophe.  This surely is a conclusion that seems intuitive, but is it correct?

Fortune, as reported by CNN Money on line, collects anecdotal situations wherein problem boards ended up with big corporate problems to boot: News Corp, BP, etc.  These boards seem to lack truly independent directors (nothwitstanding regulatory requirements for public companies wherein carefully defined levels of independence are required to sit on audit and comp committees), coupled with long tenures, advanced age, lack of women or minorities, and with personal ties to top executives (which latter point is just another way of saying they lack independence).

Several issues suggest themselves.  Aside from linking some companies suffering catastrophe with a lack of strong directorship, the data does not seem to reach the question of whether poorly directed companies have a higher catastrophe RATE.  Many poorly directed companies dodge the bullet plenty.  Many well directed companies suffer major set-backs.

It is important not to use only hindsight.  It is easy, after a debacle, to go back and note that the board lacked certain attributes.  But if you did an audit of all companies, which would include the damned and the blessed, would failure follow the weakest board?

How many of us have seen very well run boards nonetheless get surprised by disaster?  The legal standard for boards is not to meddle in operations; boards do not have front-line responsibilities.  If there is risk identified, the board is supposed to inquire that the risk is being addressed, not itself seize control of a company at the operational level.  A board has a duty of care that includes using normally prudent practices to identify and cause to be addressed enterprise risk.  The management has the operational burden.

So perhaps the ultimate stopping place of the buck, at the board level, is the selection of the principal officers who DO have front line responsibility for execution?  And perhaps a non-independent board ultimately does tend to rule over a company that is disaster-prone because such a board elects cronies, retains its own membership too long, and becomes used to the nice dinners and dulled to their duties?

The last decade of corporate grief seems to this observer, indeed again anecdotally, to be spread widely across the spectrum of well-directed, ill-directed and non-directed businesses; if anyone out there has data that is more tightly ratcheted on a statistical demonstration of the avoidance of catastrophe (not the level of earnings, just the absence of disaster) in the presence of a younger and more rigidly “independent” directorship, I would be interested in hearing about it.

We strive for good directors and thus are invested in seeing better performance from boards which meet our preconceptions.  And surely independence on boards is a defense to many shareholder suits (put another way, woe be to the defendant director who can be painted in a lawsuit as a “crony” of the controlling person(s)),

And I haven’t even gotten to the implicit age-ism in the equating of older directors with lousy boards….