Posts Tagged ‘Governance’

The S&P downgraded the U.S. credit rating last night. The full report is here. What struck me in its overview are these two points (below) which directly speak to how our fiscal reputation is being managed. In other words, the ability of our governing leaders to work effectively as a management team is no longer putting the US at the head of the class.  We all know that when corporate boards do not function well, they are called to task, reputations gets tarnished and board members find themselves disinvited to serve. We now see the same reputational metric of good governance being applied to our government and the picture is not pretty. S&P is essentially saying that our ability to govern fiscally and responsibly is ineffective, less stable and more unpredictable than it was earlier. And our ability to collaborate across parties is in question.  It’s not just the credit rating that’s being discredited but our fiscal reputation as well.  America’s reputation for fiscal safety is being downgraded as well.

More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.

Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon.

A few items crossed my desk [or should I say desktop] this week having to do with corporate governance. The first is an interesting article in the Financial Times about banning blackberries from boardrooms. The argument is that board members are charged with fiduciary responsibilities to shareholders and blackberrying or texting during meetings might be considered a breach of contract.  Board members are not doing their jobs if they are busy typing replies or reading scores of emails in meetings. I enjoyed the article because authors’ David Beatty and J Mark Weber also got into the idea of “inattention blindness” and how that might interfere with the weighty decisions required of board members in this tough business climate. One neuroscientist in the article is quoted saying that humans can not concentrate on two things at once.  I recall reading that people can only hold seven things in their head at once which is a reason most of us experience infofog a good part of the time.  At least I do. Anyhow, the point is that board members need to pay full  attention during board meetings today, particularly when the stakes are so high, and responding to electronic messages can only direct attention away from the hard work at hand.  Since board reputations are already in jeopary as one company after another failed this year, I wholeheartedly agree with the authors’ advice that boards enact “no wireless” policies in meetings for now.

I was also reading Karen Kane’s blog on corporate governance and totally concurr with a quote from Stephen Davis of the Yale Millstein Center that she cited.  Davis said that today “directors need the tools of a politician.” In other words, as Kane says, they need to persuade and explain why they took the actions they did. I think that in the future we will be seeing more explaining as Obamanomics works its way down to boards.  Greater transparency and clarification for stakeholders as well as shareholders will become more common in the years ahead. 

Now to tie the two items above together….if President Obama can do without his blackberry at times, so can board members.