Shakespeare's Macbeth can be boiled down to poor corporate governance. Scotland's monarchs suffered inadequate oversight. Macbeth claimed control of the throne by murder egged on by family members - his wife - and unbridled by his colleagues, such as Banquo, whom he killed when challenged by him.
Archer Daniels Midland Co. puts Macbeth in modern dress. Dwayne O. Andreas ascends to the chairmanship and salts the company board with so many family members, former employees, friends and paid consultants that a Thanksgiving dinner satisfies a board quorum.
Whether Mark Whitacre - a senior employee terminated after he accused the company of price fixing - qualifies as Banquo will be determined by federal authorities.
This tragedy is providing Wall Street investors with an object lesson of how deficient corporate governance can translate into a souring stock price. A diligent board should have instituted a culture of strict standards to prevent illegal actions. Instead, the company faces three grand jury investigations into price fixing, and its own allegations what Whitacre embezzled more than $9 million. Since news of the accusations, the market value of ADM has tumbled by $2 billion.
There are many corporate governance deficiencies of tragic dimension at other companies.
There are directors who have novel ideas about right and wrong. Last year, the federal government charged two senior executives of Gannett Co. with insider trading. Gannett's board terminated neither; one resigned and the other remains in charge of one of Gannett's major publications. Gannett's chairman, John J. Curley, recently explained why he didn't terminate Frank Vega of the Detroit Newspaper Agency:
"Well, Frankie, Frankie got a stock tip. In the old days, there was nothing wrong with that. In the Texas Gulf Sulphur Co. case in 1988 or some year, you know, that became not right. Most people didn't know that. Most people still don't know that. But the SEC computers knew that. So as a secondary bystander in an act, he got involved."
How was that again? Is this the chief executive officer of America's biggest newspaper chain saying most executives shouldn't be expected to know the law on insider trading? Mr. Vega allegedly profited nearly $50,000 from illegal insider trading. The Texas Gulf Sulphur case was handed down not in 1988, but rather in 1968. A 1961 decision made trading on inside tips illegal.
Then there are boards dominated by the CEO. A case in point is Louisiana-Pacific Corp. Led by a domineering chairman and chief executive, the company has faced a sea of federal charges. The U.S. attorney in Colorado recently issued a 56-count indictment against Louisiana-Pacific for environmental law violations. The company recently settled claims for faulty siding products. By some estimates, the company may incur penalties and claims totaling more than $1 billion because of management crimes the board might have headed off. But Harry A. Merlo had been Louisiana-Pacific's only chairman and president since the company's inception in 1972. Conveniently, he chaired the nominating committee that recruited new board members. Shortly after the indictment, Mr. Merlo resigned.
Other directors indulged in perquisites, such as the old RJR Nabisco under F. Ross Johnson. These privileges were so ostentatious that when Kohlberg Kravis Roberts & Co. launched the destructive buy-out in 1989, it wasn't clear on which side of the gate stood the barbarians. (Mr. Johnson, meanwhile, became a director of ADM and chairs its audit committee, adding farce to that tragedy.)
As with Macbeth, there may be a satisfying ending. In place of Burnam Woods, shareholders are attempting to reconquer corporate fiefs bearing proxy votes. Nearly three dozen institutional shareholders and almost one out of five of all shareholders voted to oust the Archer Daniels Midland board. Unlike Macbeth, however, the reform under way at ADM and other companies may take several assaults by shareholders.
William Patterson and Bartlett Naylor are, respectively, director and national coordinator of corporate affairs, International Brotherhood of Teamsters, Washington.
