While many culprits have been identified in the spectacular collapse of so many iconic American financial and manufacturing firms, none bears more responsibility than the individual directors, the cream of the capitalist crop, who sat atop Americas largest and most influential corporations while executive compensation, product offerings, quality control, risk management and internal financial controls failed.
Something is seriously wrong with the U.S. model of corporate leadership.
At Lehman Brothers Holdings Inc., for example, the 10-person external board of directors included nine retirees, four of whom were more than 75 years old; one theater producer; and one former Navy admiral, according to a report in September. Only two had direct experience in the financial services industry.
Until three years ago, when I became the CEO of the San Diego City Employees Retirement System, I served in senior capacities in NYSE-listed companies and was CEO of one of the largest independent broker-dealers in the country. When I joined SDCERS, it was a public pension system synonymous with mismanagement and ethical lapses (e.g., my predecessor and several former SDCERS trustees are still under state and federal indictments). However, today a new SDCERS board and management team are operating in a model of board governance that is superior to most public companies. While many of the following governance concepts have been debated, and resisted, for decades, today they are working well at SDCERS. Indeed, if the following governance practices had been in place at more public companies, the recent economic meltdown might have been mitigated or avoided altogether.