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There Needs To Be A Change In Corporate Boardrooms

Jan. 03, 2020 11:30 AM ETSTT, WFC, GE, BA16 Comments
John M. Mason profile picture
John M. Mason


  • Going into the new decade, there is a need to review the role that the Board of Directors plays in the modern corporation as things move faster and as scale increases.Going into the new decade, there is a need to review the role that the Board of Directors plays in the modern corporation as things move faster and as scale increases.
  • Recent examples have shown that when CEOs focus too much on short-term results and fail to provide a culture of openness and transparency, things can fall apart in the longer-run.
  • Lower-cost, index-tracking funds, due to their growth over the past decade, are in a position to exert greater influence on boards and can help bring more oversight into corporate management.

There needs to be a change in corporate boardrooms. Over the past couple of years, we have seen three corporate situations where a stronger role on the part of the company’s board of directors could have made a major difference.

The companies I am particularly thinking about, although others could be added to the list, are Wells Fargo Corp. (NYSE: WFC), General Electric Co. (NYSE: GE), and Boeing Co. (NYSE: BA).

All three organizations have gone through crisis periods in recent years, followed by changes in top management, and all three organizations have been criticized for having boards of directors that failed to provide sufficient oversight.

In all three cases, the management has been criticized for focusing too much on short-term performance goals, and not paying enough attention to longer-term objectives. The specific criticism has been that the CEOs focused on maximizing short-term shareholder wealth.

As a consequence, although each company performed well in the short run and the stock price of each company rose, the decisions made to accomplish these short-run outcomes meant that the companies failed to address issues that could sustain the organization over time.

Eventually, the emphasis on the short-run caught up with the companies and each is now in a period of turn-around struggling to find new cultures that correct their performance.

This is why a current article in the Wall Street Journal caught my eye. The title of the article, “State Street CEO Takes the Long View on Shareholder Activism.” Justin Baer, the author of the article, writes,

“As CEO of State Street Corp. (NYSE: STT), Ronald O’Hanley is on the front lines of shareholders’ push to bring change to corporate boardrooms.”

“State Street…has amassed significant governance power in recent years as investors shifted more money into the lower-cost, index-tracking funds it helped popularize—and away

This article was written by

John M. Mason profile picture
John M. Mason writes on current monetary and financial events. He is the founder and CEO of New Finance, LLC. Dr. Mason has been President and CEO of two publicly traded financial institutions and the executive vice president and CFO of a third. He has also served as a special assistant to the secretary of the Department of Housing and Urban Development in Washington, D. C. and as a senior economist within the Federal Reserve System. He formerly was on the faculty of the Finance Department, Wharton School, the University of Pennsylvania and was a professor at Penn State University and taught in both the Management Division and the Engineering Division. Dr. Mason has served on the boards of venture capital funds and other private equity funds. He has worked with young entrepreneurs, especially within the urban environment, starting or running companies primarily connected with Information Technology.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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