For corporate directors, scandal ain’t so bad

NEW YORK – Former board members of scandal-hit companies such as Enron and WorldCom once seem destined to become corporate pariahs, viewed as inept or worse.

But for some, the reality has been quite different. Rather than being shunned, some have retained board memberships at other publicly traded companies and, in some cases, even added to them, according to The Corporate Library, a corporate governance analysis firm.TCL tracked more than 20 individuals who were on the boards of Enron Corp, WorldCom Inc, Adelphia Communications Corp, and Global Crossing Ltd before the firms filed for bankruptcy protection, and found they currently hold over 50 board seats of US publicly traded companies.”Shareholders do seem to care and do recognise directors’ reputations, but the consequences of all this are rather mixed,” wrote researchers Jackie Cook and Randy Evans in a TCL report.”Some directors with Enron or Global Crossing skeletons in their closets are being squeezed off boards.But it must be difficult to judge a new board nominee based on their resume alone.”SCRUTINISEDTCL said many of the board seats currently held by former directors of Enron, Worldcom, Adelphia and Global Crossing are at smaller public firms, where shareholder bodies may be less activist and practices receive less scrutiny from media and governance ratings agencies.But some sit on boards at major firms.Former Enron director Frank Savage serves on the boards of defence contractor Lockheed Martin Corp. and money manager Alliance Capital Management Holdings.Former Secretary of Defence William S Cohen, who was a director of Global Crossing before its bankruptcy, is on the boards of media conglomerate Viacom Inc. and insurance giant American International Group Inc.Ex-Enron director Herbert S Winokur sits on the boards of Chicago-based communications company CCC Information Services Group Inc. and NATCO Group Inc., an oil and gas services firm.Former Global Crossing director William E Conway is a director of both Nextel Communications, Inc. and United Defence Industries Inc.TCL said directors of companies that enter into bankruptcy proceedings are required to disclose this fact to any new board they join for the following five years.In some cases, however, companies have stopped passing on this information in proxy materials distributed to shareholders, TCL said.UNCONCERNEDWhy are some firms seemingly unconcerned about directors’ past links with problem companies? “A more fundamental explanation is that corporate performance, including failure, is difficult to distill to the level of individual decisions,” reported Cook and Evans.Spokespeople for Lockheed Martin, Viacom, United Defence and CCC Information all voiced support for their directors who once served of boards of troubled companies.Corporate governance expert Richard Steinberg, founder of Steinberg Governance Advisors, Inc. of Westport, Connecticut, said ex-directors of troubled firms need not be excluded from directorships at other firms.”I believe it needs to be considered on a case by case basis,” he said.- Nampa-ReutersRather than being shunned, some have retained board memberships at other publicly traded companies and, in some cases, even added to them, according to The Corporate Library, a corporate governance analysis firm.TCL tracked more than 20 individuals who were on the boards of Enron Corp, WorldCom Inc, Adelphia Communications Corp, and Global Crossing Ltd before the firms filed for bankruptcy protection, and found they currently hold over 50 board seats of US publicly traded companies.”Shareholders do seem to care and do recognise directors’ reputations, but the consequences of all this are rather mixed,” wrote researchers Jackie Cook and Randy Evans in a TCL report.”Some directors with Enron or Global Crossing skeletons in their closets are being squeezed off boards.But it must be difficult to judge a new board nominee based on their resume alone.”SCRUTINISEDTCL said many of the board seats currently held by former directors of Enron, Worldcom, Adelphia and Global Crossing are at smaller public firms, where shareholder bodies may be less activist and practices receive less scrutiny from media and governance ratings agencies.But some sit on boards at major firms.Former Enron director Frank Savage serves on the boards of defence contractor Lockheed Martin Corp. and money manager Alliance Capital Management Holdings.Former Secretary of Defence William S Cohen, who was a director of Global Crossing before its bankruptcy, is on the boards of media conglomerate Viacom Inc. and insurance giant American International Group Inc.Ex-Enron director Herbert S Winokur sits on the boards of Chicago-based communications company CCC Information Services Group Inc. and NATCO Group Inc., an oil and gas services firm.Former Global Crossing director William E Conway is a director of both Nextel Communications, Inc. and United Defence Industries Inc.TCL said directors of companies that enter into bankruptcy proceedings are required to disclose this fact to any new board they join for the following five years.In some cases, however, companies have stopped passing on this information in proxy materials distributed to shareholders, TCL said.UNCONCERNEDWhy are some firms seemingly unconcerned about directors’ past links with problem companies? “A more fundamental explanation is that corporate performance, including failure, is difficult to distill to the level of individual decisions,” reported Cook and Evans.Spokespeople for Lockheed Martin, Viacom, United Defence and CCC Information all voiced support for their directors who once served of boards of troubled companies.Corporate governance expert Richard Steinberg, founder of Steinberg Governance Advisors, Inc. of Westport, Connecticut, said ex-directors of troubled firms need not be excluded from directorships at other firms.”I believe it needs to be considered on a case by case basis,” he said.- Nampa-Reuters