Company connections: politicians in spotlight

NEW YORK – Many former US politicians and diplomats have moved on to plum jobs as board members of big companies, but a backlash may be brewing as businesses face more scrutiny over who they bring in as financial watchdogs.

Boards need fewer super-star directors who sport prestigious resumes but lack financial expertise, governance experts argue. They say the corporate scandals of recent years show that boardrooms should be filled with seasoned business people who can sift through complex financial matters.”When you go from (being) a member of Congress to a board you better know finance and accounting,” said Roger Raber, head of the National Association of Corporate Directors, an education and research group.”I suspect a lot of people from the Hill don’t have finance and accounting backgrounds.””Frankly, more often than not, it doesn’t work out,” he said of politicians-turned-directors.The star-studded board at American International Group Inc, a company beset by bookkeeping and governance problems, has drawn criticism recently.Shareholder advisory firm Glass Lewis & Co has chided the insurer for having too many ex-politicians and diplomats, such as former US ambassador to the United Nations Richard Holbrooke and ex-defence secretary William Cohen, on its 16-member board.AIG needs to “increase the level of business expertise, including expertise in the insurance industry” on its board, Glass Lewis said in a report this week.AIG spokesman Chris Winans declined comment, saying only that “we welcome a diversity of thoughtful views” expressed about the company.The insurer is not the only company that has been accused of stacking its board with ex-politicians lacking business expertise.Former Hollinger International Inc chief Conrad Black, who relished rubbing shoulders with statesmen, packed his board with luminaries such as ex-Secretary of State Henry Kissinger and ex-Assistant Defense Secretary Richard Perle.Black was later ousted for payments he collected that an internal committee deemed unauthorised, and the outside directors came under fire for their failure to confront him early on.Hollinger’s board recently agreed to a US$50 million settlement to end shareholder claims that it stood by while Black looted the company.The financial gains that ex-government officials reap from board service also can leave bad tastes in the mouths of investors who see potential conflicts of interest.Former New York City police commissioner Bernard Kerik, who sat on the board of stun gun maker Taser International Inc., realised about US$6,8 million from the sale of stock options.The issue raised eyebrows when Kerik was nominated as US Homeland Security secretary because Taser was seeking to sell more of its devices to the government.Kerik later withdrew his nomination, citing questions over the immigration status of a nanny he employed.He later resigned from Taser’s board.ATTRACTIVE JOB The roster of ex-politicians serving in boardrooms is long.Former US Senator Sam Nunn, for instance, sits on numerous boards including Chevron Corp and General Electric Co.Ex-senator George Mitchell is chairman of Walt Disney Co, while former Bill Clinton confidant Vernon Jordan and ex-US trade representative Charlene Barshefsky sit on the board of American Express Co.But Raber thinks fewer companies are reaching out to ex-politicians for open board seats, although he has seen no firm data to confirm any trends.He says boards are more interested these days in tapping recently retired CEOs and lower-level executives like chief technology officers or former corporate general counsels.Raber said he still gets many calls from outgoing government figures, though, who want board seats – positions that traditionally have carried a lot of prestige and attractive pay without heavy time commitments.Others say ex-government officials still are in hot demand at boards.”The reality is you can’t look at a board based on a single director,” said Theodore Dysart, a managing partner at recruiting firm Heidrick & Struggles.”A board should really be a series of perspectives around the table.”Home improvement retailer Home Depot Inc recently named ex-Homeland Security chief Tom Ridge to its board.The appointment drew attention because Ridge helped encourage sales at Home Depot and other stores in 2003 when he urged Americans to stock up on supplies like duct tape to guard against possible terrorist attacks.Home Depot spokesman Jerry Shields declined comment on Ridge, instead referring back to a statement by CEO Bob Nardelli in February that cited Ridge’s “unique global experience” as an asset for the company.Charles Elson, director of the University of Delaware’s Corporate Governance Center, said all directors – not just ex-politicians – are drawing scrutiny.”The board is no longer viewed as a social institution, but as an important monitor of management,” he said.”The days of the trophy director are probably nearing an end.”- Nampa-ReutersThey say the corporate scandals of recent years show that boardrooms should be filled with seasoned business people who can sift through complex financial matters.”When you go from (being) a member of Congress to a board you better know finance and accounting,” said Roger Raber, head of the National Association of Corporate Directors, an education and research group.”I suspect a lot of people from the Hill don’t have finance and accounting backgrounds.””Frankly, more often than not, it doesn’t work out,” he said of politicians-turned-directors.The star-studded board at American International Group Inc, a company beset by bookkeeping and governance problems, has drawn criticism recently.Shareholder advisory firm Glass Lewis & Co has chided the insurer for having too many ex-politicians and diplomats, such as former US ambassador to the United Nations Richard Holbrooke and ex-defence secretary William Cohen, on its 16-member board.AIG needs to “increase the level of business expertise, including expertise in the insurance industry” on its board, Glass Lewis said in a report this week.AIG spokesman Chris Winans declined comment, saying only that “we welcome a diversity of thoughtful views” expressed about the company.The insurer is not the only company that has been accused of stacking its board with ex-politicians lacking business expertise.Former Hollinger International Inc chief Conrad Black, who relished rubbing shoulders with statesmen, packed his board with luminaries such as ex-Secretary of State Henry Kissinger and ex-Assistant Defense Secretary Richard Perle.Black was later ousted for payments he collected that an internal committee deemed unauthorised, and the outside directors came under fire for their failure to confront him early on.Hollinger’s board recently agreed to a US$50 million settlement to end shareholder claims that it stood by while Black looted the company.The financial gains that ex-government officials reap from board service also can leave bad tastes in the mouths of investors who see potential conflicts of interest.Former New York City police commissioner Bernard Kerik, who sat on the board of stun gun maker Taser International Inc., realised about US$6,8 million from the sale of stock options.The issue raised eyebrows when Kerik was nominated as US Homeland Security secretary because Taser was seeking to sell more of its devices to the government.Kerik later withdrew his nomination, citing questions over the immigration status of a nanny he employed.He later resigned from Taser’s board. ATTRACTIVE JOB The roster of ex-politicians serving in boardrooms is long.Former US Senator Sam Nunn, for instance, sits on numerous boards including Chevron Corp and General Electric Co.Ex-senator George Mitchell is chairman of Walt Disney Co, while former Bill Clinton confidant Vernon Jordan and ex-US trade representative Charlene Barshefsky sit on the board of American Express Co.But Raber thinks fewer companies are reaching out to ex-politicians for open board seats, although he has seen no firm data to confirm any trends.He says boards are more interested these days in tapping recently retired CEOs
and lower-level executives like chief technology officers or former corporate general counsels.Raber said he still gets many calls from outgoing government figures, though, who want board seats – positions that traditionally have carried a lot of prestige and attractive pay without heavy time commitments.Others say ex-government officials still are in hot demand at boards.”The reality is you can’t look at a board based on a single director,” said Theodore Dysart, a managing partner at recruiting firm Heidrick & Struggles.”A board should really be a series of perspectives around the table.”Home improvement retailer Home Depot Inc recently named ex-Homeland Security chief Tom Ridge to its board.The appointment drew attention because Ridge helped encourage sales at Home Depot and other stores in 2003 when he urged Americans to stock up on supplies like duct tape to guard against possible terrorist attacks.Home Depot spokesman Jerry Shields declined comment on Ridge, instead referring back to a statement by CEO Bob Nardelli in February that cited Ridge’s “unique global experience” as an asset for the company.Charles Elson, director of the University of Delaware’s Corporate Governance Center, said all directors – not just ex-politicians – are drawing scrutiny.”The board is no longer viewed as a social institution, but as an important monitor of management,” he said.”The days of the trophy director are probably nearing an end.”- Nampa-Reuters