Other Editorials

Board of Bystanders

Sunday, December 4, 2005

>From the WSJ; October 24, 2005; Page A14:

"" Inadequate corporate governance. A company like GM badly needs a board with at least a core group of directors able to advise and evaluate management from their own successful turnaround experiences. The central GM directors have not. George Fisher, the chief executive's main confidante, left Eastman Kodak after having been unable to halt its downward spiral. Eckhard Pfeiffer drove Compaq into a ditch. Percy Barnevik virtually destroyed engineering giant ABB and tried to flit away with an $88 million pension. Karen Katen is a vice-chairman of Pfizer, whose share price collapse has paralleled GM's, and for many of the same reasons. The only GM director who had reinvigorated a sickly company, A.G. Lafley of Proctor & Gamble, quietly withdrew from its board in April. The board, quite simply, is the wrong kind of board for a company facing GM's needs.

"Culture of management non-accountability. GM chronically sets objectives and fails to achieve them. Then nothing happens. The recent list is extensive: 29% U.S. market share, 5% net return on sales, earnings per share of $10, Chevrolet sales volume of three million vehicles. The corporate culture either moves the goalposts on the timing attached to each objective, sometimes to an indeterminate future; retroactively downplays its importance; or mends the problem with amnesia. GM has long been a bastion of non-accountability. Executives who have said grace over declining venues have chronically been promoted into more important ones. It should be a public embarrassment to GM's board that the CEO has been at the helm for longer than Carlos Ghosn took to convert equally sickly Nissan into one of the most profitable automakers. It doesn't seem to be."