December 03, 2004

Andy Grove: CYA is now the board's main job

As compliance grows and grows, governance shrinks and shrinks as systems based on experience and effectiveness are replaced by ones based on rules and fear. Andy Grove, the Chairman of Intel, goes even further and asserts that boards weighed down by compliance rules are now no longer doing the job they were set up to do: run the company

In a recent speech here's how he put it:

"If a board is preoccupied with protecting their rear-ends or talking about whether the latest member qualifies under the definition of independence and can serve on the audit committee, then the company's real business is not even being considered," said Grove, inaugural speaker in the Dean's Lecture Series at Wharton.

"... He adds also that Grove said he suspects that many [boards] have been too distracted by the embarrassments of the last several years. In trying to make sure they don't become the next Enron or Adelphia, they are focusing on mug shots, not the big picture.

"Since the wave of awareness started with a bunch of purportedly criminal actions, the weight of the new board activities has been to avoid being caught in criminal action. The process has been defensive - 'How do we keep out of jail? How do we keep from getting sued? How do we keep ourselves out of the newspapers?' A lot of the board activities that take place under the banner of governance are compliance actions that are far away from being strategic participation in the key decisions a company makes."

One more observation he makes was surprising to me, but on reflection, it makes sense:

Grove had found Intel's own board to be something of a paradox. It was a panel of esteemed, powerful people, but when they came together, some members seldom spoke. "I would see ex-CEOs join the board and not make a meaningful comment for years because they felt intimidated by the combined body," he recalls. "I had to coax them into participation. Sometimes it took five, six or seven years. I think it's the idea of the board, rather than the board itself, that creates this behavior."

Seems like people are shy, no matter where they are.

Posted by iang at December 3, 2004 07:35 AM | TrackBack

The end of the board structure while at one time it made sense the board lacks the ability to react to managments instant ability to actions. the only answer is real time accounting since anything less would be a further insult to the shareholders. Yes instant accounting as money is spent as invoices are presented show it all to the shareholders. Of course you can retain some information if you are management but you better have a good reason. Maybe the board could observe that which is not revealed to the shareholders in real time? Reviewing the non-realtime information for the benefit of the shareholders. If one board member sent a flag up that might be enough to assist in stopping fraud. The reality is the board has the ability to order such a structure of reporting but most of them lack the ability to understand and time to make it happen. Boards of Directors are titular non-functioning entities essentially appointed by the management so they can rob the shareholders or at least lie to them on a consistent basis.

Grove would not want a real board all he wants is a stick to keep folks in line. Grove can say such and such a person never contributed to the discussion because he or she was shy or stupid. Either way Grove likes a sealed flow of information flowing in one direction towards his compensation and his tactics to enhance its overall total. We live in a capitalistic enviroment to think Grove is anything other than a Pirate of Commerce is foolish. Governance is a dirty word for any company thats why its been mandated by law not drafted by managment internally. The real problem is as long as the law does not touch Groves compensation or go after his fortune he has the luxury of leaving a legacy of honor and governance one he did not earn. Grove, Gates, Jobs, and others are all bastards that would deal drugs if the risk reward where presented in the right scenario. Grove manufactures subcomponents in China using slave labor not directly but at a distance. Grove is a cappo, a knocker, a grass, and so are we all for buying his stuff. The road to hell has one great big party goin on fun is had by all but the destination is the problem. Slave labor and Intels success are linked. While Taiwan is the known location for some factories the real work is done in slave labor camps Intel knows this and profits from it so do its shareholders and US consumers.

This same scenario has been going on for two centuries cheap cotton for wanker limeys wearing cotton print dresses and shirts. Cheap computers for fat American kids to overweight to go out and play. The world Dickens wrote about has never vanished from the human scene but at least Dickens told the truth. Grove would sell his mother for change pure and simple. Consumers of slave labor products like Intel and every US Citizen is guilty of providing aid for the Han Chinese and their racist destruction of non-Han Chinese in Eastern China Slave Labor Camps. Mr. Grove governance inside the big boardroom does not even equal justice, or for that matter running a company. The strategy Grove always used and Intel still uses is cheap labor, market dumping, and manipulation of government standards. Power not the increments of transitors and processing power drove this fortune.

Posted by: Jimbo at December 3, 2004 09:34 AM