Saturday, January 9, 2010

A Flashback

The announcement this week of a leadership change at the J. Paul Getty Museum sparked a memory of a former leading figure in the evolution of modern-day corporate governance, Harold Williams. Williams was chairman of the Securities and Exchange Commission when I first got into the business world in the 1970s. After he stepped down as SEC chair in 1981 he became president and CEO of the J. Paul Getty Trust, a cultural and philanthropic institution that includes the museum among its operations.

When people want to know about the history of Directors & Boards, I tell them that it was founded, in 1976, during a time of great trouble in the boardroom. Corporate America was caught in the ugly glare of the foreign payoff scandals, when boards seemingly were unaware of the behavior of their managers in illegally bribing foreign agents for contracts and were oblivious to the legerdemain in the corporate accounting. (Does that last part sound familiar?) Congressional hearings ensued, and a new law was enacted — the Foreign Corrupt Practices Act.

The SEC began putting the pressure on boards to act more responsibly, and independently. The SEC had two activist chairmen in the 1970s — first with Roderick Hills and then with Harold Williams — who strongly moved the needle in the direction of boards rethinking their role, their behavior, and their composition. A new era in the evolution of corporate governance got underway.

During his reign in Washington, Williams table thumped for separating the chairman and CEO positions. Yes, a topic that is still much debated today, some 30-plus years later, was a hot subject then at the SEC and in boardrooms – maybe I should say a "hot potato."

And that's why a remembrance of Williams comes so readily to mind with the news out of the Getty organization. I am about to publish a major piece on the wisdom — or folly — of separating the chairman and CEO jobs. Look for this as the cover story in the First Quarter edition of Directors & Boards, off press next month.

In a way, this separating the roles analysis returns the journal to the era of its roots — when boards were in big trouble for improper risk management and financial oversight, when the government was making life in the boardroom less comfortable, and corporate governance was about to enter a new phase in its evolution toward independent leadership.