I am borrowing the title of today's blog post from one used by New York Times columnist Bob Herbert in December 2008. Here is a sample of what he had to say in his column:
"Americans must resolve to be smarter going forward than we have for the past few years. ... We have behaved in ways that were incredibly, astonishingly and embarrassingly stupid for much too long. We've wrecked the economy and mortgaged the future of generations yet unborn. ... We were stupid in so many ways. We shipped American jobs overseas by the millions and came up with the fiction that this was a good idea for just about everybody. We could have and should have taken the time and made the effort to think globalization through, to be smarter about it and craft ways to cushion its more harmful effects and to share its benefits more equally. We bought into the dopey idea that you could radically cut taxes and still maintain critical government services — and fight two wars to boot! ... It's time to stop being stupid."
This appeal to "resolve to be smarter going forward" readily applies to what goes on in the boardroom. On the day that I write this, March 12, the Wall Street Journal is reporting three developments that absolutely cry out for someone to say, "Stop being stupid." Allow me the dubious honor:
• AIG is announcing that it intends to recoup millions of dollars in retention payments slated for employees who have already left the firm.
• The Black & Decker board felt there was no perceived conflict of independence in putting on a special committee charged with appraising the company's acquisition by Stanley Works — which would trigger an enormous payout to Black & Decker's CEO — a member who was significantly invested with the CEO in a personal real estate development.
• What the WSJ describes as a "scathing report" has been released on the collapse of Lehman Brothers, alleging transaction designed to distort a clear picture of the financial soundness of the firm; a follow-up statement from a lawyer for Lehman's then CEO, Richard Fuld, is saying: "Mr. Fuld did not know what those transactions were — he didn't structure or negotiate them, nor was he aware of their accounting treatment."
C'mon, people. What is a board doing when it approves a multimillion-dollar compensation arrangement designed to reward executives to stay but will still pay them royally if they leave? What is a board doing permitting a director who is in bed with the CEO on a personal investment to be on a special committee approving his merger-instigated huge payout — and not thinking that's a conflicted situation? What is a chairman and CEO, well-documented for his hands-on role in running the firm, doing in saying that he had no involvement whatsoever in a tactic crucial to staving off the collapse of his company? (Granting that he had no such involvement, why would he issue such a statement anyway — what kind of a reflection is that on his leadership to be claiming such ignorance?)
Some of the best minds in governance believe that "courage" is the most important attribute in being a director. Last year I devoted an editor's note to that very topic. Yes, exhibiting courage in the boardroom is one way to have a governance system that functions the way it should. Another way is to stiffen the spine of the system through legal and regulatory ordering — hastily enacted legislation like SOX or some of the stuff now spewing from Washington.
A third way, and maybe the best way — thank you, Bob Herbert — is to just stop being stupid.
