ONE MORE TIME. WHAT IS THE VALUE PROPOSITION FOR A
STRONG BOARD DOMINATED BY OUTSIDERS?
Put the legal requirements for a Board to one side for a moment. Put Sarbanes Oxley to one side for a moment.
From a business perspective, why do you need competent Boards dominated by strong outsiders?
The argument goes like this:
1. Good CEOs are champions. Champions are bred to have hubris. If they did not have believe in themselves, they would not be aggressive CEOs.
2. In the absence of a strong counterveiling force, some CEO Champtions will rigidily hold on to a once successful business model that ought to be thrown away. In the absence of a strong counterveiling force, some CEO Champions will foolishly rush into M&A activities that defy both logic and statistical probability.
3. This strong counterviling force is called the Board of Directors.
For a summary of a Stanford University study that supports this perspective, please click HERE.