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Integrity - use of values or principles to guide action in the situation at hand.

Below are links and discussion related to the values of freedom, hope, trust, privacy, responsibility, safety, and well-being, within business and government situations arising in the areas of security, privacy, technology, corporate governance, sustainability, and CSR.

Assigning corporate culpability, 18.4.04

About Business

Investors blame boards and CEOs for failing to improve performance, according to a survey of large fund managers published recently by McKinsey Quarterly.

Several shareholder initiatives are challenging traditional board practices. For example, Mark Sirower reports in The Wall Street Journal that in 2003, 48 shareholder proposals were voted on with the goal of eliminating staggered boards.

Board membership terms are staggered in 60 percent of the Standard & Poor's 500 companies. The ostensible reason is to provide continuity to board leadership. Critics argue that staggered terms protect entrenched boards and prevent wholesale removal of an ineffective board.

In March, the Securities and Exchange Commission also heard arguments in favor of augmenting shareholder influence in selecting board members. The proposal would enable shareholder groups to place board candidates on the ballot under certain conditions to run against the company's proposed slate of directors. Business groups are waging a campaign against the SEC's plan for corporate proxy ballots, arguing that this might expose boards to the influence of narrow interest groups.

Board members do concede that their boards are still not models of governance or accountability. According to a survey of 150 U.S. corporate directors reported in McKinsey, they view directors' lack of motivation and limited time commitment to board activities as the most significant impediment to improving board performance. Over 75 percent of the respondents also see the Sarbanes-Oxley Act as incapable of driving board improvements.

Board members also point fingers at the CEOs of companies they direct, claiming that CEOs resist change and prefer non-independent board members. A source of director frustration is that CEOs and insiders set the agenda for board meetings and constrain discussions.

The most visible disagreement between CEOs and many boards and investors concerns the dual role of chairman and CEO. CEOs want it combined, and most investors and directors want to split it according to the McKinsey survey.

Comparison with other countries makes the case that the CEO/chairman structure is a matter of tradition, not strategic necessity. In Germany, the Netherlands and South Africa, all boards have split roles, and in the United Kingdom, Australia and Canada, the vast majority of companies have separated the functions and it works perfectly well. In the United States, the reverse is true, with only 20 percent of boards splitting the two roles and an additional 50 percent opting for a lead director to provide some counterbalance to CEO power.


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"We shall need compromises in the days ahead, to be sure. But these will be, or should be, compromises of issues, not principles. We can compromise our political positions, but not ourselves. We can resolve the clash of interests without conceding our ideals. And even the necessity for the right kind of compromise does not eliminate the need for those idealists and reformers who keep our compromises moving ahead, who prevent all political situations from meeting the description supplied by Shaw: "smirched with compromise, rotted with opportunism, mildewed by expedience, stretched out of shape with wirepulling and putrefied with permeation.
Compromise need not mean cowardice. .."

John Fitzgerald Kennedy, "Profiles in Courage"


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