An investor should pay attention to how well directors perform these tasks as a way to gauge where along the continuum from owner orientation to manager orientation they sit. | C HAPTER 13 DIRECTORS AT WORK An increasingly common lament sung across corporate America is that directors are overworked. They are asked to do too much must satisfy too many competing interests and so on. There is a simple and sufficient solution to this condition. Directors should be asked to do a short list of five things and do them well. The key jobs entrusted to any board of directors are as follows Selecting an effective chief executive Setting executive compensation Evaluating takeovers Allocating capital Promoting integrity in financial reporting Effective performance of these jobs ultimately depends not so much on governance mechanisms as on board trustworthiness. An investor should pay attention to how well directors perform these tasks as a way to gauge where along the continuum from owner orientation to manager orientation they sit. A management-oriented position is suggested by fat executive paychecks for a dismal performance. A stakeholder-oriented position reveals itself in poor returns on invested capital that keep unproductive plants operating in a bow to labor pressure. An owner orientation is reflected by good performance reasonable executive pay and the cultivation of productive workers in productive jobs. As a management orientation example ask yourself whose interests were really going to be served by AMP s resistance to Allied-Signal s bid discussed in Chapter 11 AMP s shareholders objected and so they obviously thought their interests were being disserved and AMP s plan to boost the company s profitability included cutting 205 Copyright 2001 The McGraw-Hill Companies Inc. Click Here for Terms of Use 206 In Managers We Trust the work force by about 9 or 4200 jobs and closing ten AMP s board ultimately may have served the corporation s interests in concluding a deal with a friendly partner but AMP s CEO and management undoubtedly pressured the board to resist what by all accounts looked good for shareholders in favor of something
