Insanity is doing the same thing over and over again and expecting different results.

If some traditional directors aren't doing their jobs (see today's NYT column by Gretchen Morgenson, here), then why is it that people who are likely to do a better job don't get chosen as directors of public companies?  It can't be that potentially good directors are that hard to find.  We aren't.  It must be that boards are afraid to try something new, even when the "old" doesn't work well for them. 

I'm looking for a board that is willing to take a chance on some new blood.  Takers?

What do these two things have in common?

The stor(ies) on Titanic II (e.g., here) and this story on how the banks are back to bundling up risky loans again. 

My favorite quote from the NYT story:

Banks have won over investors by taking steps to make this generation of structured products safer than the last one. But with demand for these products on the rise, credit ratings agencies and regulators are warning that the additional protections are already dwindling, allowing some of the old excesses to creep back into the market. 

And my favorite quote from the Daily Mail story:

Mr Kanerva, of Finnish boat designers Deltamarin, added: 'I can assure you that from a safety point of view it will be absolutely the most safe cruise ship in the world.'
'We are taking into account all of the possible incidents and accidents and we try to simulate all of those occasions.'

And people wonder why we keep making the same mistakes over and over....

Dear HP board: I'm available (still).

In today's New York Times, James B. Stewart walks us through the mechanics (here) of why the HP directors who have made some abysmal decisions were re-elected. 

If boards want to bring on people with different experiences (and that's a big assumption), then they're going to need to figure out a way to find those people.  They're not going to find them on the boards of other public companies.  They need to ask their search firms to be more creative in locating possible directors.

There are all sorts of people that those search firms could find.  Academics who write about governance or about the industries of those public companies are a good start.  But I'm sure that the search firms could cast their nets more broadly in all sorts of ways.

I've been interviewed for one public company's board, asked to interview for another one's board, and invited to interview for a private company's board.  In two out of the three cases, the search firm indicated that it was interviewing me for a "diversity" seat.  (In the third, I think that the company was hoping that I'd join the board and stop writing about it.  Sorry, Enron.) 

I'm not valuable to a board because I'm female.  I'm valuable to a board because of my study of why some very smart people have found themselves doing dumb things.  I'm valuable because of my thoughts about executive compensation.  I happen to be female, and I'm sure that my socialization as a middle-class, well-educated female might bring some new perspectives, but that's not why I'd be useful to a board.

Non-profits are comfortable putting me on their boards.  So, to those search committees looking for new blood, here I am.

Dear H-P Board: seriously, you need to add someone like me.

When I was reading today's Wall Street Journal story about the problems with H-P's acquisition of Autonomy Corp. (here), I couldn't help thinking that the problem with many public boards is that they have too many people who have run large companies and not enough people who study human behavior. 

Boards absolutely need people who "get" their business model and understand how to create the type of environment that will help a business thrive.  But they absolutely also need people who can watch the board's decision-making and call "shenanigans" on decisions that are being made for the wrong reasons and with the wrong dynamics.

Of course, I'm saying this in part because I think that I would add value to a public company's board.  I'm also saying it, though, because I can think of many people besides me who could do the same.

Boards:  next time you need to fill a seat, try hard not to fill it with someone whose background is just like everyone else's.  Insanity, after all, is doing the same thing each time and expecting different results.

Let's see if I can get this straight....

Affairs aren't good things, I know.  But let's do some calculus:

CIA Director has affair, has to resign.  I get that, although I'm saddened by that, because I had a great deal of respect for him.

Incoming Lockheed CEO has affair, gets fired--and gets $3.5MM in severance pay.  Huh?

Great new article about corporate governance.

See here. 

It's the incentives.

In today's special Dealbook section on BigLaw, there's a great article about the culture of firms like Cravath (here).  What I found especially interesting was the notion that taking out the eat-what-you-kill types of incentives, as well as the "if we don't pay them a lot of money, they'll leave" instincts, leads to a firm where people aren't necessarily cutthroat and still get to do very interesting work.

Not a big surprise.  After all, people work to fulfill the incentives given to them.  The people who focus on salary (see "anchoring effect"), at least after they reach the "comfortable living" threshold, seem to me to be among the most unhappy people.  I've had colleagues at every place I work whose mission in life seems to be to ferret out everyone else's salary and then sulk if they're not at the tippy-top of the list.  (They also tend to taunt the higher-paid among their colleagues.)

So when folks are paid in lockstep, they have to find their self-worth in other areas, such as the quality of the work they're getting, or the opportunities to do new and interesting work. 

Folks who head up organizations should take note.  It cannot be true that people need to be at the top of the pay scale to be happy.  And, because we don't live in Lake Wobegone, not everyone can be at the top of the pay scale.  Giving people opportunities and--when the money is there--raises is important.  Placing people into ordinal rank by salaries alone isn't.