Quoted in Maclean’s Magazine on RIM

January 28, 2012

Recent changes only confirm that the  company  remains in denial

We are quoted in this week’s cover story of Maclean’s on the RIM fiasco. Regular readers will know that Finlay ON Governance has been on this story for several years and has long predicted the kind of stock meltdown and leadership turmoil that has rocked the company.  The co-founders’ decision to step aside from the co-CEO slot, but not out of the boardroom, and the appointment of an insider to CEO with an old-guard director moving up as chair of the board, do not change our views.

The Maclean’s piece presents a good overview of some of the failures but is a little short on the root cause, which we have long contended is RIM’s dysfunctional system of corporate governance.  Here are some further thoughts on that subject and why the recent management changes are unlikely to produce the results investors would like.

The fact that RIM’s top management and board could take so long to come up with so little just shows how far out of touch they remain.  It’s obvious that Balsillie and Lazaridis wanted their guy in the top spot and do not grasp why shareholders were looking for more than a marionette whose strings they can pull any time.

What is really alarming is that independent directors think this will work, when a clean break with a strong new CEO at the helm, plus a fresh outsider as board chair  – unaccompanied by RIM’s bulging baggage of failures — should have been brought in.  Of course, any new CEO worthy of the title would have insisted that Balsillie and Lazaridis depart the board, as was the case at Yahoo recently.  It will take a few more tries, and several new shocks, before the company actually gets it right  – if it ever does.

Separation complexes are unfortunate in dogs.  They are a disaster in company founders who can no longer read the market or the wishes of their investors.  The new insider CEO is not the solution.  Nor is the appointment of Barbara Stymiest as the so-called “independent” board chair.  We were among the first — and long before it became fashionable — to openly call for this kind of change.  But putting a long-time enabler of RIM’s governance problems in charge of the board is a little like promoting a sleeping sentry to captain of the guards.

RIM’s boardroom is located in Waterloo, Ontario, but as far as investors are concerned, these changes only confirm that it remains firmly footed in denial.

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in Board of Directors,Corporate Governance,Hot Issues,RIM

HP’s Board Leaps Backwards — Again

September 23, 2011

Another costly blunder from corporate America’s most dysfunctional, discredited and disdained board

HP’s board took another gigantic jump backward today.  It’s not so much that it fired one CEO and hired another.  People have come to expect that on a regular basis from what has become corporate America’s most dysfunctional, discredited and disdained board.

It is the shell game involving HP’s chairman that should prompt eyebrows to be raised even higher.  Ray Lane was the board’s non-executive chairman and played the largest role in the appointment of Meg Whitman as new CEO.  Now, he’s jumped inside, this time to become executive chairman of the board, with a much bigger payday as part of the deal.  We are unaware of any comparable situation where two outside directors suddenly have become insiders, one as CEO and one as head of the board she reports to.  Is this marriage of convenience the main reason why there was no full search for a new CEO?  Is it just one more sign of a cozy club mentality at work in a boardroom where accountability has been the missing voice?  We think so.

We also believe it is a further step in the wrong direction for the board to think that a lead director, yet to be appointed, will be able to provide the necessary focus for checks and balances that is so important to its fiduciary responsibility.  No lead director has ever prevented disaster from occurring in any major company.  It is bad corporate governance, pure and simple. For a company whose most costly product has been disaster, with billions in shareholder value wiped out over the past year alone, HP’s board obviously still does not get the fundamentals of how to execute on its significant responsibilities.

HP’s formula for a turnaround must include the highest standards of corporate governance, not the lowest. The rather large shell game it engaged in by turning a so-called non-executive chairman into an insider as part of the package that brought its newest CEO into the room shows that it does not even know where the switch is to turn that process on.

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in Board of Directors,Corporate Governance,Hot Issues,HP

RIM Needs a New OS — for its Boardroom

September 16, 2011

The game has changed.  RIM’s management has not.  Neither has its board.

Today’s latest (20 percent) plunge in the stock of Canadian based Research In Motion, this time because the company missed about every expected metric for the quarter, re-confirms that RIM needs a new operating system for its boardroom.  It is the board, with a its succession of lame directors, that has permitted a culture of smugness, distraction and disconnection to cloud the judgment and performance of top management, and has too long tolerated a disingenuous streak in the way the co-founders deal with adversity.  This is what has led to RIM’s fall from glory and the devastation of its stock.  Management was playing its own game and setting its own rules.  It thought success would continue indefinitely and the market would defer endlessly to its much-trumpeted wisdom.

The game has changed.  RIM’s management has not.  BlackBerrys are out.  Apples are in.  The kids decide what’s hip and everybody wants to be cool.  Holding up a new Playbook is the definition of uncool.  Launching it in the summer is the definition of stupidity.   Only grandiose egos, too used to everyone genuflecting to their brilliance, could come up with this foolishness.

Long before it became popular, in the wake of the billions of dollars in company value that have been obliterated, we lamented the weaknesses of RIM’s governance practices .  We predicted further casualties from a board mentality where management is effectively accountable to itself and still allows a regime involving co-this and co-that at the top that would not be tolerated in any mature, self-respecting company, let alone one that is experiencing something of a freefall in its shares. The stock is down more than 60 percent this year.  No significant change in management, or the board for that matter, has been forthcoming.

RIM’s problems will not end until the board steps up, key management actors are forced to step down and a new culture of accountability is rebooted in RIM’s boardroom.

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in Board of Directors,Corporate Governance,Hot Issues,RIM

News Corp Scandal Shows The High Cost of Ethical Folly — Once More

July 18, 2011

The purest treasure mortal times afford is spotless reputation. Shakespeare, King Richard II Two universal facts remain unchanged in the News Corporation saga of serial hacking and management misjudgments:  First, a company with a weak ethical culture, no matter how successful financially, will never fully survive the winds of public outrage when it flounders upon [...]

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Which Conrad Black?

July 4, 2011

Is it the good turtle soup or merely the mock? Finally, the long legal ordeal of Conrad M. Black, at least as it concerns the U.S. criminal courts, has come to an end.  There has been a trial, a jury verdict, a sentence imposed, an appeal, an appeal of an appeal, prison time served, a [...]

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Research In Motion’s Plunge a Failure of Corporate Governance

June 20, 2011

The crashing fall of Research In Motion’s stock from its euphoric highs where management could do no wrong (even when it did) to the current depths of shareholder odium has one explanation — and only one explanation.  It is a failure of corporate governance, pure and simple.  What brought RIM to this point was adumbrated [...]

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Disorganized money markets mask mob activity: report

June 8, 2011

June 8, 2011 | 13:24 Jessica Murphy, Parliamentary Bureau | QMI Agency Canada’s patchwork securities regulation system gives the mob plenty of places to hide, a new report indicates. The draft government report probing mob meddling in Canada’s financial sector, obtained by QMI Agency, suggests a patchwork of securities regulators across the country make it hard to [...]

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“Ask Not”: Still The Defining Call to Generations

January 20, 2011

A half-century later, the message that came to define the Kennedy era still stands:  We are all ennobled when we follow a purpose greater than ourselves. Exactly fifty years ago today, the word went forth that the torch had been passed to a new generation.  On this cold January day in 1961, a newly sworn [...]

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Camelot Half a Century Ago

November 8, 2010

America’s brief romance with what has been the closest thing to political Camelot since the Jeffersonian era began this night exactly 50 years ago, with the narrow election of John F. Kennedy to the presidency.  It would not be until early the next day before it was certain that Mr. Kennedy had actually defeated Richard [...]

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