The court-appointed Examiner chose to continue the same lackadaisical approach to directorial performance and accountability in his search for answers as the directors themselves evidenced in their drowsy drift toward disaster.
A little noted statement in the report of the court-appointed Examiner in the Lehman Brothers bankruptcy reveals the extent of the deference displayed to the company’s former directors.
The Examiner admits in his report that he provided witnesses “advance notice” of the topics he intended to cover and that he allowed them to make use of notes and written statements before the interviews in order to “refresh recollection.” No doubt these were prepared with the assistance of legal counsel, whom the Examiner confirms represented interviewees in the “vast majority” of cases. Significantly, the Examiner chose not to conduct his examinations under oath, and, if that’s not astonishing enough, no transcripts were ever recorded. The Examiner preferred an “informal” approach over the formal depositions available to him.
This is how the largest bankruptcy in history conducted its search for information and how Lehman’s directors, who presided over the downfall, were allowed to take part in what amounted to a quest for the truth with all the rigor and intensity of a marshmallow roast – - without the fire.
We have long maintained that directors are among the most pampered class in the business world, accorded by society, the media, investors and the courts a level of deference and respect that has few parallels. Time and again, it is this approach that has permitted directors to take shelter in the harbor of the disengaged and uninformed, giving rise to the appearance of men and women who, having been lauded in press reports and company statements just days or hours before as experienced and exceptionally accomplished, suddenly adopt the demeanor of amiable dunces in their hapless efforts to explain what happened and why. This is what occurred in Enron’s collapse and before the fall of the Penn Central Railroad. The spectacle of Hollinger’s confused directors at Conrad Black’s criminal fraud trial in 2007, where board members appeared challenged even in reading important documents, will also be recalled among astute boardroom watchers.
As we noted well before the company’s demise, and repeated here, Lehman’s feeble approach to corporate governance was well established by its board and the structure and membership it adopted. It was, in our view, a significant and inevitable contributor to that downfall. It is an outrage that the Examiner chose to continue the same lackadaisical approach to directorial performance and accountability in his search for answers as the directors themselves evidenced in their drowsy drift toward disaster.