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 on these pages some time ago. A few changes in boardroom players followed our reports, but a change in culture did not. The current crisis confirms that the board remains overly deferential to its co-founders. This, along with the fact that directors continue to permit them to head the board as co-chairs, as well as head the management team as co-CEOs, is exhibit one in the case for RIM’s governance shortcomings. Any board that would have allowed the two men who were at the center of RIM’s options backdating scandal and who displayed such sophomoric excuses as to their knowledge of corporate governance practices and basic accounting rules (Mr. Balsillie retains a professional accounting designation) is not a board that entirely understands its role in protecting shareholder interests. We were the first to call for the appointment of a non-executive chair at RIM some years ago and for the dismantling of the peculiar positions of board co-chairman and management co-CEO. Those reforms are needed now more than ever, yet the board seems both deaf and blind to their urgency.
As RIM’s shareholders have watched billions wiped out in stock value over the past several weeks, little has been heard from the board or its lead director, John E. Richardson, however. Nor has there been any indication that directors are foregoing their fees during a time when investors are losing so much. Each director is paid a minimum of $150,000 annually. That’s a reasonable fee for directors who are adding value; it is far too much for bystanders to a company’s calamity. Exactly one year ago , RIM’s stock on the NASDAQ Exchange closed at $58.84. As of this posting, the stock has fallen to $26.74. Investors are bailing in droves.
It is time for a shakeup at RIM. It starts with a board that ceases to be mesmerized by management actors who have too long dominated the corporate governance stage and brings in serious accountability reforms that raise investor confidence and restore corporate performance.