San Francisco – California

 

 

 

 

 

Boards Of Directors

 

 

 

The price of a successful country is offering rewards to success.  Are the rewards too large?  The alternative is paying too much for failure.

 

An interesting proposal by a U.S. congressperson is to require companies to have employees represented on the Board of Directors.  There is no reasonable logic to this.  The Board needs to be exceptionally knowledgeable about the company.  Why pick people who have not progressed to the top?

 

An example of the folly of this approach was part of a consulting job I did in Poland for the U.S. State Department.  I was advising on house construction design when the president of the company told me that they were required to have a meeting of the stock holders to decide on what to do with the cash resources of the company.  In converting the company to a private company from a public company the government gave the stock equally to all employees and the employees had decided to distribute the cash assets equally to all stockholders.  This would mean the company could not buy the land and materials to enable the company to build homes.

 

That is the point about having employees participate in management decisions.

 

There was a solution however. 

 

I advised changing the voting to allow employees to obtain stock or money.  In the vote the management took stock and most of the employees took their money. Management gained control and there was enough money to stay in business. 

 

Think about the ramifications of this!

 





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