South-Western - Management  
Directors in the Crosshairs
Topic Ethics and Social Responsibility
Key Words Boards of directors
News Story 

Unions and public pension funds have been gearing up to single out board members of corporations, holding them personally responsible for exorbitant executive pay, board conflicts of interest, and other unsavory practices. The effort gained momentum after shareholders' unprecedented vote of no confidence in Walt Disney's CEO Michael Eisner at the company's March 3 annual meeting.

The SEC is considering a rule that would allow shareholders to run insurgent candidates against directors on proxy in some circumstances. Labor intends to take advantage of this new rule when it goes into effect in 2005. The Business Roundtable is concerned that putting individuals on the hot seat will disrupt boards and can mask a separate agenda - exercising influence on board selections and how companies are run.

The AFL-CIO plans to ask other shareholders to withhold votes for Comcast Corp. CEO Brian L. Roberts and director Decker Anstrom. In April, labor plans to roll out similar attacks on up to a dozen directors, including three board members at United Rentals Inc. who approved big severance packages for top management, including themselves.

Labor's new stance has had an impact on companies already. If the pressure continues, more directors may find that serving on a board isn't quite as cozy as it once was.

Questions
1.

What is the role of a board of directors? What is a director's role in overseeing the ethical practices of a company?

2.

Should there be legal consequences when a board of directors does not assume a watchdog role over a company? Why or why not?

Source "Directors in the Crosshairs," Business Week, March 29, 2004, p. 95.
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