If you were a director at a company that had to be bailed out by the US government, would you leave the board or would you continue to serve? This is a tough question and one that faced many directors last year. At many of the most high-profile companies, directors did leave the board – either by choice or in response to pressure from outside the company. I recently studied the governance changes made by the 25 most high-profile TARP recipients for a report published today, and found that 22 of those companies had changes in board composition since May of 2008. A few of these companies had dramatic turnover among directors (e.g., at AIG, only two of the 11 current directors have served on the board for more than two years). Other governance changes have been made by many of these companies, including changes in the board leadership structure and to the election standards used for director elections.
Changes made by some of the TARP companies give reason for cautious optimism that the boards now have more potential to be effective. However, let’s wait and see what decisions these boards make about CEO compensation, risk assessment, etc. I hope these companies will provide more information about these and other decisions as called for under the SEC’s new disclosure requirements. We will be watching as these companies file their proxies in the coming weeks.
Annalisa Barrett - Senior Research Associate
