There is a game called Six Degrees of Kevin Bacon, in which the object is to link Kevin Bacon with another actor in less than six shared movies. Maybe a new game could be created, Six Degrees of Vernon Jordan, where all board members are only six directors removed from Vernon Jordan. For instance, Mr. Jordan is only four directors removed from Enron. Ronnie Chan sat on the Enron and Motorola Boards. Chan shared a Motorola Board membership with H. Laurance Fuller who also sits on the JP Morgan Chase Board. Lawrence Bossidy also sits on Morgan’s Board as well as the Merck Board. William Bowen sits on the Merck Board and the American Express Board with Vernon Jordan.
Or we can do it this way. Mr. Jordan sits on the American Express Board with Kenneth Chenault, who also sits on the IBM Board with Lucio Noto, who also sits on the Philip Morris Board with Jane Evans, who also sits on the KB Home Board with Ray Irani who sat on the IBP Board with Wendy Gramm, who sat on the Enron Board. Five moves.
Or we can go this way. Norman Blake, Jr. on the Boards of both Enron and Owens-Corning Fiberglass. Glenn Hiner on Boards of Owens-Corning and Dana. Jospeh Magliochetti on Boards of Dana and BellSouth. Leo Mullin on BellSouth and Johnson & Johnson. Ralph Larsen on J&J and Xerox. Jordan on Xerox Board. Five moves again.
This web of relationships, I believe, is one of the reasons Boards are supine. Management can escape Board scrutiny because Boards are partially made up of executives of other companies that may want to escape scrutiny from their Boards—kind of like the Golden Rule-Do Unto Others as You Would Have Them Do Unto You. Management can escape Board scrutiny because Boards are partially made up of non-executive outside directors who earn a tidy sum from being on Boards. Management can escape Board scrutiny because questioning management can get one kicked out of the club, like the threats to Mr. Hewlett. And no one wants to be kicked out of a great club.
If the Board isn’t ultimately responsible for overseeing management, why hasn’t the Board of Enron been called to testify to Congress? Could it be because this may threaten a profitable source of income for retiring public officials? Not to pick on anyone in particular, but George Mitchell, former Senate Majority Leader now serves on the Boards of Casella Waste Systems, FedEx (Shirley Jackson, former Chair of the Nuclear Regulatory Commission on the Board, also director of AT&T Corp., Newport News Shipbuilding Inc., Public Service Enterprise Group Incorporated, SCI Systems, Inc., Sealed Air Corporation and USX Corporation.), Staples , Starwood Hotels & Resorts Worldwide (Charlene Barshefsky on Board and also director of American Express), UNUM/ Provident Corporation, Unilever N.V., Walt Disney and Xerox. Anyone up for a game of Six Degrees of George Mitchell?