The Biggest Problem With Corporate Governance Is Hiding In Plain Sight

To understand the problem, let’s begin with how listed companies are governed. At the top you have a board, typically consisting of a chairman and a number of directors, some of whom are usually independent or possess specialist expertise. Their job is to supervise the executive management in the running of the company. The board of directors is there to protect the long term interests of various groups: most obviously shareholders, but also other stakeholders like employees and local communities. The key point is that the board of directors operates as the representatives, or agents of the company’s stakeholders. And, generally they are rewarded pretty handsomely for this. In that sense, a board of directors is no different from any other agent you might employ to protect your interests: like a lawyer, publicist, head-hunter, mortgage broker, or even a nanny.