00:00 Speaker A
Let’s get to some of the other things that you talked about in your piece in terms of other sort of structural changes that could be made. Um, and one of them does have to do with boards, which under regular regulations, you know, you have to have independent board directors.
00:16 Speaker A
Why is that not a good, I mean, it sounds good on paper, right? To have people who are not sort of, um, buddy buddy with the executives at the company.
00:27 Speaker B
Yeah, and independent directors are good. and uh there’s some great independent directors out there. I’m an independent director and I like to think I’m okay.
00:37 Speaker B
The problem though is that uh we took a good idea and we turned it into the almost the only idea we have about board composition.
00:46 Speaker B
Uh we now have boards where in most boards, the only inside director is the CEO.
00:54 Speaker B
And so you have a board that’s entirely filled with individuals who only know what’s going on in the company because they’re told by the CEO.
01:02 Speaker B
And whose only stake in the company is stock options and maybe a bit of reputation, but they don’t have deep ties to the company the way inside directors do.
01:12 Speaker B
And when you look at at this point, 40 years of empirical research on boards with sort of all independent directors, you find uh in the research either they don’t outperform boards with inside directors, or in many cases they do worse.
01:29 Speaker C
Bryce, if I can just jump in here, Julie and add to that.
01:33 Speaker C
Uh, I like independent directors. I’ve been one, but I think they actually have to understand the business. And the governance gurus 10, 15, 20 years ago decided, you know, if you were a customer of a company or a supplier, you couldn’t be on the board. That can be the most valuable people and we got to going to diversity we went almost too far in looking that as a primary criteria. I think we really look to have a board that’s knowledgeable former
01:53 Speaker C
CEOs and people that know something about the business. that we’ve made it too hard for them to become independent directors. So I’d like to encourage that uh because I think that can be extremely helpful.
02:04 Speaker B
Well Bryce and if I if I can just add to what Bill says,
02:08 Speaker B
this idea that independent directors should be the only directors on the board besides maybe the CEO is based on the idea that the only value that a board contributes is keeping an eye on the CEO, monitoring management. But anyone who’s been in a board room realizes the real value directors give is in strategy and making connections and providing a sober second look and acting as a sounding board.
02:25 Speaker B
Boards should be selected for those qualities, not just the empty category of doesn’t know the CEO very well, may not like them.