Boards of Directors Finally Taking Responsibility - At Least Some of Them

While I haven't written about the topic on this blog, I have been a very strong critic of Boards of Directors and their general lack of accountability over time.

While that statement is very broad and full of exceptions, my personal opinion of boards, in general, is skeptical at best. Although most large, publicly traded corporations' directors are very successful and well regarded, there is appearance of a lack of accountability. CEOs are fired, managers are fired, but directors are rarely put out, except by activist investors, like Carl Ichan. Find Premium Finance Jobs on Doostang. Start Now! www.Doostang.com

While working about 223 hours a year, directors usually make about $30,000+ in retainers and much more in stock, as well as "meeting fees" for an average of $119,164. Not bad work, if you can get it. RingCentral Online - Free Trial plus 10% Off

However, according to the Wall Street Journal, in an article titled, "More Directors are Cutting Their Own Pay," some boards seem to have gotten the egalitarian bug!

According to the article, GM, Ford, Eddie Bauer, and Herman Miller, to name a few (out of 43), have agreed to reduce their compensation. While this is a good start, it may be a false comparison, as:

"The pay cuts follow recent increases in overall compensation for individual directors...total median director compensation rose 12% to $119,164...It was the third straight year of double digit increases."

Seems like these folks have been doing pretty well, despite the disastrous years the major automakers have seen. However, I must give credit where credit is due. The directors at GM: "...recently cut their pay for the third time in four years...," but, "...revived their full retainer in 2008." However, with the bailout money, they reduced their retainers to $1.

Ford seems to have done a little better: "...directors gave up the $40,000 cash portion of their annual retainer, as well as payments for committee chairmen." So maybe, maybe, boards are beginning to see that even they, the ones who are supposed to supervising the executives, are part of the rise and fall of the company. Perhaps reducing director compensation is a pointless exercise for companies that are billions in the hole, but it does demonstrate accountability.



Although I would like to end this on a high note, the Journal article speaks of an unnamed company and an unnamed director, who, on being asked to reduce his compensation, demurred, as his compensation for 223 hours of work is "...an important part of my income."

I guess if you make the US gross median income of $50,740 and lose your only job, its not as important as that director's income. How's that for accountability?!

Hydrogen Fuel-cell Bus, Another Loser Drives By

**Read the follow on articles, "Big Green Trucks" and "Hybrid Hummer Hums!"**

Alternative energy is great, so long as it is cost effective. As reported in Green Car Journal, and written about by Bill Visnic at Edmunds Auto Observer, in one 3 bus test, hydrogen fuel cells are a bust, big time.

Here is the background:

"To fulfill a California Air Resources Board requirement that operators of large bus fleets participate in a Zero-Emission Bus demonstration program, in 2005 the Santa Clara Valley Transportation Authority purchased three buses powered by early versions of fuel cells developed by Ballard Power Systems Inc. of Vancouver, Canada."

OK, I am all for pilots, prototypes and testing. Sometimes it leads to very successful outcomes, and other times they just miss the mark. That is why Boeing and Airbus do destructive testing of airplanes. However, before these pilots take place, there is usually a fairly accurate prediction of the outcome. Additionally, good business practices provide that if the predictions and assumptions are wildly off, the pilot is canceled.

In the case of Santa Clara, these buses were a complete flop. The article states that the usual cost per mile to operate a diesel bus is $1.61, however, with the hydrogen fuel cell system, it is $51.66. Further, the hydrogen fuel cell buses broke down with greater frequency and the cost to repair were significantly higher. A diesel bus has a per mile part cost of $0.34, while the fuel cell bus per mile part cost was $34.40. Wow! As if those figures weren't enough, the fuel cell bus broke down six times more than the diesel bus. So, about every 1000 miles, the fuel cell bus broke down. Would you tolerate that in any of your personal or fleet vehicles???

Not that this test was all bad, the company who made the bus, Ballard, has decided to exit the vehicle fuel cell business and sell the assets to Ford and Daimler. That my friends, is economic efficiency.