The effects are insidious and more far reaching than you might imagine. “It creates a culture with no accountability,” says Charles Elson, director of the University of Delaware’s John L. Weinberg Center for Corporate Governance. In companies where directors are genuinely subject to the shareholders’ will, CEOs get fired; BP’s (BP) board fired Tony Hayward last year, for example, and Hewlett-Packard’s (HPQ) board fired Mark Hurd. The message cascades down through the organization: Bad behavior gets you fired here. But at companies where the CEO can fire the board, a different message cascades down: We don’t answer to the shareholders, we answer to just one person. It’s the rule of man, not the rule of law.
Is this an overreach by Colvin? Read this and see what you think:
To see the results, consider the most infamous scandal companies of the past several years - Enron, Worldcom, Healthsouth, Adelphia, Parmalat. Like News Corp., each had risen from nothing to huge success under one man, and through various means he had maintained total effective control. Employees felt they were beholden to a person who was beyond outside governance. The results were devastating to shareholders, employees, customers, suppliers, and communities.
While this is anecdotal, certainly, and it leaves out companies like Tyco and the mortgage-bubble predators, it’s fascinating all the same. Combine it with the goings on at its UK newspaper arm, the coverup facilitated by his executives, including his son, the sordid tale of News America, and the corruption long documented in Murdoch’s behavior with despots like the Chinese, and the bigger picture emerges.
And it’s ultimately why Rupert Murdoch can’t—and won’t—escape responsibility for the crimes of his underlings.