In an article entitled Teflon Directors published today at the Forbes website, Maya Roney reports on the present whereabouts of the directors who served on the boards of Enron, Global Crossing, Worldcom, Adelphia, Tyco and Waste Management during the ‘scandal’ periods.1
Between them, these directors still hold in excess of 120 directorships at other public listed US companies.
We know that shareholders have a difficult time challenging board nominations supported by incumbent boards. However, withheld votes in director elections indicate general levels of shareholder dissatisfaction with the status quo.
In 2003, shortly after the breaking news of corporate scandals, average votes for the ‘teflon directors’ listed in the article was 3% less than that of all other nominees to US public company boards. Since the average level of support for board nominees is around 95%, 3% makes quite a big difference in guaging general levels of shareholder confidence.
However, the margin has narrowed to 1.3% in 2004 and 0.5% in 2005. This suggests that shareholders become complacent or, as Roney points out, are not informed about the past failures of board nominees: “…many companies don’t make it easy for shareholders to find out where their directors have been…” omiting mention of Enron, Global Crossing or WorldCom from directors’ bios.
The Corporate Library maintains a database of ‘problem directors’, amongst which are listed many of the teflon directors. Now that the majority vote standard is taking hold, reputation may start counting for something in director elections.