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| 2002 News and Press Releases |
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HEADLINE ARCHIVED:
Boards Find It Harder To Fill Hot Seats
By: James Cox
USA TODAY. July 31, 2002
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Excerpt: Headhunter Russell Reynolds recently went to three companies with candidates for their empty board seats. All three of his prospects wound up getting offers. That's when it got weird. One wouldn't accept until he sat in on two board meetings to convince himself the other directors were up to snuff. The second sent a team of financial experts to the company recruiting him. They took a week to go over its accounting procedures before he was satisfied and agreed to join. The last candidate, a CEO, accepted a seat on the board of a health care company. But she was overruled by her own board and told to stick to the business she was being paid to run. The once-clubby boardroom is a lonely place these days. The deluge of corporate scandals at WorldCom, Enron and others has made directors harder than ever to find. Candidates are begging off because it's too much work, and with the number of lawsuits against companies and directors exploding, too risky. For headhunters, the process of finding new directors has become a death march through the Rolodex. Search firm Christian & Timbers says that before the Enron scandal unfolded, it typically contacted 25 people to find two good candidates for a board vacancy. Post-Enron, the same search requires reaching out to 100 prospects -- "even for the prestigious, marquee boards that people were dying to sit on just a year ago," CEO Jeffrey Christian says. The liability issue is real. Shareholders and bondholders filed 485 class-action securities fraud lawsuits last year, up from 109 just two years before. Enough bad news -- a big earnings restatement, steep losses, a credit downgrade, a Chapter 11 bankruptcy filing -- almost guarantees a lawsuit, whether or not there is evidence of fraud. Past shareholder complaints usually named the target company, its CEO and other key executives. Now, big pension funds and other institutional investors are deliberately naming board members, too, arguing that accounting improprieties and other shenanigans couldn't take place if directors were on the ball.
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