Much of the crisis in the banking industry has been blamed on the inaction of the boards of directors at companies including Bank of America (BAC) and Citigroup (C). Some of Citi’s most prominent members have left, probably not entirely of their own volition. The board at B of A has been savagely attacked over the last several weeks because it did not insist on better due diligence in the buyout of Merrill Lynch and for allowing large bonuses to be paid to employees after the firm had taken TARP money.

The boards of GM (GM) and Ford (F) have also been singled out because they willfully refused to prepare for the demand for fuel-efficient vehicles. Management at these companies went for the easy money by building large SUVs and pick-ups when fuel prices were low. That was hardly a good five-year plan as the results of the last several quarters have proven.

Several GM board members have served since the late 1990s, so they have seen enough of the history of the car industry to know that oil does not stay cheap forever. Two of the longer serving members on the Ford board are members of the founding family. They could hardly have missed the lessons of the early 1970s oil crisis.

Each of these four companies has directors who chose not to ask hard questions and demand answers. How does a bank that was making $1 billion a year suddenly make $10 billion? How does a car company that nearly went out of business when oil prices rose sharply over three decades ago decide to reduce spending for the development of fuel-efficient vehicles?

Boards have some understandable reluctance to cross some lines if they may not have a tangible effect on company results. The Apple (AAPL) board clearly decided that Steve Jobs had some right to his privacy about his health. That may have been bad for investors. No one may ever know.

Several of America’s most famous companies have fallen on very hard times recently and investors might want to ask whey their boards appear to have done nothing demonstrable to help shareholders.

The first company on the list is The New York Times (NYT). It has been clear for over two years that the newspaper industry is in grave trouble even though internet initiatives have had some modest success. But, the New York Times chose to keep a number of newspaper properties which have been in trouble, notably The Boston Globe. Investors should want to know why the board did not demand a plan for restructuring the company. The easy answer is that the founding Sulzberger family controls enough of the voting power of the board so that actions by other members could have been ineffective. That does not mean  that the board should have given up its fiduciary responsibilities. Members who believed that their obligation to the shareholders had been compromised should have stepped down long ago. If anyone did leave the NYT board over matters of disagreeing with the company’s direction, it was poorly reported.

Motorola (MOT) is another American business iconic brand which is close to the point of extinction. The company’s core handset business has been flailing for close to two years. One CEO was fired over a year ago, but now the  firm has two CEOs. One of them was to run the handset businesses after it was spun-off from the main company. That process has been delayed and may never happen. Motorola lost $3.6 billion in the fourth quarter of last year. For that quarter, revenue from the company’s handset unit dropped by over half  Several members of the Motorola board have run other huge firms including Deutsche Telekom and JPMorgan. But, the company still has two CEOs and has not explained to shareholders why its cellular phone unit will never be worth a dime.

GE’s (GE) board only has to answer one question. With its shares at a multi-year low and trading almost 70% below where they were twelve months ago, why is the company still a conglomerate? The only answer to that is that the board and senior management have decided to keep it that way. It has become harder and harder to defend having entertainment, medical products, and jet aircraft manufacturing under the same roof with several risky financial services units. While the company’s CEO has defended that point of view, it is hard to imagine why the board has supported the strategy. The former head of JPMorgan sits on the GE board along with the former CEOs of Johnson & Johnson (JNJ) and P&G (PG). It would be interesting to ask them how they would have fared at their companies with shares down 70%.

One of the largest American companies that reached a crisis in the last month is Dow Chemical. It lost a deal with Kuwait that would have given it about $7 billion. It also bid to buy Rohm & Hass (ROH). Now that the money from Kuwait is gone and the worldwide chemical industry is in a deep recession, Dow is backing away from the acquisition of Rohm & Hass. Based on all public information, it has no right to do so. When did that Dow board know that the Kuwait deal was in trouble? Did it decide to rely on the money which was coming from the Middle East company to complete the Rohm deal? Did anyone ask how the M&A transaction would be financed absent the Kuwait joint venture? Rohm has now fairly taken Dow to court and insisted that the deal be completed. It has pointed out that Dow has access to the capital necessary to close. That capital may be expensive, but the legal and ethical obligations are clear. Dow CEO Andrew Liveris has quickly developed a reputation as a man who can’t be trusted. That has already started to rub off on the board.

Many other large company boards have abdicated their responsibilities to their shareholders as the firms that they were supposed to protect fell apart. It is remarkable that so few directors at other large companies have learned so little from these failures in governance. More large companies may fail as a result.

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Douglas A. McIntyre

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