Power, Corruption, and Corporate Governance

“Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.” Bishop Mandell Creighton, 1887.

I would agree with Bishop Creighton that great men are almost always bad men. The operative words are almost always. Jesus Christ was a great man, but He was not bad. John Wesley was a great man, who had a sin nature but had his heart strangely warmed at Aldersgate. This event resulted in an incredible movement that impacted the world and saved a country from the same fate suffered by France.

I agree there are many examples of great people who were bad, so I can’t disallow the good bishop’s comment. We must recognize the fallen nature of humankind, therefore we must admit to the need for appropriate controls within our organizations to protect against power corruption. If you are a CEO of a company with sales of $60 Billion, you have a great level of revenue, more than many countries through out the world. Thus, the danger of corruption is prevalent.

One way that power and corruption is enhanced is when corporate leadership has little or no accountability. Where this practically plays out is in the area of corporate governance, specifically when the board of directors allows the CEO of the company to also be the Chairman of the Board.

This practice is being debated by the Chairman’s Forum, a group representing current and former Chairmen of American and Canadian companies. This group is stepping up its drive to separate the Chairman and CEO positions, thus ensuring a better functioning board and complete separate of duties ensuring better agent accountability.

“The group’s proposed corporate-governance policy endorses appointing an independent director as Chairman after an incumbent CEO-Chairman leave.” The belief is that separation of duties is a much better governance practice.It does appear that more companies are recognizing the importance of this practice. In November, even Apple named outside director Arthur Levinson as Chairman. The argument against this movement is speed of decision-making. “Operational nimbleness,” according to the Dollar Thrifty Automotive Group, “is critical to maintain competitive advantage,” which is why this company just awarded its CEO with the title of Chairman of the Board.

Personally I think the separation is a good thing. It initiates a level of control that will ensure agent efficiency as well as principle oversight. “Supporters of the role split say the setup allows the chief executive to run the business while the Chairman leads the board, recruits new directors and manages CEO succession.”

If power corrupts, and absolute power corrupts absolutely, then separation of duties makes sense. All of us know of examples of business leaders, politicians, and even pastors who have believed they are above the law and the rules don’t apply to them. These powerful individuals forgot who they were in the big scheme of things. I have no doubt that all of us have the tendency to make the same type of mistakes these others did. Thus, we need control mechanisms designed within our governance practices to protect ourselves. I think the separation of duties is a good thing.

And that is my thought for the day!

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