Most boards have been rubber stamps in recent years, willing to do whatever corporate leaders wanted them to do. You can look at Enron's board and, in retrospect, see obvious weaknesses. Several board members were ultra-busy CEOs of their own firms; at least one was receiving a fee for advising the company on vague "European issues" in addition to substantial compensation for serving on the board. The result of Enron and similar scandals has been a call for pervasive reform and government regulation. But the real flaw in these organizations is one that no amount of regulation will address. Corporate executives and corporate boards must begin to speak the truth among themselves. They must begin to value truth and reward it.
It isn't easy to create a culture of candor within an organization, but it is possible. The plaque I mentioned at the start of this column belongs to Sidney Harman, CEO of Harman International Industries. In a recent quarterly report to the firm's investors, Harman addressed the question of the independence of its board by assuring investors that the company did no business with its mostly independent board members, and had other mechanisms in place to ensure both the board's and the company's integrity. More important, Harman made it clear that he constantly scrutinizes the organization. "I am fully engaged in this company. I pay attention, and I know what goes on throughout it," he wrote. The leader who pays attention and welcomes information, bad as well as good, has taken the vital first step in creating a candid, honest organization—the only kind that can restore confidence in our leaders and institutions.
Warren Bennis is distinguished professor of business at the University of Southern California and coauthor of Geeks and Geezers: How Era, Values and Defining Moments Shape Leaders, which is being published this month by Harvard Business School Press.
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