Some thoughts on board structures and rules
May 1, 2010
By Quak Hiang Whai
hiangwhai@corporateobserver.com.sg
Imagine you start a business of your own. And then you become very good at it.
And you train your kids to take over. They become very good at it too.
And then suddenly, some regulatory body is now telling you you can't pass it on to your kids. And you can't have anyone who knows the business well to help you.
And you can't hire anyone on your board who happens to be a relative or who has close dealings with your company. Essentially, you can only hire people who are not familiar with you and your business. Better yet, if he or she is a complete stranger who happens to carry good paper qualifications from decades ago.
OK, I exaggerate.
But looking at some of the regulations and guidelines that are recently being recommended by some wise guys at the authorities, one gets the sense they are being written by people who have absolutely no business sense or experience in building and managing business. And all in the name of corporate governance and transparency.
But highly-regarded and well-thought out corporate governance and transparency as recommended by the West have helped gotten us into the current global economic mess.
Or at least they didn't prevent the supposedly well-regulated, well-governed boards of the likes of Lehman Brothers, Goldman Sachs and other financial giants from messing up big-time. When the intent is bad, no amount of rules and governance on paper can prevent bad management and fraud.
Business knowledge and experience count in business. Relationships count even more. Why should an effective board member who has contributed enormously to your business with his or her insights learned from all these years of watching your company be penalized, just because he or she has spent more than nine years as an independent director?
But increasingly, learned regulators are telling us how to structure our boards, how to pay executives, who we can hire, how long they can work for you and what business they can do. And now some wise people are even arguing for quotas for the right gender. Are we in danger of over-meddling with the boards and the
private business of entrepreneurs?
Much as we need to protect the interest of public shareholders who put in their hard-earned money, there are existing governance and disclosure rules to help protect investors and help them make sound investments.
At the end of the day, it is the individuals, the families and the SMEs (small and medium enterprises) who create innovation and enterprise. Not the regulators.
We need to go back to the basics and count on our common sense. Let's not suffer from the syndrome of over-education.
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