The decline of power, moreover, is not confined simply to the shareholder but, according to Business Week, has extended to the board of directors. Even the board, which once sat at the right hand of the source of all economic power, must change its role. Its control is now becoming control in theory rather than in practice. “One of the totems of business is the board of directors. That august body, once synonymous with power, prestige, and probity, is now under attack. Its critics call it an ornamental anachronism and charge that board members no longer protect the interests of stockholders.” It seems that boards merely rubber stamp what managers have already decided, and can protect the interests of shareholders only when those interests coincide with those of the managers. “One company president, irritated that his directors did not give him total control, said: “I didn’t get to be president by soliciting a lot of opinions, then getting a consensus of everybody around, and going along with the majority–and that’s one of the reasons our board has never really shaped up.'” A company director is reported to have said: “The reason I don’t get involved as an outside board member is that I don’t have time to get the facts, and I prefer not to look stupid. Silence is a marvelous cover.” It would further seem that “in most large and medium-sized companies where the president and board members own only a few shares of stock, the president determines what boards will do. In most cases this means that the board is relegated to performing functions that are substantially diluted from the classical roles of policymakers and guardians of the stockholders’ interests.”
With a business run by an entrepreneur there is an owner, employees, and customers, with the entrepreneur being the owner. But with the professionalization of these three, the situation is different. it is no longer true to say that the shareholders own the company. Shareholders simply own shares. To “own” means to be able to control, as well as to have responsibility for, and although shareholders generally have a fair degree of ritual control, the real control of a company resides in the role of the president.
March 14th, 2020 ~ Learning about the role of president is an important element in this book. We will learn more on this soon. Also, keeping in mind the equal importance of each of members of the triad: employees, shareholders and market.