Earlier this week, a reporter from Reuters called me, wanting to know if I thought the firing of Léo Apotheker as chief executive officer of HP was a symptom of some deep problem in Delaware corporate law. Should it be that easy for a board to fire a CEO?
In a word, yes. Normally, the firing of a CEO is seen as a sign that corporate governance is healthy. At a minimum, it suggests that the directors are not beholden to the CEO, and that has to count in their favor.
In this country, we expend a lot of energy on creating independent boards, but a more profound corporate governance challenge is creating a competent board. Managerial incompetence is a problem with only one solution: termination. See here for an extended discussion.
When I read the above headline on the top Business and Finance story on the W$J, I was momentarily shaken. "Activists," of course, refers to shareholders who want to replace the incumbent directors. Lots of HP shareholders believe the HP board is incompetent -- and why wouldn't they after all of the shenanigans of the past few years? (including this) -- and replacement of those directors is the right solution to this problem.
Nevertheless, the board resists. Using company resources. I understand that a board's resistance to change can be value enhancing in some circumstances, but I don't understand our persistant objections to election reform in corporations.
Is there a deep problem in Delaware corporate law? Yes, but it has nothing to with Apotheker's firing. It has to do with the fact that the directors who did the firing still have their jobs.
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