What are Directors Worth, and What do They Owe?

All weekend, I've been thinking about James B. Stewart's excellent column in Friday's New York Times about "bad directors and why they aren't thrown out." (Full column, here)

His "shining" example of a disastrously bad board is Hewlett-Packard. Item by item, Stewart follows the board's non-actions through the Mark Hurd sexual harassment disaster, through the hiring of fired SAP chief Leo Apotheker, the "wildly overpriced" acquisition of Autonomy, a UK software maker, and eventually the firing of Apotheker (with $13 million in "termination benefits") -- during all of which the company's stock slid by more than half.

To add insult to Hewlett-Packard shareholder's injuries: "all 11 HP directors were re-elected on March 20."

In its proxy materials, HP recommended that the entire slate of directors be re-elected, "citing the risk of 'destabilizing' the company by changing directors in an 'abrupt and disorderly manner.'"

It's hard to see how the company could be more destabilized by a bunch of newcomers than it already has been by a bunch of rubber-stamps.

What do directors owe the companies on whose boards they serve? For their generous salaries for part-time work (per Stewart's article, HP directors "received a mix of cash and stock payments ranging from $292,000 to $380,000 in 2012."), I think that the least they owe the company is a measure of integrity.

Did no one on the board question the hiring of Apotheker? Did no one question the price paid for Autonomy? Did no one question.... Oh you get the point.

I know the power of group-think, that impulse to go along with what everybody seems to think is right.

Was that the problem? Or, in this case, was it the power of that hefty cash-and-stock incentive? Rock the boat too much, and you might find yourself out of favor, and out of a cushy little piece of cash.

Compensation experts are always saying that top-dollar needs to be paid to entice the most talented executives and board members. But maybe top-dollar is just a little too much.

Today's Times carries a DealBook column by Susanne Craig (here) on the soaring pay for bank boards. You thought HP directors did well? According to Craig, at Goldman Sachs, "the average annual compensation for a director ...was $488,709 in 2011, the last year for which data is available, up more than 50 percent from 2008", and some directors earned over $500,000.

You know, I have a bunch of household renovation projects I'd like to take up, so I could use a little extra cash. I'd be happy to serve on the HP board.

I don't see how I could do worse than the current crop.