Thursday, August 22, 2013

Todd Henderson and Stephen Bainbridge: Rethinking Corporate Boards: Why Companies Need ‘Board Service Providers’

http://www.businessweek.com/articles/2013-08-22/rethinking-corporate-boards-why-companies-need-board-service-providers

Rethinking Corporate Boards: Why Companies Need ‘Board Service Providers’

 M. Todd Henderson and Stephen M. Bainbridge

"Hiring a BSP to provide board services instead of a loose group of sole proprietorships will increase board accountability, both from markets and judicial supervision. For instance, BSPs traded in public markets will be disciplined to provide quality services at competitive prices, and courts may be more willing to enforce fiduciary duties against companies than against individuals.

There currently is no market for directors. They find their way onto boards largely through personal connections, often with the CEO, or the opaque headhunter process, and because votes are private and decisions are made collectively, the accountability to shareholders is greatly diminished. Although it is possible for any individual to run for a board seat on any company, the publicity and voting costs are prohibitive. A BSP with a national reputation and the ability to provide all director functions would be able to reduce the cost of winning board seats."

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