Imagine with me a fictional corporation, Illinois Lincoln Logs, Inc. (ticker: ILL) that is the fifth largest company (by revenue) in the S&P 500 Index, accounting for 4.4% of the aggregate revenue generated by the companies within the S&P 500. Because it is a publically owned company, it is governed by a board of directors whose legal obligation is to oversee the overall operation and financial condition of the corporation for the benefit of, and in the best interests of, all the shareholders of Illinois Lincoln Logs! The board fulfills this obligation (referred to as its “fiduciary duty”) through its quarterly review of the decisions and actions of the company’s CEO and management team. A crucial part of this review process includes monitoring the company’s annual budget, operational metrics (growth, accounts payable, accounts receivable, and countless other metrics) and balance sheet.
It should be obvious that ILL is a major corporation within this scenario – a corporation whose success or failure impacts the lives of many thousands of workers, families, suppliers, customers, and so forth. Therefore, the highest standards of performance, accountability, and diligence must be applied to the work of the board.
I urge you to move over to the "SLIDE SHOW" (to the right of this article) to see the details regarding the financial mismanagement that has reeked havoc within ILL -- from an absence of budget management and sound fiscal discipline to an abysmal abdication of its responsibility to fund its pension promises. All of this has left ILL with the worst financial condition among all of its peers!
CONCLUSION (to be read after you've seen the slides):
A pretty discouraging picture, isn’t it? Is it hopeless, or are there action steps that can be taken to remediate these problems and transform ILL from an embarrassing morass of financial and administrative dysfunction... into a new entity with energy, positive momentum, and hope!
In PART II, we’ll consider what you could do if you were named to serve as the next chairperson of the ILL board of directors. Be on the lookout for Part II, because you are sure to find the job of chair very challenging!