One of the great statesmen of corporate governance, Ira Millstein, answered questions about boards and the changes likely to come from the new administration in an interview with The American Lawyer, excerpted below:
How would you characterize the state of corporate governance today?
I’m very proud of how far we’ve come. Directors understand they have a job to do. Investors are seeking long term gains. But corporate governance keeps evolving. We happen to be at one of the big [moments of] change. The biggest challenge I think we have is that the country has gone rather short-term. Today we have hedge funds and insurance companies and all the rest who profit by holding stock in corporations. The stock becomes almost a commodity. They go short-term and look for faster gains, rather than invest as if they were in it for the long-term.You can’t pass a law to say don’t do that. Capitalism is capitalism. I believe in the market and I believe in capitalism. What you have to think about is, who can change this? The board is the last resort.
Do you foresee any way the new administration can impact corporate governance?
I don’t think there’s a lot they can do to change how boards operate. There is a big wave of discontent in this country. Trump caught it. The lawyers, media and banks missed it. Trump got elected by people who are not happy, because they’re out of jobs and they can’t find the work they used to be able to get. I’m now thinking that there is something boards can do about this. They should listen to the fact that, unfortunately, only a tiny piece of the American public trusts the corporate sector.I’ve been thinking about what they could do to make it easier for people who are dispossessed. If competition requires them to move out of this country, then do it, but in doing it, why not think about how you can help the people who are dispossessed. Maybe you can start educating people about what’s coming. I don’t think we can, as a private sector, continue to disregard this. It’s too important.I think the private sector has a role to play here. I’m not urging companies to set aside a bundle of money to do good. I’m urging boards to think of this as a matter of reputation. I think that is good business.