Lessons From a Dysfunctional Board

After emerging from the government bailout about five years ago, the board of the “new GM” was supposed to exercise their fiduciary responsibility more diligently than their predecessors. However, after recalling nearly 30 million cars and revelations that some GM managers had known about defective switches that resulted in 19 known deaths for over 10 years, the board’s current chairman, Theodore Solso said that he “only had a vague recollection of the details.”

He went on to say in a recent interview: “I can’t remember the specifics.” What planet does this guy live on? He even dug a deeper ditch by saying: “When we had all the facts we did our job.” Really?

After the resignation of a number of board members recently, the remaining board is realizing that the boards of both the “old” and “new” GM were negligent in applying their fiduciary responsibilities to the shareholders. This now has resulted in lawsuits from shareholders against former and current board members, as well as legal investigations by the Justice Department, the SEC and 45 state attorneys general.

Senator Richard Blumenthal of Connecticut has accused the board of abdicating too much responsibility to management for resolving the switch problem that resulted in the aforementioned deaths of drivers of GM cars with defective switches. He concluded that ”the board’s silence and apparent absence as a force is really regrettable.”

Board chairman Solso claims, “We didn’t understand the enormity of the situation at the beginning, because I don’t think management did—it was an evolving problem.” How many people had to be killed before it was recognized as a serious problem?

Robert M. Donnelly is CMO of Flo-Tite Valves & Controls, a U.S. based supplier of valves and components to the process control industry in North America. A coach, educator, and advisor to founders/CEOs of growing firms, he is a serial entrepreneur, having started, grown and sold several technology based businesses. Previously he held executive positions at IBM, Pfizer and Exxon.