When it comes right down to it, a corporate board of directors has one crucial decision to make: Hire the right person to lead the company.
Getting that decision wrong can destroy shareholder value, sometimes permanently. And no one knows this better than long-term investors of Hewlett-Packard and Yahoo, companies that -- along with Nokia, Research in Motion and Netflix -- have had disastrous years and face uncertain, if not grim, futures.
The HP and Yahoo boards have been in the news in recent weeks, thanks to the dismissal of chief executives whose deficiencies no longer could be hidden or explained away.
HP grabbed the headlines this week, first with rumors that Leo Apotheker -- the German native who took over last Nov. 1 after the departure of CEO Mark Hurd -- was about to lose his job.
In the course of the story unfolding, it was reported that when Apotheker was hired, eight of the 12 HP board members had never interviewed, never mind met, the former (and short-time) SAP chief executive.
Worse, according to the New York Times, HP was having problems attracting candidates for the job Hurd left in August 2010 after allegations of sexual harassment and expense-account irregularities:
Running HP might seem to be one of the best jobs in corporate America. But the committee quickly discovered that a company whose board had summarily fired its last two chief executives was a hard sell to top candidates, said people involved in the search.
Which is why Apotheker was described to the Times by one board member as "the best of a very unattractive group."
This for one of the "best jobs in corporate America," a position for which Apotheker got a three-year, $53 million compensation package and a severance deal in the range of $10 million to $12 million.
It probably wasn't the two firings (Hurd and his predecessor, Carly Fiorina) that scared away good candidates as much as the rancorous board soap-opera, which included a spying scandal targeting board members and journalists. What top-level CEO talent would want to dive into that dysfunctional snake pit?
Then there's Yahoo, which these days is rumored to not even be seeking a replacement for ousted CEO Carol Bartz because, basically, the board has given up.
You can't really blame them. I'd give up on a company run by that board.
Yahoo's board has a long history of picking the wrong person to run the company, whether it's Bartz, company co-founder Jerry Yang or no-Internet-experience Warner Bros. executive Terry Semel.
And let's not forget the board's rejection of Microsoft's unsolicited offer in February 2008 to buy it for $44.6 billion, which directors indignantly declared "substantially undervalues" Yahoo, which currently is worth about 40% of that substantially undervalued offer.
Now Yahoo's board is contemplating selling off all or parts of the company. But that might not be a viable move, as NYT's Dealbook explains:
Yahoo is damaged goods, and if the board does decide to engage in a sale process, it may quickly find that bidders are willing to buy only at a bargain-basement price. Without a viable strategy or chief executive, Yahoo’s directors may take the easy course to sell at a low price and be done with the company. The alternative is to do the hard work of turning around Yahoo.
That last one isn't happening without the right chief executive. And the right chief executive isn't going to report to that board.
Which just leaves a sale. So what Yahoo really needs is an impulsive buyer with a lot of cash and a board of directors so irresponsible it won't bother with basic due diligence.
Mr. Lane, you have a call from a Mr. Yang.