This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Interview: Why Good CEOs Make Bad Moves

Jackson: How do you do that? The SEC can't mandate assertive boards?

Finkelstein: You're right. Outsiders can't make it happen. It has to come from the boards themselves who are often self-perpetuating. You and I worked on a tool for boards to use to identify early-warning signs of problems. It wasn't a very successful tool because we found that most boards don't want to hear about the problems they have. No bad news is good news. And there's an army of consultants and search companies to always come around and compliment you.

However, the evidence of the last 12 months is clear: If boards don't do a better job identifying early-warning signs, their companies will fail. I guess that's my hope, that boards become afraid enough so that they'll make the necessary changes themselves. The government cannot regulate good governance. We're talking about quality of decision-making and interaction here. You're not going to be able to put something like that in a Sarbanes-Oxley.

Jackson: How should CEOs and boards safeguard themselves against killing their companies?

Finkelstein: Do you have high-quality debate in your management team or board or are you an "imperial CEO" who has driven away anyone with a different opinion than you? Are you surrounded only by "yes men" or a bunch of weak consultants telling you what you want to hear?

Boards need to be regularly monitoring the strategy of the company against a set of predetermined yardsticks. It should be like a well-run venture-backed company: You don't get your next round of funding until you hit your metrics. Is the board regularly discussing the risks facing the company and are they working on mitigating the risks?

Finally, each director -- no matter how much they like their CEO or other members of the management team -- has to constantly remind themselves that they are the last backstop for shareholders and for other stakeholders. Don't let a stellar career go up in smoke because you didn't ask that extra question. Understand what the company does for customers, and exactly how that translates into profits and shareholder returns. That's one thing that no board member can outsource.

Jackson: Thanks, Syd.

Think Again from Harvard Business Press will be available in February.

At the time of publication, Jackson had a small personal position in YHOO.

Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd.
4 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $12.20 0.00%
YHOO $26.82 0.00%
AAPL $94.99 0.00%
FB $99.54 0.00%
GOOG $678.11 0.00%


Chart of I:DJI
DOW 16,014.38 -12.67 -0.08%
S&P 500 1,852.21 -1.23 -0.07%
NASDAQ 4,268.7630 -14.99 -0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs