How can a firm lower the chances that key managers will pursue their own self-interest at the expense of the stockholders? At the expense of the employees?
The chapter notes that in 2010, in roughly two-thirds of U.S. firms, the CEO is also the chair of the board of directors. More broadly this can be viewed as an intermingling of management and ownership. Why are these two roles typically separated? Is it a positive development for so many firms to have a combined CEO and board chair?
In Chapter 6 (Strategy Highlight 6.1), we discussed how Toyota went from a "perfect recall" in the early days of its Lexus brand in 1989 to a "recall nightmare" of more than 8 million vehicles for accelerator problems in 2010. Some analysts have questioned the role of Japanese corporate governance in the mishandling of the accelerator issues at Toyota.91 These sources note Japan's governance system is geared around the company rather than the stockholders. Thus, boards are often all company insiders who bring a deep knowledge of company operations to the table. However, in Japan's rigid corporate hierarchy and emphasis on harmony, this can result in keeping bad news out of the boardroom. In 2010, Toyota's board of directors consisted of 29 men, none of whom were outsiders to the company.
How might Toyota's response to the initial accelerator concerns in 2009 have been different if the board had on it a former politician, the president of a communications firm, and the CEO of a major consumer-products company (as were on the board at Ford Motor Company in 2010)?
Does the groupthink discussion raised in Strategy Highlight 12.1 seem relevant here? Why or why not?