Appointing celebrities to boards is a longstanding tradition. Companies do it because it gets them publicity and attention, and those onerous meetings tend to go by a lot faster when you're staring into the twinkling eyes of, say, Lance Armstrong, who served on the board of Morgans Hotel Group. Celebrities do it for the extra cash and because it makes them sound smart. Of course, they're not smart — at least not usually about whatever business they're on the board of. For instance, while it is true that Tommy Franks does have an entrepreneurial spirit, he doesn't really belong on Bank of America's auditing committee. OJ Simpson's wonderful performance in The Naked Gun movies really did not qualify him to discuss metrics at Infinity Broadcasting Corp meetings, and Lance in fact missed eleven of Morgans' board meetings in 2007, because after all, he's Lance Armstrong and has a bike to ride and starlets to date and a ball to look out for. At best, these appointments are a waste of space and money; at worst, they're taking up a slot someone decent could be occupying, and preventing companies from functioning better. And now the SEC has wised up, now that they've decided to start wising up to stuff.
Tomorrow they're meeting to discuss, among other things, new rules that will require people appointed to the boards of companies to know about the actual companies.
“What the SEC wants to do is prompt companies to make sure they’re appointing directors who can do the job and not just look pretty on a roster,” said Stephen Davis, a senior fellow at the Millstein Center for Corporate Governance and Performance at the Yale School of Management.
Right. It's just a suggestion. For now. Anyway, this is bad news for Vikram Pandit. We think he was about a hairbreadth away from nominating Heidi Montag to replace Robert Rubin on Citigroup's board, and why not? It wasn't like Rubin had a granular knowledge of operations anyway, and frankly, when it came to packaging air and selling it to consumers, Heidi is at least as good as anyone else out there. Shame, this new reality.