Bad boards of directors kill more companies than bad management…

A side-comment at the Mid Atlantic Biotech conference really got me thinking. One of the panelists mentioned as an aside that she thought that more companies failed due to bad boards than due to bad management (she preferred not to be named).

The board of directors is more than a set of advisors to company management — they represent the shareholders of a company and have a fiduciary duty to ensure that shareholders interests are served. They have the power to replace executives, and can be held liable if they don’t do their jobs. As seen in the case of Dyadic, boards of directors can exert great control over companies.

I’ve regularly give talks on managing unexpected risks, and I’d love to find more examples of boards of directors actions leading companies astray — does anyone have any leads?

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  1. Mark E.
      October 29, 2010

    When the board of Apple decided to replace Steve Jobs with John Scullery they made a huge mistake.

  2. Chuck
      October 29, 2010

    Checkout KV Pharmacal in St. Louis. The board has made a mess of it for many years.

    Also Biovail and Elan have also suffered from poor board oversight and direction in recent years.

  3. Elaine
      October 29, 2010

    Check out Peregrine Pharmaceuticals (PPHM). All the board members are related through Roswell Capital Management and serve on the boards of other companies connected to Roswell like PTSC. The board salaries are incredible, ranking up there with multi-billion dollar revenue Fortune 100 companies. The board can’t be voted out and they refuse to nominate anyone with biotech experience.

  4. BiotechBlog
      October 29, 2010

    Excellent commentary!

  5. specs6203
      April 12, 2011

    What recourse does one have with a bad board of directors? I worked for a local not for profit organization that has a terrible board of directors. I am one of many dedicated employees that has left the organization and there will defintely be more to come. We fear that the organization may fold due to the terrible leadership and our community greatly needs this service. What can be done?