Private securities litigation is as important a remedy as ever to failed governance.
Boards of directors are not fulfilling their role as the shareholders’ representatives -- the check on the power and abuses of management -- in the corporate governance scheme.
First, even “independent” directors are often not truly independent. They are frequently friends or relatives of management who are unable or unwilling to challenge management. “Soft money” contributions to the favorite universities, charities, and political campaigns of the director further debunk the myth of independence. The compensation, audit, and nominating committees, which have critical oversight roles, are made up of these same board members.
In spite of these apparent conflicts, it remains very difficult under the current law to prove a director is not independent and prevent him or her from serving on the board.
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