Vampires Among Us By: Diana PowellESQ. 2012.11.07

“To sin by silence, when they should protest, makes cowards of men.”

-Abraham Lincoln

Abraham Lincoln stated it clearly and perfectly: silence can be cowardly; inaction can lead to tragic results. According to experts, corporate shareholders’ silence and inaction has helped produce a culture of “excessive risk-taking” by corporate boards, and “the lack of board oversight and independent directors” has led to failures in corporate governance.

According to one popular contemporary author, Abraham Lincoln never met a vampire he didn’t want to slay. Now, I’m certainly not implying that all board of directors of corporations are vampires, but we need only look at the Enron and WorldCom debacles and the financial collapse of 2008 to begin to feel a twinge of doubt about the collective silence and inaction on the part of the shareholders as being at least a small part of the contributing factors that led to these disasters.

A lack of shareholders exercising their rights has been given by experts as a contributing factor to the problems within the corporate culture today. Corporations enjoy most of the “rights and responsibilities that individuals possess,” combined with only “limited liability on the part of shareholders.”  Shareholders, made up of individuals, companies or institutions “are not held personally liable for the company’s debts, but do share in the profits.” The Chief Executive Officer “has a fiduciary duty to the company’s shareholders. Any course of action taken by the CEO should be in the best interest of the shareholders.” (Investopedia.com) Simply put, what duties do the shareholders owe the corporation? Answer – exercise their rights as shareholders and “guardians” of the corporation!

Governance reviews are positive actions that can be taken in order to begin to “fix” the unhealthy corporate environment that exists today. It’s about accountability. Shareholders have a stake in the success of a corporation. Therefore, they should be diligent in their duties as shareholders and take a more active part. Ensuring that the corporate committees charged with performing governance reviews are in point of fact executing these reviews is an extraordinary way to begin their active participation in the “life” of the corporation of which they own shares.

Shareholder responsibility: action instead of inaction; dialogue in place of silence. Corporate governance reviews annually taken by board of directors to fulfill their fiduciary duties to the corporations they represent. These measures taken together will ultimately lead to a healthier, more productive and successful corporate culture. Follow Lincoln’s advice: Speak-up! Take action! Slay the vampires!

Diana K. Powell

Diana K. Powell, Esq. joined Westminster Consulting in September 2012 as Senior Legal Advisor. Previously she was a sole practitioner who advised educational organizations, government bodies and private corporations. Diana was responsible for negotiating agreements for high-tech software corporations...

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