Intel Corp (INTC)

[greg s]

Intel's Grove scolds corporate boards

http://zdnet.com.com/2100-1106-960732.html

By Charles Cooper
Special to ZDNet News
October 4, 2002, 4:45 AM PT

CUPERTINO, Calif.--Intel Chairman Andrew Grove on Thursday waded into the raging debate over corporate governance, scolding boards of directors for lax oversight of top executives.
Speaking here at a conference organized by the Harvard Business School, Grove reserved special scorn for senior managers who take millions of shares of stock as incentives to motivate themselves to work on behalf of shareholders.

"When that happens, you see atrocities," said Grove. "I don't know how to find other words."

Grove castigated a system in which boards of directors too often function as mere rubber stamps for a company's chief executive officer. "Boards in public corporations can practically be described as advisory bodies, selected by the CEO, working for the CEO," he said.

Grove's comments follow a series of scandals that have shattered investor confidence and devastated companies such as energy producer Enron.

During his tenure as president and later CEO of the giant chipmaker--a period that coincided with Intel's emergence as the world's dominant supplier of microprocessors--Grove had a reputation for speaking his mind. He was very much in form Thursday as he warmed up to the subject.

Although Grove said corporate boards have improved oversight since the wave of accounting scandals that began with the disclosures of dubious bookkeeping and dealings at Enron last year, he said much work remains. In particular, Grove criticized arrangements in which a single person holds the title of chairman and CEO, as he said occurs in 85 percent of Fortune 500 companies.

He was pessimistic about the likelihood of any significant near-term changes, floating an interim proposal that directors be required to attend quarterly meetings. "I think half the grades of board directors should be based on their participation," he said, suggesting this would help keep management in line.

Grove's suggestion held merit for Clay Christensen, a professor of business administration at Harvard, who said he sits on three corporate boards.

"I bone up for two hours before (the meetings)," he said. "But what I know about what's going on is from what they tell me."

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