The Way it was: 1986.

On Our 10th Anniversary

When we acquired DIRECTORS & BOARDS [in 1981], it was becoming evident that directorship was in transition. The prestige was being wrung out of the job, and greater risk was being heaped on. There were going to be great changes ahead -- not least of which was the ever-higher level of commitment and motivation that being a board member was going to require. Our intention then, now, and for the future is to put together between the covers of this journal a common body of knowledge that can be shared with American (and increasingly global) leaders on how to better govern a business enterprise. We want to both inform and motivate executives so as to help them achieve peak performance in this crucial function of being a corporate director.

Milton Rock, DIRECTORS & BOARDS publisher, in "A Time for Reflection and Paying Tribute" [Fall 1986].

Management's Three Choices

It is well documented that any number of managements have in past times made egregious mistakes in their headlong pursuit of long-term growth at the expense of earnings and shareholder values. One need go back in time only to the late 1970s, and in some cases even as recently as the early 1980s, to understand the genesis of the dilemma faced by so many companies today. To take the chemicals industry as an example, there was a time in the late 1970s when managements of many chemicals companies found themselves managing mature, commodity businesses which were generating more cash than could profitably be internally reinvested. These managements had the choice between diversifying into new businesses for which they often had little special knowledge or talent, distributing surplus cash to their shareholders who would then be free to reinvest for themselves, or proceeding with ambitious capital-expansion programs notwithstanding the paucity of internal investment opportunities.

While some managements chose the first alternative, with decidedly mixed results I might add, and almost none chose the second, it is incredible how many, perhaps out of force of habit or an interest in preserving and expanding their corporate domain, felt compelled to overinvest in declining businesses with, incidentally, disastrous results for their shareholders.

Samuel Heyman, chairman and CEO of GAF Corp., in "A Nation of Gin Rummy Managers" [Spring 1986].

Shareholders Win, Employees Lose

Mergers and acquisitions are invariably accompanied by traumatic changes for the employees of the acquired company. Though the shareholders of an acquired company generally profit, frequently handsomely, many employees find their lives seriously disrupted. Perhaps corporate management's legal mandate to focus on the interests of the shareholders sometimes obscures their vision of the needs of their company's employees.

Dorman Commons, chairman and CEO of Natomas Co., in "When the Courtship Ended" [Summer 1986]. Mr. Commons was writing about the $1.3 billion takeover of his company by Diamond Shamrock Corp.

How Boards Get into Trouble

What you find in the great corporate disasters with remarkable consistency is the same kind of culture -- in which dissent is suppressed, in which loyalty is measured by agreement rather than disagreement, and where, as you approach the top of the management structure, you find the people have been selected by virtue of their willingness to go along rather than to speak their mind. Where that situation exists there's often a progressive loss in what I call the collective grasp of reality. In that type of setting, usually with an authoritarian leader and a group of people...

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