Business Exposed102
newspaper. Bills, bank statements, the accounts of a multina-
tional; what’s the difference really?
But, as I said, not all outside directors are (ex-)CEOs. Quite
often, companies also invite ex-government ofcials to serve on
their boards. The reasons for that, as research has indicated, are
not hard to fathom: they can provide advice, but they can also
provide inuence. I guess there’s nothing wrong with buying
advice, but the idea of buying inuence might be a bit more
morally challenged . . .
Government ofcials can provide specic advice on how to deal
with government-related issues. They have specic knowledge
and experience and can therefore provide valuable advice. But
ex-ofcials can also offer contacts for communication that are
not accessible to other companies. Then, directorships start to
become the currency used to buy inuence, which makes it a bit
more dubious. It certainly gets dubious if they provide a direct
way to inuence political decisions. Some people have even
suggested that board memberships for ex-government ofcials
are rewards for services rendered while they were in government
. . . which would certainly be in the “barely legal” category.
It’s hard to examine which of the aforementioned reasons
motivates rms to invite ex-government ofcials on to their
board: the legal ones (e.g., specialist advice) or the barely
legal ones (inuence and rewards for past services). However,
by analyzing which individuals are offered the job, we can
get a sense of what’s going on. Professor Richard Lester from
Texas A&M University and some of his colleagues analyzed
this question: which government ofcials are most likely to
be approached to serve on a board? Using data from the US,
they tracked all senators, congressmen, and presidential cabinet
ministers who left ofce between 1988 and 2003 and gured out
which of them were offered directorships.
They found that the longer ofcials had served in government,
the more likely they were to be approached for a directorship. I
guess that could be because more experience gives them more
inuence, but also because experience made them better advisors.