A Great Example of Governance Failures and the Risks They Create. HP Board Had Not Met New CEO

This article on the board at HP demonstrates very clearly how a dysfunctional board is the source of major risks. It is fascinating that the infighting among the board members led to their hiring a CEO that the majority had not met — and who had been terminated from his prior position as CEO of SAP after a short tenure.

Just one quote:

Interviews with several current and former directors and people close to them involved in the search that resulted in the hiring of Mr. Apotheker reveal a board that, while composed of many accomplished individuals, as a group was rife with animosities, suspicion, distrust, personal ambitions and jockeying for power that rendered it nearly dysfunctional.

The COSO Internal Control Framework tells us that board operations are a major element in an effective system of internal control. How can internal audit say that this source of corporate risk is outside the scope of their responsibilities and fail to even consider it for inclusion in the audit plan?

Let's leave aside for a moment how we will assess it. Surely, this is a risk we cannot afford to ignore!

Posted on Sep 22, 2011 by Norman Marks

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  1. Management IS a risk in a number of ways, but I think most often ignorance or arrogance - or a combination thereof..

    Some thoughts:

    http://johnglennmbci.blogspot.com/2011/09/erm-bc-coop-management-as-risk.html

    http://johnglennmbci.blogspot.com/2011/09/erm-bc-coop-my-bosses-made-me-do-it.html

  1. Risk on a management team or board is mitigated by only having people who are team players - who are there because it is possible to accomplish much more with a coherent team than you can by yourself. If you assess for the the right things - Role, Coherence, and Teaming Characteristics, and pick your team members accordingly, you won't get the negative interactions that inevitably result in risky decisions. 

  1.  I don't think we are ignoring it consciously. I think that we are just too afraid to deal with it on  two fronts Norman. The first is how to audit this satisfactorily and the second is having the courage to do so. In the case of HP, there is a serious problem not only with the termination of Leo Apotheker less than one year after he took up his position. There was already a revolving door before Mr. Apotheker came on the scene and even now many would question the qualifications of the current individual for the type of products that this company sells. This should indeed be part of an audit plan but the skills and qualifications to do so are not there unfortunately and perhaps even the gravitas

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