Customer Reviews

Money for Nothing: How CEOs and Boards Enrich Themselves While Bankrupting America

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Money for Nothing: How the Failure of Corporate Boards Is Ruining American Business and Costing Us Trillions by John Gillespie and David Zweig begins with a story familiar to just about everyone on the globe -- corporate and economic collapse brought on by greedy CEOs. The authors look behind the headlines to reveal and document the systematic failure of corporate boards who are supposed to look out for shareowner interests but are still too often picked by the very ones they are supposed to advise and monitor... the CEOs.

They discuss how companies spend enormous sums of shareholder money to fight off reforms, either directly or through organizations like the US Chamber of Commerce or the Business Roundtable. According to the authors, "corporate boards remain the weakest link in our free enterprise system."

A brief overview is provided on how we got here and what it means for shareowners and society. Much of the book is given over to example after example of conflicts of interest, overlapping boards, and a world driven by the greed and status needs of CEOs. Studies have shown that 80% of acquisitions fail to deliver and many fail outright. Too often they are driven by incentives that reward empire building over the generation of profits.

Jennifer Lerner, the only psychologist on the faculty of Harvard's Kennedy School of Government, finds that "Americans tend to exhibit anger more readily than those in many other cultures, and the effects of being in power closely resemble those of being angry." CEOs and other executives, it turns out, have substantially larger appetites for risk and are more optimistic about outcomes. Changing the context can improve outcomes, especially where the environment demands "predecisional accountability to an audience with unknown views." In the case of corporations, that would be a diverse independent board, not predictable lapdogs of management.

Later chapters review "The Myth of Shareholders' Rights" and other issues, including proxy mechanics that allow moving shares to be voted multiple times based on the "day of record," when large blocks of stocks may be most likely to have several different owners. They document that not only do shareowners have little power, the gatekeepers and guardians paid to protect shareowner interests are almost always conflicted, leading to de facto control by management. At the same time, laws like the "business judgment rule" make it nearly impossible to hold fiduciaries accountable. Pension assets that are turned over to plan managers who provide kickbacks back to corporations earned 29% lower returns, according to a cited 2009 GAO report. The failures documented by Gillespie and Zweig cost investors and the public trillions, bringing the world economy to its knees.

It is time boards stopped being the CEOs friend and instead took on the role of the CEO's boss. After a thorough examination of the issues, documented with an abundance of real-life examples, Gillespie and Zweig close with a list of recommendations that could go far in changing the culture of the boardroom, strengthening accountability, reducing conflicts of interest, and getting shareowners involved. In a very abbreviated form:

- Create a new class of public directors and a training consortium
- Insist of gender, ethnic, and perceptual diversity
- Limit directors to three or fewer boards and require substantial "skin in the game"
- Initiate more communication between directors and shareowners
- Split chair/CEO roles & learn lessons from nonprofits
- Allow 10% of shareowners to call an extraordinary general meeting
- Add clout to say-on-pay, reform executive compensation, and shareholder approval of golden parachutes
- Ban staggered boards and require majority votes elections
- Proxy access for shareowners, daylight nominating & election processes, & require real board evaluations
- Require board risk committees & empower boards to gather independent information
- End conflict of interest in mutual fund voting by allowing third party voters per Investor Suffrage Movement
- Reform voting mechanics to end manipulation by management
- Reform auditor business model & Fix "up the ladder" provision of SOX
- Reform rating agency model, fully disclose lobbyist expenses, provide real funding for SEC enforcement
- Federalize corporate law
- Better coverage of governance issues by the financial media
- Better financial education, including how corporate governance works

Gillespie and Zweig hit all the bases for a solid home run. They tell us how the game is fixed and how the rules can be changed to play fair. After all, shareowners own the "ball" and all the other equipment. Will we listen? Even more importantly, will we act? The authors have even set up a website at [...]. Take a look; give it a read; ACT!!

"Money For Nothing" is chock-full(and shock-full)of anecdotes about CEOs and board members. The authors have dozens of right-on ideas for improving corporate boards and making them more accountable to shareholders. The endnotes are thorough but not too obtrusive for us general readers. The index is helpful (Bernie Madoff on page 15, Arnold Swarzenegger on page 225, corporate boards as enabling lapdogs on quite a few pages). It's not perfect. Based on the title I was expecting something more entertaining (like "The Informer!" maybe). It has some, but it needs more touches of humor because the topic is depressing enough.

"Of the world's two hundred largest economies, more than half are corporations." (p. 18) So when corporations go wrong, everyone suffers. "Money For Nothing" dissects what may be the weakest link within too many corporations -- an incestuous and beholden board of directors. Gillespie and Zweig expose insulting attitudes of CEOs, shocking negligence by directors, and a disturbing lack of internal and external curbs on bad behavior. For instance, one director was kicked off the board for saying the CEO's huge compensation at a failing company was a PR problem which needed to be considered by the board. (pp.110-111) They contrast the horror stories with some of praiseworthy corporate governance and suggest over two dozen ways to help cure the situation. They name names and kick some very deserving butt.

The book is VERY readable. [...]. After you read the book, the website also has links to organizations which are trying to correct problems.

Have you ever wondered what REALLY happens behind closed doors in America's corporations? Have you ever wondered why America's corporations have made such horrible, short-sighted decisions? Have you wondered if there is anything you can do? If you have, then you must read "Money For Nothing." The short answer is that too many CEOs want - and get - rubber-stampers on their boards of directors, mostly old white guys more interested in keeping their cushy jobs than in helping the company or the shareholders. Did you know that in in a lot of companies the board doesn't have to pay any attention to what a majority of shareholders want done? This book reveals lots of interesting details in a very entertaining way. It also outlines lots of ways we can help stop the horrors.

"Money for Nothing" hooked me from the start with the corporate giant collapsing and dying scene. Been there, seen that, glad I'm out. It's real and real bad out there. Unless corporate directors quit acting like a bunch of trained seals and start representing stockholders, that scene is going to keep playing in a loop. Gillespie and Zweig pull no punches in this K.O. of a book.

The authors have the hidden world of corporate boards exactly right -- some good and trying hard, others lost in the shadow of a maniac, some just lost or flailing. In telling the story and outlining remedies, they didn't rely on book research; they interviewed the players from Dennis Kozlowski [former Tyco CEO and current in-(big)-house laundryman, rightfully sitting surrounded by snitches and molesters but claiming to be the victim of the times and a weak board of directors] to Lynn Turner [former SEC chief accountant, member of several boards, testifier to the House Oversight Committee] to Ann McLaughlin Korologos [Secretary of Labor under Ronald Reagan with additional experience as a director at companies as diverse Kellog's, Fannie Mae, and Microsoft] to Eliot Spitzer [who as New York Attorney General sued Richard Grasso, the former chairman of the New York Stock Exchange, claiming he had failed to fully inform the board of directors of his deferred compensation package which exceeded $140 million]. No comment on Spitzer's later exploits.

I liked this book so much that I ordered one to give to somebody else. "Like" may not be the right word because the subject is so serious. For well over a year we've all been dodging falling businesses or helping to shore up teetering ones. We've all heard about the ridiculous pay and bonuses too many of those companies gave or tried to give their executives. What we haven't heard enough about until now is how the boards of directors of too many corporations have been fiddling around with golf while the businesses they are supposed to be nurturing are crashing and burning. The authors bring some brightly shining lights into the boardroom so those of use who aren't so privileged can see clearly as the director mice scramble. It's very informative and very entertaining. There are practical steps such as enforcing current laws and making some new ones to enforce shareholders' rights. I like the Appendix where you can find links to organizations and descriptions of what what they do.

Money for Nothing is incredibly interesting and entertaining: it's full of rich and outrageous insider stories as well as a lot of analysis showing how and why most boards fail in their jobs. It gives the general reader, like myself, a peek behind the closed door of the boardroom and shows how shareholders are excluded from the system. Especially fascinating to me was how shareholders' own money is being being used to prevent and circumvent reforms through massive lobbying expenditures controlled by corporate executives. It also concludes with a section on companies and directors who are doing it right and gives twenty-five measures that could help to reform the structure and culture of boards. It's hard to imagine that the previous reviewer actually read this book as I found it anything but mundane!!!

I admit it. I'm mad. I'm mad as you-know-what and I don't want to take it anymore! And neither should you. I lost a ton of money, no thanks to Lehman Brothers. Now I know who and what to blame. "Money For Nothing" lays it out and lays it right in the laps of CEOs and their tame monkeys sitting on the boards of directors. Gillespie and Zweig know what they're writing about. They name names and give details in an incisive, yet entertaining way (never thought I'd be laughing while reading about my money disappearing, but it happened). If I were on a "weak" board, after this book, I'd be afraid. Very afraid. Something needs to be done and "Money for Nothing" points out several ways to proceed.

Cogent, lucid, authoritative, and timely books which are both interesting and appropriate for courses are often difficult to find. "Money For Nothing" is an excellent choice as a parallel text for both entry- and upper-level as well as graduate business courses. Because of it's research, organization, argumentation, and the writers' skill, the book is also suitable for undergraduate business communication classes. Another reviewer's synopsis of the contents is excellent.


SEVERAL MONTHS LATER: I remain impressed with this book and have recommended it as required reading in several courses. For this reason, I am looking forward to the paperback edition which will deliver the same excellent material in a more economical package.

Shemp is sitting on a bunch of corporate boards along with the rest of the stooges -- exactly where too many CEOs want him and placed him. Yes, placed him. CEOs nominate board members; shareholders' votes are pretty much meaningless.

Shemp is dead so his contribution to a company is, not surprisingly, minimal. His voice will not be raised against requests for a CEO's bloated bonus. Shemp will never see when a company is heading off legal, ethical, or good-business-practices rails. It would take a miracle for Shemp to blow the whistle.

Shemp is glued to his seat as long as the CEO wants him. Shareholders in almost every single US corporation don't have the right to remove Shemp. Shemp cannot be sued by shareholders for not doing his job. Shemp is protected from the SEC, too.

But there's hope. Read "Money for Nothing" and get involved with correcting the not-so-funny-comedy-of-errors which is (at least partially) responsible for failing American businesses and our dismal economy. Gillespie and Zweig's solutions and resources should not be missed.