The Costs of Compliance: Too Few Geeks

We've noted before that the faddish devotion to compliance-oriented corporate governance—encouraged by everything and everyone from Sarbanes-Oxley, it's attendant regulatory schema, some of the more opinionated-parts of the business press and the reigning corporate governance gurus—has serious costs that are all too often ignored. The whole corporate-spying pretexting scandal at Hewlett-Packard was probably the public example of this.

Now Tom Perkins, a veteran from the HP wars, has made his first public remarks since the scandal and directed them at exactly this problem. According to Perkins, too many corporate board members are so obsessed with compliance that they don't know much about the company on whose board they are serving. He draws a useful distinction between two-types of directors--the guidance geeks who understand the business and the compliance nerds who understand legal rules and regulations.

The San Jose Mercury News reports:

During his 35-minute talk, Perkins outlined two kinds of board members, placing himself in the category of an old-style venture capital-type who is extremely involved in the business. He called that type a "guidance director.''

In contrast is the new emerging director, whom he called the "compliance director.'' He described that person as someone increasingly focused on Sarbanes-Oxley requirements, who jumps from company board to company board, dispensing and heeding advice from consultants and lawyers.

Perkins, 75, derided the latter, which he called a "plug-to-plug compatible director'' who believes he or she is equally capable of serving on a bank board as on that of a technology behemoth such as HP.

And Perkins thinks things are only getting worse. The compliance nerds are beating out the guidance geeks.

But today, he said, with too few "geeks'' on its board, HP has evolved fully into a compliance board, "possibly untroubled by worries about technology and marketing strategy.''

"I think the guidance board will vanish and it will be replaced by compliance boards who just listen to lawyers and consultants,'' he said, referring to the general corporate trend.

Ex-HP director laments corporate board trend [Mercury News]