Cornered In The Corner Office

REVOLT IN THE BOARDROOM

The New Rules of Power in Corporate America

By Alan Murray

Collins -- 247pp -- $25.95

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Editor's Review

Four Stars
Star Rating

The Good A concise and readable probe of the battle for control within U.S. corporations.

The Bad May overstate the degree to which boards and investors have gained power at CEOs? expense.

The Bottom Line Discovers fresh insights from even the best-known corporate blow-ups.

It has been six long years of scandal since Enron's meltdown first began. CEOs are in jail, companies are shuttered, and laws have been rewritten. Even the casual reader of the business press passed outrage long ago. So Wall Street Journal columnist Alan Murray's decision to revisit the corporate-governance wars of recent years in the just-published Revolt in the Boardroom meant he would have to find a way to make the topic fresh. He succeeded, drawing insight from even the best-known blow-ups.

As Murray sees it, at the start of the 21st century investors, board members, and CEOs are locked in a power struggle to control the American Corporation. All are groping to learn the new rules of the game. In the process, boards and investors have gained significantly at the expense of the CEO.

In telling this story, Murray's past as a TV political commentator serves him well. The scrum he covered in Washington turns out to be a lot like this corporate tug-of-war. He astutely describes CEOs forced to woo their public like White House hopefuls and liberal activists who, frustrated by the conservative politics of the early 2000s, have transferred their attention to corporations with surprising success.

There are numerous vignettes, the most detailed dealing with Hewlett-Packard (HPQ ), AIG (AIG ), and Boeing (BA ). These are nicely turned but offer no revelations. However, Revolt has other rewards. First, there's Murray's succinct history of the U.S. corporation that's both comprehensive and filled with little-remembered particulars. For instance, the description of corporate gadfly Evelyn Davis, who "stripped down to a bathing suit, and marched around the room waving an American flag" during a tempestuous 1970 General Motors (GM ) board meeting, beautifully captures the iconoclasm of the early shareholder agitators.

In her wake have come a new generation of far more ambitious shareholder advocates. Labor activist Richard Ferlauto and Michael Brune of the Rainforest Action Network (RAN) excel at political theater, using public embarrassment to pressure companies to do everything from abandoning the sale of old-growth wood to trimming excessive CEO pay. Activist hedge fund managers such as Pershing Square Capital Management's William Ackman, who took on McDonald's (MCD ), use their business acumen to challenge corporations with the aplomb of investment bankers.

These agitators have added to the pressures modern CEOs and boards were already feeling in an age of heightened regulation and litigation—and have intensified the battle for control. One striking development: Boards today are more powerful than those of the past, chief executives less so, says the author. "CEOs now find they are constantly campaigning to keep their jobs," Murray writes. But neither party seems to understand entirely where management's responsibility ends and the board's begins. "Am I sorry? Do I regret it? Yes," he quotes Hewlett-Packard's former lead director, Patricia Dunn, saying of the botched campaign she led to ferret out board members who had leaked information to the press. "Am I responsible? No." Leaving one to wonder: Who is, then?

Today, battles like Dunn's play out under a public spotlight. Murray finds a downside to such "democratization": Well-organized activists, among them environmentalists at RAN and Christian conservatives at the American Family Assn., can now move corporations toward goals not shared by all fellow shareholders, let alone management.

The era of the imperial CEO seems to be ending. But Murray ignores one truth: If CEOs are good enough, they're still largely left alone to do their jobs. Ray R. Irani of Occidental Petroleum and George David of United Technologies (UTX ) are but two examples. And some aspects of the revolution Murray chronicles may be reversing. At HP, a company whose woes receive more focus here than any other, the chairman and CEO roles, once split as good-governance types recommend, have been reunited under Carly Fiorina's replacement, Mark Hurd. Moreover, the dramatic 2005 and 2006 CEO turnover levels that Murray cites have greatly slowed this year.

In an early section reviewing the history of CEO clout, Murray writes that John Kenneth Galbraith's 1967 The New Industrial State beautifully captured the consolidation of corporate might in the third quarter of the 20th century. But, Murray writes, the economist's predictions of greater concentration to come proved wrong. Technology empowered consumers, reversing the dominance Galbraith described. It's possible that Murray's own book will suffer a similar fate. Over time, what looks like a permanent shift in power may be tempered, and the CEO may rise again.

By Nanette Byrnes

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