By Joe Palumbo
So you want to be a member of the board of directors. Why not? It sounds exciting enough, and it’s a good way to make a few extra dollars with some prestige. There is the opportunity to socialize with the company president, and it is a nice addition to your resume.
Then you have the additional perks of board luncheons and perhaps even dinners. But be careful because not everything that shines is made of gold. In our post-Enron era, board directors are being further scrutinized in corporate responsibility and negligence of corporate oversight.
Ignorantly saying “I just didn’t know” is no longer a defense. I spoke with Al Pennisi of the law firm Pennisi, Daniels & Norelli, at 97-77 Queens Blvd. in Rego Park. Pennisi was quick to point out the importance of being aware of the makeup of the board as to its members.
Pennisi also said it is important to be aware of the nature of the business, its reputation and even knowing if it’s a non-profit organization. A board director in today’s world must clearly indicate that reasonable efforts were employed in gathering pertinent information that could indicate fraud or inappropriate conduct.
With rules getting tighter it’s clear that a trend is developing where executives are reluctant to fill board positions. In the past it might have been quite safe to be a board member and cast your vote with the majority. After all, the board majority should be up to speed on what’s going on. But in today’s faster business world, research and homework is mandatory.
If you become a board member in this post-corporate-scandal-laden era you’re going to have to be ready to give an account if circumstances call for it. Questions will be raised as to what kind of active interest a board member took in the company and what he or she should have known.
Look for legislators to draw up additional laws and guidelines on the responsibilities of members of the board. With this will probably come great potential in the insurance business. D&O insurance, which covers directors and officers, must be taken seriously.
So how’s business for those with the notion of becoming board directors? With the excellent possibility of more openings than takers, its outlook has to be one considered at this moment headed in the direction of descent.
Joe Palumbo is the fund manager for The Palco Group, Inc. and can be reached at palcogroup@aol.com or 1-718-461-8317.
