In his first public speech since resigning from HP's board, Tom Perkins outlined what he sees as wrong with corporate boards. As Perkins sees it, in the post-Enron era, boards are filled with what he calls "compliance directors", individuals that are mainly concerned with things like Sarbanes-Oxley requirements and other governance issues. The problem is that these directors don't really know much about the actual business (via Valleywag), and so, ironically, aren't in a position to prevent another Enron from playing out. This makes a lot of sense. In order to know if management is engaging in fraud, you really need to have a solid understanding of what the company does. If your expertise is simply in governance, it may be easy to miss what's going on right in front of you. Ideally, a company should probably have a mix of directors, some of whom really know the business and the industry, with others more knowledgeable on compliance issues. But, if Perkins' assessment is correct, Sarbanes-Oxley has caused companies to put an overemphasis on the latter group, potentially causing problems down the road. Of course, this would hardly be the first perverse consequence of this legislation.
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