RulesandTrust 199outside the CEO’s presence, a practice Buffett in particular cham-
pions. This is creditworthy not so much under the logic of suspicion
of the CEO but as an independent chec kon the CEO’s judgment.
Some gobbledygoo kabout improved board processes is com-
monly bandied about. This is usually sheer nonsense or gloss. Re-
quirements such as swift flows of quality information, statements of
governance principles, and procedures for full and effective partici-
pation of all directors seem like mere bafflegab. These practices
should simply be part of the normal operation of a well-governed
corporation. Giving credit for the articulation of these practices is
superfluous—like giving umpires extra credit for knowing the rules
of baseball.
Other common and strange prescriptions take pages from the
equally silly playboo kof American politics. Term limits for directors?
Why should a good director be forbidden from continuing in his job
just because he’s done it for a specified period of time? Age limits?
Nearly 40% of Fortune 1000 companies adopted age limits in re-
sponse to urgings from governance poobahs such as CalPers.
But a company that forbids persons older than, say, 65 or 70 is
ordaining the exclusion of talent from its reach. One can applaud
Jac kBogle for stepping down as Vanguard’s chairman at the fund’s
mandated retirement age of 70, but is Vanguard really better off
without Jac kor any other (old!) sagacious person with integrity? And
what should it matter—on its own terms—that 5 of the 18 members
of Disney’s board are in their seventies, if those people are savvy
business leaders who see kto promote the interests of Disney’s own-
ers?
At the other end of the politically correct scale of corporate gov-
ernance is the goal of trying to add diversity of gender or race to the
board. Diversity itself is not a laudable business goal and is nothing
for which credit should be given to the leaders of a business orga-
nization. It is just as out of place, silly, and off the mar kas delib-
erately creating and maintaining a diversified portfolio of stocks. It
may turn out to be fine and dandy, but if so, that is a consequence
and not a cause of a more prudent disposition that focuses on fun-
damentals rather than frames. It does not matter one way or the
other that GE’s board has two women and one blac kperson on it
though it does matter that those people and GE’s other directors are
outstanding business thinkers with a strong owner orientation.
The problem with all these sorts of proposals is their universality.
What is good for GM may not be good for GE, and what is good for