RulesandTrust 201worthiness, not to mention access to the corridors of power, could
remain valuable to a company that shares her service with so many
others.
A final point all corporations should worry about is who is next
in line for the top spot. It may not be necessary for a company to
have a formal succession plan for its CEO, but it is important for
the board to give it some thought. The trouble is that even the best
laid plan can go awry and sometimes the most surprising and un-
planned succession can have terrific benefits. Succession is a matter
of judgment, and just because a board has thought hard about it,
that doesn’t mean its plan will wor k(more on this in the next chap-
ter).
All these details of corporate governance provide clues about
managerial trustworthiness. A board filled with close personal
friends of the CEO who lac ksolid business bac kgrounds is a red
flag of caution. A board that fails to review the chief’s performance
regularly may not be trustworthy either. Take another area of cor-
porate life: charitable giving. If most of the corporation’s charitable
contributions go to pet causes of the CEO, maybe you should won-
der whether he treats the corporation more as his than as yours.
Unique among major American corporations, Berkshire Hathaway
rejects managerial direction of discretionary charitable giving, put-
ting this power directly in the hands of shareholders.^7
If these factors indicate high trustworthiness, lower your dis-
count rate on a good business; if they suggest moderate trustwor-
thiness, raise it upward. (If they suggest an antiowner orientation,
simply stay away.)
Amid the intense interest in corporate governance there gener-
ally emerges the subtopic of corporate governance for Internet com-
panies. Some argue that the traditional templates of corporate gov-
ernance simply do not apply to new economy companies. It is hard
to see exactly why, but the argument seems to be that the speed of
industry change, the intensity of competition, the shortage of
technology-savvy managers, and the importance of stoc koptions in
compensation packages mean that the new economy cannot abide
the old rules and ways.^8
These arguments are silly. On their face, they state very little
difference in the problems of governing a new economy company
versus an old economy company. Change, competition, managerial
savvy, and incentive compensation matter in all businesses. A better