Ira M. Millstein practiced law for over 50 years, counseling some of the top U.S. companies on governance matters. Among his clients and policy projects in which he was involved were General Motors, American Express, Westinghouse, Macy’s, Drexel Burnham Lambert, Mayor Abraham Beame and New York City during the fiscal crisis, Con Edison, Planned Parenthood, the Organization for Economic Cooperation and Development, the New York State Task Force on Pension Fund Investment, and the New York State Commission on Public Authority Reform. In The Activist Director: Lessons from the Boardroom and the Future of the Corporation (Columbia Business School Publishing, 2016) he recounts stories of corporate governance failures (and, in the case of Planned Parenthood, success) and offers guidelines for making boards more active and effective.
Millstein starts with “the previously untold story of how GM directors finally woke up twenty-five years ago to deal with the company’s financial meltdown. … For the first time, independent directors, meeting separately, challenged an angry, typically imperial CEO [Roger Smith]—and later fired his chosen successor publicly.” During the ten years, beginning in 1985, in which Millstein was involved with GM, the company became competitive again. What happened after that time, how it ended up needing a government bailout, Millstein leaves for others to tell.
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Then there was Drexel, “the terror of Wall Street.” Millstein’s client was Fred Joseph, Drexel’s CEO, so he had “an excellent perch from which to watch a good thing going wrong.” And wrong it definitely went. By the end Drexel was bankrupt and Michael Milken was in jail.
Millstein was deeply involved in all of these crises and provides a fresh perspective on them. That alone would make this book worth reading. But he also makes recommendations on how boards can “partner” with management, valuable advice for corporations that want to remain competitive.
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Some of the worst corporate meltdowns over the past sixty years can be traced to passive directors who favored operational shortcuts over quality growth strategies. Thinking primarily about placating institutional investors, selective stockholders, proxy advisors, and corporate management, these inattentive and deferential board members have relied on short-term share price increases to sustain their companies long term. Driven by a desire for prosperity, not posterity, these actions can doom any company.
In The Activist Director, attorney Ira M. Millstein looks back at fifty years of counseling companies, nonprofits, and governments to actively govern their corporations and constituencies. From the threat of bankruptcy and the ConEd blackout of 1970s New York City, to the meltdown of Drexel Burnham Lambert in the late 1980s, to the turnaround of General Motors in the mid-1990s, Millstein takes readers into the boardrooms of several of the greatest catastrophes and success stories of America’s best-known corporations.
His solution lies at the top: a new breed of activist directors who partner with management and reject short-term outlooks, plan a future based on growth and innovation, and take responsibility for corporate organization, strategy, and efficiency. What questions should we ask of potential board members and how do we know they’ll be active? Millstein offers pragmatic suggestions for recruiting activist directors to the boardroom to secure the future of the corporation.