Tuesday, May 16, 2006

Ayn Rand on Boards of Directors

Ayn Rand has written some fascinating books—Atlas Shrugged and The Fountainhead are two of my favorites. I was recently leafing through an old copy of The Fountainhead and came across a wonderful little passage on boards of directors. I had always thought that the roots of lousy corporate governance in so many companies lay with things like the sheer incompetence of many board members, or their conflict of interest with their compensation package or with the CEO who appointed them, or with their lack of spine and integrity. But Ayn Rand pointed me to another possible factor: a group dynamic that yields blandness and turgidity. As she points out, this group dynamic also explains the frequent ineffectualness of committees.

Let’s set the stage. We’re in the 1930’s, in New York City. Howard Roark, the young brilliant, iconoclastic architect is approached by a businessman named Kent Lansing. Lansing is a member of the board of directors of a corporation which is planning to erect a luxurious hotel in Manhattan. The board has not yet decided on an architect, but Lansing wants the commission to go to Roark.

Here’s the conversation that follows.

“I won’t try to tell you how much I’d like to do it,” Roark said to him at the end of their first interview. “But there’s not a chance of my getting it. I can get along with people—when they’re alone. I can do nothing with them in groups. No board has ever hired me—and I don’t think one ever will.”

Kent Lansing smiled. “Have you ever known a board to do anything?”

“What do you mean?”

“Just that: have you ever known a board to do anything at all?”

“Well, they seem to exist and function.”

“Do they? You know, there was a time when everyone thought it self-evident that the earth was flat. It would be entertaining to speculate upon the nature and causes of humanity’s illusions. I’ll write a book about it some day. It won’t be popular. I’ll have a chapter on boards of directors. You see, they don’t exist.”

“I’d like to believe you, but what’s the gag?”

“…All I mean is that a board of directors is one or two ambitious men—and a lot of ballast. I mean that groups of men are vacuums. Great big empty nothings. They say we can’t visualize a total nothing. Hell, sit at any committee meeting. The point is only who chooses to fill that nothing. It’s a tough battle. The toughest. It’s simple enough to fight any enemy, so long as he’s there to be fought. But when he isn’t……”

Postscript: Speaking of those tough battles, I am reminded of Peter Drucker’s conclusion that the only times he had seen something important come out of organizations is when that something had been carried out by “monomaniacs with a mission.”

Post-postscript: Kent Lansing fought the battle against the ennui, inconclusiveness and petty personal politics of his fellow board members, reassuring Roark with “Don’t worry. They’re all against me. But I have one advantage: they don’t know what they want. I do.” And two months later, Roark signed a contract to design the hotel.


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