The appointment of former politicians to large public companies’ boards is regularly called into question. Just recently, following the scandal at Chesapeake Energy (NYSE: CHK) when CEO Aubrey McClendon made investments in drilling projects in which the company was involved, the issue was in the limelight again. Chesapeake, based in Oklahoma, has two powerful politicians on its board — former member of the Senate from Oklahoma, Don Nickles, and former Oklahoma Governor Frank Keating. The company’s board members used the company’s private planes for travel — a perk most governance experts frown on. Perhaps the more salient question is why the two have stayed on the board under the current circumstances. It is equally reasonable to ask why politicians, with their backgrounds unrelated to running big companies, were even appointed to the board.
Many other politicians sit on the boards of America’s largest public companies, and some aspects of their services raise troubling issues. Some are successful lobbyists because of their Washington connections. These firms could work for causes or companies that do not have identical interests to those of the corporations of the boards on which they sit. There are questions about the past ethical behavior of others of these board members. In most cases, the former politicians have no obvious backgrounds to be on public companies’ boards. A final problem is that some have done very well financially because they sit on several boards — another practice many corporate governance experts oppose.
The common thread among the directors on this list is that they have been paid very well in their roles. Most make over a quarter of a million dollars a year. Most also have stock ownerships or grants that add substantially to those payments and are usually in the millions of dollars.
24/7 Wall St. examined the boards of the largest 100 public companies in America based on sales to find politicians who are current and recently past members. To qualify, a person must be a former governor, Senator, or member of the House of Representatives. We scrutinized their past records in elected office , their current jobs, and their qualifications to be public company directors.
Research firm GMI Ratings was critical in supporting us with research for much of our analysis. Securities held by these board members at the corporations they serve include stock ownership, securities that can be acquired, exercisable options and deferred stock units. All data are from the most recent proxies.
This article should provide shareholders of public companies, both institutional and individual ones, with some guidance about why politicians are chosen for boards. It should also tell the extent to which these individuals are qualified, both ethically and in terms of work experience, to effectively do their jobs.