Richard was a licensed respiratory therapist, and I was a certified public accountant. Our timing could not have been better because the healthcare market was ready for a major shift to outpatient services Within 10 years, we were operating a billion-dollar company that had a presence in all 50 states. We operated more rehabilitation hospitals, surgery centers and outpatient rehabilitation centers than any other company. I retired as chief financial officer of HealthSouth in the fall of
We have entered into an age of widespread investor skepticism over nearly all aspects of corporate governance. Scandals are sapping investor confidence. With the financial shenanigans at Enron, WorldCom, Global Crossing, Tyco, Adelphia, Lucent, Xerox, Qwest, Ahold NV, Peregrine and other public companies permeating the news, many are seeking ways to improve corporate governance and, in particular, Director accountability to Shareholders.
Solutions involving better disclosure and stiffer penalties miss the big picture. Tweaking rules and regulations at the margins will only minimally improve the quality of corporate governance.
The powers-that-be will vigorously seek to maintain the status quo. Almost everyone who has previously enjoyed an advantage and is suddenly forced onto a level playing field will feel cheated, treated unfairly, singled out for undeserved punishment.
Shareholders the true owners of Corporate America should have the legal right to nominate truly independent Director-candidates and cause the names of those candidates to appear on the Company's ballot. Shareholders put their faith in and entrust their money to directors to manage the company and counter a chief executive if need be.
But when things get tough, boards become captive of executives or bankers or they simply leave. The recent case of Dynegy illustrates this.
Rather than stay to fix the mess the directors created, the entire Dynegy board resigned when shareholders rejected its efforts to sell the company.
The reasons are interrelated. Too often directors don't have enough skin in the game to push the company in a strong direction.
They do not own substantial stock in their companies and face no risk if things go wrong. Even if directors are given incentives to take strong action, the corporate board is not set up for this type of decision-making.
Directors work part time to manage the company. It's tough getting any group to agree on anything, let alone to challenge chief executives.
Boards thus naturally tend to rely on the top executives and advisers. Board collegiality and friendships among directors and with the chief executive often also mean that no director takes a disruptive stance. All these factors work to prevent directors from taking charge of a company or forging their own vision, a sobering thought for those who advocate greater board power.
Too often, in my experience, boardrooms are full of directors that still don't understand that they have a fiduciary duty to shareholders at large. I think we have too much in boardrooms today a feeling that you have kind of a divine right to continue on the Board without anybody challenging that assumption.
They think they deserve their steep payouts even when their performance has been far from stellar. Yet, because CEOs have influence over who gets on the board -- the only board slate offered to shareholders is the one proposed by management -- directors are careful not to offend them.
Call it the fear factor: If directors knew they stood a good chance of losing their board seats -- and the prestige and valuable business connections these provide -- unless they aligned themselves with shareholders, they might stop forking over so much and narrow the gap between what CEOs and their managers and employees get.
To get there requires changing corporate laws and practices. As a first step … shareholders gain the power to place director candidates on corporate ballots and to initiate and adopt changes in corporate charters. Under current rules, shareholders can only pass nonbinding resolutions and must wage costly proxy fights to nominate a dissident director slate.
If they can't elect the directors who represent their interests, what can they do? Moreover, strong oversight by shareholders should reduce the need for regulatory oversight.
At a minimum, the breakdown of board accountability has resulted in stock losses for investors. At worst, it has contributed to corporate wrongdoing. Each member of the group tailors his or her view to fit the consensus. Signs of groupthink include the ignoring of expert opinion, selective use of evidence and the illusion of omnipotence.
The price of groupthink is that, at some point, reality intrudes. More critical eyes help root out potential problems and facilitate solutions. Janis, the Yale psychologist, explained how panels of experts could make colossal mistakes.
People on these panels, he said, are forever worrying about their personal relevance and effectiveness, and feel that if they deviate too far from the consensus, they will not be given a serious role. They self-censor personal doubts about the emerging group consensus if they cannot express these doubts in a formal way that conforms with apparent assumptions held by the group.
From my own experience on expert panels, I know firsthand the pressures that people — might I say mavericks?
I felt the need to use restraint. I did so very gently, and felt vulnerable expressing such quirky views.
Deviating too far from consensus leaves one feeling potentially ostracized from the group, with the risk that one may be terminated.Selma is a city in and the county seat of Dallas County, in the Black Belt region of south central Alabama and extending to the west.
Located on the banks of the Alabama River, the city has a population of 20, as of the census.. The city is best known for the s Selma Voting Rights Movement and the Selma to Montgomery marches, beginning with "Bloody Sunday" in March and ending. Nov 24, · Many lessons can be learned from the accounting scandal at HealthSouth.
Accounting scandals of this scale do not just occur on their own; they require multiple people to orchestrate. When the tone at the top of a company deviates away from any sort of ethical framework, it should be a red flag to other members of the company, to auditors, and to the public that fraud is more likely to occur.
HealthSouth FRAUD. No description by He Became A Hotshot CEO. He Tried To Be A Country Star.
Then It All Came Crashing Down. The Bizarre Rise and Fall of Healthsouth's Richard Scrushy.” Fortune Magazine, July 7, Lessons Learned Conclusion Ending up Behind Bars Fraud is Never the Answer Overview of healthcare industry.
HealthSouth FRAUD. No description by He Became A Hotshot CEO. He Tried To Be A Country Star. Then It All Came Crashing Down. The Bizarre Rise and Fall of Healthsouth's Richard Scrushy.” Fortune Magazine, July 7, Lessons Learned Conclusion Ending up Behind Bars Fraud is Never the Answer Overview of healthcare industry.
HealthSouth Lessons Learned 1. Birmingham Economic Summit “Economic Development: Lessons Learned from the HealthSouth Turnaround” Presentation by: Jay Grinney President and Chief Executive Officer HealthSouth Corporation November 19, 1. Determine the lessons to be learned from fraud cases Identify activities of the Public Company Accounting Oversight Board Identify the major requirements of the Sarbanes-Oxley Act of