The resignation of Eric Scmidt, the chief executive officer of Google, from the board of directors of Apple is just a glaring example of a poor industry practice. Currently serving CEOs should not be board members of other public companies.
In the Schmidt/Apple affair it took head-on competition in some areas between the two companies before the announced mutual decision that Schmidt should take his leave. Dow Jones Newswires also noted there has been a Federal Trade Commission look at the boards of Apple and Google, as they not only shared Schmidt as a member on both but also Genentech Chairman Arthur Levinson.
Apple CEO Steve Jobs thanked Schmidt today for being “an excellent board member,” but added, “as Google enters more of Apple’s core businesses, with Android and now Chrome OS, Eric’s effectiveness as an Apple board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest.”
Conflicts of interest may be the red flag here, but it really doesn’t matter if we are talking about the CEO of a widget company sitting on the board of a publicly traded organic fruit company. The fact is if boards are to move beyond their too-often ceremonial role they need people with specific expertise who can spend significant hours learning the business and industry and with the guts to challenge top management when needed.
As this blogger has noted before, if you are the CEO of a publicly traded company, you have a full time job and then some. It should be your only professional commitment for all of the time you are in the job. If you are also the member of another company’s board somebody is getting cheated of your time. Maybe its the shareholders and employees of the company you run. Maybe its the shareholders and employees of the company on whose board you serve. Maybe it’s both.