Shareholders and Sleeping Boards

The WSJ reports that the subprime meltdown has spurred shareholders to take action.  The article suggests that investors are focussing on the board and the failure to monitor the activies of management. 

We have long noted that companies like Countrywide provided director compensation in the vicinity of $500,000, providing directors with a nice sinecure and considerable incentive not to rock the boat (not to mention an incentive to approve lucrative compensation packages for top management). 

This is a problem that can be placed squarely at the feet of the Delaware courts.  As Harry Gerla is discussing in his posts about Caremark, the courts resolutely refuse to impose meaningful obligations on the board to monitor the activities of the company.  The inaction has consequences.  Congress already preempted much of this area with the provisions in SOX governing internal controls and CEO/CFO certification.  With crises like the subprime scandal, more preemption may be around the corner.