Two of the directors on JPMorgan’s risk committee retired 19 July following low support (just over 50%) they received at the company’s May annual meeting. One member of the risk committee remains, though the board has stated that it seeks to fill the vacant posts.
One novel answer to such board problems may be more “professional boards.” An academic paper, Boards-R-Us: Reconceptualizing Corporate Boards, published on 10 July by of University of California–Los Angeles law professor Stephen Bainbridge and University of Chicago law professor Todd Henderson suggests that board accountability would improve if directors came from professional service companies set up for that purpose, similar to the way firms outsource external auditing services. The authors argue that “this could create a market for corporate governance separate and distinct from market for corporate control.”
Critics of such a plan for professional services firms to provide board directors raise concerns as to whether such directors can adequately fulfill their fiduciary duty of serving shareowners, especially if they are called on to serve on a large number of boards that would not allow them to dedicate adequate time to each company at which they serve.
Our article anticipates that criticism. Among other things, we suggest that courts may be more willing to hold firms liable than individuals. In addition, we argue that reputational and financial incentives can be designed to ensure that firms more than "adequately fulfill their fiduciary duty."