Over the past decade, American companies have tried hard to find ways  to discourage senior from feathering their own nests at the expense of their  shareholders. The three most popular reforms have been recruiting more outside directors in order to make boards more independent, linking bosses’pay to various performance measures, and giving bosses share options, so that they  have the same long-term interests as their shareholders.
These reforms have been widely adopted by American’s larger companies, and surveys suggest that many more companies are thinking of following their  leaD. But have they done any good? Three papers presented at the annual meeting of the Academy of Management in Boston this week suggest not. As is usually  the case with boardroomtinkering, the consequences have differed from those intendeD.    Start with those independent boards. On the face of it, dismissing the boss’s friends from the board and replacing them with outsiders looks a perfect way to make senior managers more accountable. But that is not the conclusion of a study by Professor James Westphal. Instead, he found that bosses with a boardroom full of outsides spend much of their time building alliances, doing  personal favors and generally pleasing the outsiders.
All too often, these seductions succeeD. Mr.Westphal found that, to a  remarkable degree, “independent” boards pursue strategies that are likely to favor seniormanagers rather than shareholders. Such companies diversify their business, increase the pay of executives and weaken the link between pay and performance.
To assess the impact of performance related pay, Mr.Westphal asked the bosses of 103 companies with sales of over $1 billion what measurements were used to determine their pay. The measurements varied widely, ranging from sales to earnings per share. But the researcher’s big discovery was that bosses attend to measures that affect their own incomes and ignore or play down other factors that affect a company’s overall success.
In short, bosses are quick to turn every imaginable system of corporate government to their advantage—which is probably why they are the people who are put in charge of things. Here is a paradox for the management theorists:  any boss who cannot beat a system designed to keep him under control is probably not worth having.