Vignette 6.4 SHOULD THE BOARD CHAIRPERSON BE AN EXECUTIVE? Burrin Corporation's sales and profits had slipped from their highs of 3 years ago. Everyone knew that the company faced increasing pressure from foreign competition and general maturing of the industry. However, some directors wondered whether Jay Kelly, CEO and chairman of the board, was the man to turn the company around. Kelly was a "numbers man" who had come up through corporate finance. He had an exceptionally good feel for the bottom line but had demonstrated little ability to sense technological and market trends. Prior to the June bimonthly board meeting, venture capitalist Linda Lopez and another independent board member requested a full discussion of Kelly's performance. Kelly had no option but to comply. However, he manufactured 12 other agenda issues, guaranteed to generate extensive discussion, and put them ahead of Lopez's item. the evening By the time Lopez's agenda item was reached, it was late and some of the directors had already left. One of Kelly's cohorts on the board proposed deferring discussion of the CEO's performance until the next meeting "because of its obvious importance to all of us." Lopez had little choice but to concur. After the meeting, several board members expressed support for Lopez's position and shared their own impatience with Kelly's stalling tactics. However, when Lopez received the agenda for the August meeting, she was surprised to see several items still ahead of her requested discussion. Fortunately for her cause-although not so fortunately for the company-2 days before the meeting, Kelly was bound over to a grand jury on a fraud charge. With the board shaken by that event and some other suspicions of high-level fraud, Lopez was able to convince the directors to appoint a nonexecutive chairperson. Kelly remained as CEO pending the outcome of the grand jury's deliberations. Meanwhile, the board instructed the audit committee to conduct its own investigations into possible fraud and to report to the October meeting. Thought Questions: I. What are the conflicting incentives that Jay Kelly was facing (e.g., shareholder incentives vs. management incentives)? 2. What are some things that the board could have done to more effectively address the issues brought up by Linda Lopez and the other independent board member?