Tuesday, January 11, 2005

New Twist on Corporate Governance

The New York Times
January 11, 2005

New Twist on Corporate Governance

If there is any upside to the forced resignation of Florencio López-de-Silanes from his post as director of Yale's International Institute for Corporate Governance, it is this: corporate governance, a relatively obscure issue a few years ago, has now grown big enough to generate its own scandals.

Big enough, indeed, to have inspired an institute, which Yale's School of Management created in mid-2001. Yale wooed Mr. López-de-Silanes from Harvard to run the center, reportedly outbidding other suitors.

As Yale had hoped, the energetic young academic, now 38, soon put the institute on the map, churning out scholarly papers and trotting energetically around the globe to one forum after another. Mr. López-de-Silanes has also been a consultant to the World Bank, and he was recently honored by the World Economic Forum as one of the 100 Global Leaders for Tomorrow.

The problem was that Mr. López-de-Silanes reportedly billed both his hosts and Yale for his travel expenses - about $150,000 altogether, according to The Wall Street Journal. Upon discovering these irregularities, Yale quietly orchestrated his resignation for "financial misconduct and irregularities."

Mr. López-de-Silanes has apologized, is said to have made restitution and, through his attorney, attributes his behavior to "the intensity of my focus on my work." There has been much gnashing of teeth among corporate governance experts, who say this is simply another case of leaders' failing to lead by example. A more upbeat take is that only an issue that everyone is now interested in could have generated so many trips.