People and Governance

…or maybe the title should have been people make governance.  Processes and procedures only go so far, especially when stakeholders’ trust is lost or fragile.

An example: I just filled out my vote for my small Citigroup stake.  Given Citi’s still fraught state, I paid a bit more attention than usual to my votes.

The history of two of the director candidates caught my eye.  It was a bit surprising to see a past Lehman director — Jerry Grundhofer — and a past Fannie Mae director — Diana Taylor — on my ballot.  I googled around a bit and found nothing negative about their directorships.  In fact, Ms. Taylor appears to be a very respected former regulator who went to Fannie Mae to strengthen its governance (though thoughts of amakudari danced in my head).

Sadly, the web of reputation is more tangled than ever.  Two brief board stints for infamous firms made me pause before casting my vote; and made me scrutinize the rest of the proposals even more closely.  Trust but verify, indeed.

Black Swan author on the limits of statistics

Turkey -- day 1002

Turkey -- day 1002

An excellent and accessible on-line article by Nassim Taleb (author of The Black Swan) about how to protect against improbable events.  It is always refreshing to see a stats expert warning of the discipline’s limits. 

A lot of his focus is on the current financial mess, which of course has at least some of its roots in the misuse of statistics.  Even worse, when everyone uses the same half-baked statistical analyses to assure themselves that there is little risk, they are unknowingly and unwittingly increasing the likelihood and magnitude of the pesky risk events. 

Taleb also has a way with the colorful metaphor:

A turkey is fed for a 1000 days—every day confirms to its statistical department that the human race cares about its welfare “with increased statistical significance”. On the 1001st day, the turkey has a surprise.

%d bloggers like this: