Focus shifts to AMR's board team By Del Jones, USA TODAY The AMR board has fired CEO Donald Carty, but heavy lifting remains and experts question if the directors have the skill and energy to bring the nation's largest airline to a safe landing. In replacing the chairman and CEO of American Airlines' parent company with President Gerard Arpey as CEO and veteran director Edward Brennan as executive board chairman, the AMR board has put a new management team in place. Ordinarily, the job might be finished. But AMR is teetering near bankruptcy court protection, and survival may ride on sage directors. "Do they have the real talent? The internal fortitude? Are they too tired for the challenges ahead?" asks Eleanor Bloxham, president of The Value Alliance, a corporate board consultant. Strategic management professor Catherine Daily at the Indiana University Kelley School of Business and an expert on corporate boards said great boards shine in times of crisis. But crisis can showcase bad boards, as well At a glance, AMR can't be accused of stacking its 12-member board with insiders. Carty was the only AMR executive. But Nell Minow, editor of the Corporate Library, says there are at least four directors with business dealings with AMR, ties that may make the board less independent than it appears. The board proved itself independent enough to get rid of Carty with proper haste, says lawyer Rick Miller, who advises boards on governance issues for the firm Powell Goldstein in Atlanta. Carty had become "damaged goods," Miller says, after unions learned that he failed to tell them about the company's executive compensation plans before they approved pay cuts and benefit reductions to keep AMR out of Chapter 11 reorganization. Minow also praises the board for taking quick action, but he says to keep an eye on the exit pay package that Carty will get. AMR hasn't disclosed whether Carty's severance package differs from the one in its 2002 proxy statement filed last week. The board now faces complicated decisions. Typically their only duty is to maximize stockholder wealth. But corporate law has shifted so that when a company nears insolvency, the directors have an expanded duty to workers, customers, suppliers and creditors, Miller says. Daily likes that the board appointed retired Sears CEO Brennan as AMR's executive chairman. Perhaps no industry has gone through the financial distress that airlines have faced since Sept. 11, but the retail industry comes close. "I suspect that he has an appreciation for what AMR is going through," Daily says. Minow says when Brennan was at Sears a decade ago he was not only CEO and chairman, but controlled the nominating committee that selected his board. "He was legendary for bad governance," she said. The retail industry was indeed distressed, but Brennan did not distinguish himself, Minow said. Sears' retail division sucked resources away from the company's more successful financial arm, she says. Minow says the board needs to add a director, a heavyweight with experience in the airline industry. Bloxham says the directors also need to look deeper into AMR's management team and make changes where appropriate. They need to bring on another director or two with expertise in running distressed companies, she says. Daily and Minow say that expertise can be accomplished with outside consultants. The AMR directors John Bachmann, managing partner, Edward Jones. David Boren, former U.S. senator, president of University of Oklahoma. Edward Brennan, former CEO, Sears. Armando Codina, CEO, real estate investment company Codina Group. Earl Graves, CEO of own company that publishes Black Enterprise magazine. Ann McLaughlin Korologos, chairman emeritus, The Aspen Institute. Michael Miles, special limited partner, investment banking firm Forstmann Little. Philip Purcell, CEO, Morgan Stanley. Joe Rodgers, chairman, JMR Group investment company, former ambassador to France. Judith Rodin, president, University of Pennsylvania. Roger Staubach, CEO of his own real estate company, former Dallas Cowboys quarterback. *************************************************** The owner of Roger's Trinbago Site/TnTisland.com Roj (Roger James) escape email mailto:ejames@xxxxxxxxx Trinbago site: www.tntisland.com Carib Brass Ctn site www.tntisland.com/caribbeanbrassconnection/ Steel Expressions www.mts.net/~ejames/se/ Site of the Week: http://www.pscutt.com TnT Webdirectory: http://search.co.tt *********************************************************