Chelsea Clinton IAC board controversyCorporate-governance watchdogs are always on the lookout for flimsy boards, and they're on the case regarding a new appointee at IAC/ InterActiveCorp (IACI), a company that runs sites including Match.com, Ask.com, and Dictionary.com.

IAC has added a well-known Clinton to its board of directors: No, not either of those Clintons. They've appointed Chelsea Clinton, daughter of former President Bill and current Secretary of State Hillary.

No doubt Chelsea is smart. IAC Chairman and CEO Barry Diller said as much, pointing out that Chelsea adds a much-needed youthful, diverse viewpoint to the board. "Experience ... can be of no great value, while diversity, youth, character, and exceptional brain power [have] a good chance to create a fine contributing board member," Diller said.

On the surface, it's a good sentiment. U.S. boards do have big problems to address these days, including lack of diversity and lockstep views. They tend to be populated by men from similar backgrounds who exhibit similar mindsets and have very similar goals. It's very hard for a bunch of "yes men" to stand up against management and for shareholders, after all.

Still, youth doesn't trump experience in corporate boardrooms.

Good for Publicity, Questionable for Shareholders

This new appointment is a big -- and possibly bad -- deal for IAC shareholders.

Boards of directors are charged with protecting shareholder interests, whether many investors realize it or not. These days, plenty of corporate problems -- such as out-of-control CEO pay -- can be correlated with dysfunctional or flimsy boards that have nothing near an independent spirit that's willing to challenge management teams.

Now 31, Chelsea Clinton was in her teens during the dot-com bubble and only about 20 years old when it burst, for example. That was a make-or-break time for companies like IAC, but she was probably still pretty preoccupied simply with the process of growing up.

GMI's Nell Minow commented on Clinton's appointment on PBS's Nightly Business Report, arguing that the best directors have decades of achievement to speak for them. She also pointed out that IAC's Diller has a tendency to populate his board with "cronies," which is just one reason The Corporate Library gives that company a near-failing "D" grade for its corporate governance.

In addition, Diller supported both of Clinton's parents' campaigns, which gives shareholders no reason to believe this is the kind of independent director that helps make a robust boardroom. In fact, she sounds a bit dependent on her parents' careers at this point.

Name-dropping "important" or "known" appointees instead of adding truly experienced directors indicates weak corporate governance and madly waving red flags for shareholders. Hopefully, investors will become increasingly aware of the quality of the boards at the companies they own and vote their proxies wisely when it comes time for director elections.

Motley Fool analyst Alyce Lomax owns no shares of IAC/InterActiveCorp.


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