Risk & Compliance

Looking Good Isn’t Enough

Celebrity board members may be on the way out.
Kris FrieswickMarch 1, 2003

We’re sure that Priscilla Presley, Alexander M. Haig Jr., and Francis Ford Coppola are valued members of the board of MGM Inc., upon which they all sit, but we wonder what all the new director-independence and financial-literacy requirements will mean for the future of celebrity board members.

“I think we’re going to see the name value of celebrity directors easing out,” says Ralph Ward, publisher of the newsletter Boardroom Insider. Financial-literacy requirements may make a celebrity less…desirable, shall we say, as a board member. On the other hand, who’s more independent than a movie star? “Right now there’s more concern about having independent directors lacking any ties to the company than having financial literacy, so there’s really mixed incentives here,” says Ward.

Celebs themselves may start dropping off boards, especially if they want to avoid the unpleasantness now facing basketball legend Kareem Abdul-Jabbar, former Rams running back Eric Dickerson, former Oakland A’s pitcher Vida Blue, Olympic gold-medal sprinter Michael Johnson, and boxer Laila Ali. These sports stars, along with other officers and directors of now-defunct health-and-fitness company Znetix, are being sued by the company’s receiver to recover some of the $91 million in investor cash that founder Kevin Lawrence allegedly blew on wine, women, and song.

The suit claims the celebs “should have known that they were not performing their duties in a manner that was in the best interest of Znetix.” This assumes the stars knew what those duties were; we can only hope they know what D&O insurance is.