In your research you have discovered two things about corporate governance that defy conventional wisdom. What are these?

New York business solutions, governance, restructuring & bankruptcy attorney Martin Bienenstock of Proskauer Rose discusses two surprises of corporate governance.

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One is that as Professor Christensen puts it, when management does what it’s been taught to do at the finest business schools, which is listen to your best customers, always improve the quality of your product and by following those teachings you too can fail. Because what he found based on empirical research is that companies that are always upwardly mobile looking to improve the product and cater to their best clients ignore inferior products that are not good enough for their best clients but are more than good enough for people who don’t buy their product because it’s too expensive or who buy it but who really don’t need it. And the inventions that go to those markets end up being improved and then they overtake the industry leader’s product. So that’s one thing that is totally counterintuitive that has brought down companies like Kodak, many of the airlines, Woolworth’s these companies span multiple industries.

The other thing that defies conventional wisdom is that as Speeder Drucker wrote in 1989, when a company fails, its board of directors is often the last to know about it because they don’t see the failure coming. And that has to do with what’s on the boards agenda and whether they’re following or causing management to follow the risks to their ongoing business and doing something about them when they arise.