Chelsea Clinton and the Meritocracy Myth

Yes, I'd be happy to join your board.

After reading a few accounts of Chelsea Clinton’s recent appointment to the Board of InterActiveCorp (IAC), a company that runs sites including Match.com, Ask.com, and Dictionary.com, here’s what I think we’re supposed to conclude.

There’s one winner and one loser.

The obvious winner? C-squared herself. The Wall Street Journal explains. Ms. Clinton will receive an annual retainer of $50,000. In addition, she will receive a $250,000 grant of IAC restricted stock.  

IAC’s stock is up 41% this year. Say she serves for ten years. With stock appreciation that will be well over $1m in income for attending what I suspect are quarterly meetings. Winner, winner, several very nice chicken dinners. She’s currently working on a Ph.D at Oxford. Sure hope they reimburse her for her airfare.

The loser is actually losers. From Alyce Lomax in Daily Finance:

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’sNightly 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. 

The unreported loser is the notion of meritocracy that the right loves to trumpet. This is the idea that the relative work ethic of U.S. citizens determines their success instead of the color of their skin, their gender, or their parents’ connections. Ironic that a first family of the left disproves one of the right’s foundational ideas.

C-squared’s appointment proves the playing field, that is life in the U.S. in 2011, isn’t level, the starting line of life is staggered, and an individual’s personal capital sometimes trumps others’ smarts and work ethic.

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