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Is IBM Stuck in a Hazard at the Masters?

In two days, the world’s best golfers will tee off at Augusta National Golf Club for this year’s iteration of the Masters. Augusta is the toniest of tony country clubs; extremely expensive and equally selective.  It’s also a place steeped in tradition and history, especially for golfers; among other things, it’s the only club that hosts the same major championship every year. Not all of Augusta’s history is history to be proud of, though. Founded in 1933, it admitted its first African American member in 1990. It has yet to admit its first female member.[1] In 2003, the club responded to protests challenging its overtly sexist policy by asserting that women could “go start [their] own club.”

Now, it seems that there may be some crow on the menu at the Masters this year. Every year, Augusta has traditionally offered membership to the CEO’s of each of IBM, Exxon, and AT&T (the 3 principal sponsors of the Masters). In October, 2011, IBM appointed Ginni Rometty its new CEO.  As of this writing, Augusta has not offered her membership. With its annual weekend in the national spotlight fast approaching, Augusta has a decision to make. More importantly, though, so do IBM and Ms. Rometty.

If Augusta wanted Ms. Rometty as a member, it would have made the offer long ago. To deny her membership after offering it to so many of her predecessors would be patently offensive and would rightly subject Augusta to scorn, vitriol, and ridicule. Offering it to her now, though, seems little better.

On a daily basis, Ms. Rometty certainly makes decisions that dwarf this controversy. So, I can’t imagine she’s devoting a whole lot of time or energy to thinking about it. Nonetheless, she and IBM have the chance to be good corporate citizens. I hope she’ll reject the membership if it’s offered, or (even better) politely announce, before it’s offered, that Augusta doesn’t deserve a member of her caliber.

What IBM should do poses a question more directly relevant to this blog. Personally, I’d like to see IBM extricate itself from sponsorship of the tournament as soon as possible without exposing it to litigation. Corporate directors and officers, though, don’t have the luxury of governing according to their personal feelings. In Maryland, a director must, among other things, act in the best interests of the corporation, acting as a reasonably prudent person with the director’s skill, education and experience would act in the same or similar circumstances.[2] In particular, this duty requires directors to become reasonably informed about their decisions before making them. Of course, the amount of information required varies with the importance of the decision being made. The point, though, is that even if certain individual directors at IBM might want to get the company out of its association with Augusta, they may be duty-bound not to. Terminating the sponsorship might very well cost the company substantial money in the long run, and might alienate many of its vendors and clients.

If I were counseling the directors of a Maryland corporation in a similar situation, I’d advise them to gain as much information as reasonably possible about the effect that each course would have on the corporation, then carefully consider all that information. I’d advise each director to (1) vote to terminate or continue the sponsorship based on what he or she honestly and in good faith believed to be in the best interests of the corporation, and (2) document the reasons for his or her vote (or at least the factors and information considered) in the meeting minutes. Doing so would ensure not only that each director met his or her duty, but could prove that he or she had done so in the event of a challenge.



[1] Information comes from Janet McManus’ excellent article on ESPN.com, here [http://espn.go.com/espnw/commentary/7755038/espnw-ginni-rometty-force-augusta-change-ways].

[2] IBM is a New York corporation. Directors’ duties under New York law are likely similar to those described above, but are almost certainly not identical. The author is not admitted to practice in New York, and expresses no opinion on any matter of New York law.