By David F. Larcker and Brian Tayan *

(exechange) — February 1, 2019 — The bankruptcy of PG&E Corp. — and the resignation of CEO Geisha Williams — is an unfortunate reminder of the critical importance of risk management programs and the too-often occurrence with which those programs fail.

In the case of PG&E, the failure occurred in its core business — power delivery to residential customers, albeit customers in fire-prone areas.

Rightly or wrongly, the company has long had a reputation for poor safety. Devastating fires in Northern California in 2017 and 2018 exemplified this. So too did a catastrophic natural gas pipeline explosion in 2010.

Geisha Williams, who stepped down in January 2019 with a Push-out Score of 9, was a key figure in the company’s effort to rehabilitate its public image following the explosion. However, a change at the top did not lead to a substantive improvement in the company’s ability to reduce risk.

In this way, PG&E is reminiscent of major failures at companies such as Equifax Inc. and General Electric Co.

In these cases, boards have shown their willingness to hold CEOs accountable. However, they also serve as a reminder that boards should put much more emphasis on developing programs, plans and procedures that actually work in preventing disasters that can cause long-lasting damage to the business.

* The authors are a professor and researcher at the Rock Center for Corporate Governance, Stanford University.

Editor’s note: This is a guest post.