Sounding Off On The Best And Worst Boards
Your article "The best and worst boards" (Cover Story, Nov. 25) makes a significant contribution to the corporate governance field. The article clearly describes the major forces causing boardroom reform, and it provides a very useful outline of best practices for boards. It is clear that corporate boards must move beyond their traditional monitoring role to take on additional oversight responsibilities related to strategic planning and risk management. The education of directors will be critical as boards expand their responsibilities.
We fully support your efforts to measure board performance, and we applaud the National Association of Corporate Directors' courageous new guidelines on director professionalism. As the corporate governance revolution continues, we hope that one additional reform will be more widely adopted--splitting the roles of CEO and board chairman. Until these roles are separated, many companies will continue to place too much power in one person's hands.
Dana R. Hermanson
Corporate Governance Center
Coles School of Business
Kennesaw State University
John A. Byrne has clearly stepped heavily on the sore toe of Corporate America, which may not be aware of that sore toe after many years of walking funny.
I have no quarrel with your guidelines for corporate boards. However, you include a couple of requirements that may be too restrictive and one that is not restrictive enough.
Directors' fees should not be paid exclusively in stock. Nor should service be limited to those under 70 years of age. There is not enough talent available to enforce those restrictions. Further, the limit on the number of boards on which a director can serve should be stated. From my own experience, even four directorships may be too many. A directorship requires a serious commitment of time and energy. I'd rather have a ready reserve of both than be forced to skimp.
Stewart A. Washburn
In your article on corporate boards, diversity of age was mentioned briefly. And while the number of nonwhite males has been increasing, there are still very few. I wonder if women and minorities have a significant impact on corporate performances. I'd welcome further research to address this serious question.
Joseph W. Leonard
I was disappointed to see that your survey and related article on board governance failed to address CEO succession and executive development. This is probably one of the most critical issues and decisions a board of directors faces, with impacts on long-term creation of shareholder and customer value.
Our ongoing benchmarking of "better practices" related to executive resource and succession planning across North America has identified some big gaps in executive talent-pool management in many organizations.
In many companies, there is no link between the business-strategy development process and the selection and development of executive talent--either for today or the future. Given that developing a CEO for a larger enterprise takes at least 15 years, this is not something that can be left until the last minute.
Until boards, CEOs, and organizations like the National Association of Corporate Directors start to take a hard look at the principles and processes for effective CEO succession, a critical part of effective board governance will continue to be vacant.
Mark S. Van Clieaf
Your cover story on corporate governance was insightful and timely, shining a spotlight in what has long been a dark corridor of American business. I am disappointed you didn't emphasize the importance of diversity when citing best practices for developing boards of directors. Without fresh voices from women and minorities, there's a strong likelihood corporate boards will miss major trends that may be crucial to their business.
Although the number of women and minorities on boards is growing, it is not growing fast enough. Perhaps BUSINESS WEEK's new rankings will help.
William A. Strang
Associate Dean for External Relations
School of Business
University of Wisconsin
It is great to read of the progress Campbell Soup Co. and others have made moving boards to higher performance, accountability, and cost management. It would be better to see some standards proposed from within the business community--not just from directors' associations--to meet these objectives, before unproductive alternatives get put into law by regulatory agencies. It is only a matter of time before such regulation appears. The best-practices summaries you provide are a good place to start.
And what about a little peer review? It's common practice in many professions. Also, we should not ignore the great earnings potential and resultant long-term increase in shareholder value that exists in downsizing our boards. As a manager with a financial background, I would also recommend that some good old-fashioned continuing professional education in financial basics be required each year.
St. Paul, Minn.