The Best Board Is An Independent Board

"The Best and Worst Boards" (Cover Story, Dec. 8) highlights the distinction between good corporate governance and good corporate performance. What your survey respondents are telling Walt Disney Co. CEO Michael D. Eisner is that good performance is no substitute for good governance. Instead, the process used to achieve the performance (including the governance process) matters to investors.

Why does the process matter? A company can excel for a number of reasons, including great people, great products, or great processes. When I buy Disney stock, I want to know that I am buying more than the current CEO's talents, as outstanding as they appear to be. Instead, I want to buy a stake in an organization with a great CEO and a great governance process. If the next CEO is not as talented as Mr. Eisner, at least I know that the governance process will work to maximize the CEO's and company's success.

What should Disney and other companies in their position do? Fix the governance process, particularly the elements related to board independence. Until a strong, independent board is in place, investors will have less confidence in Disney's ability to deliver consistent, first-rate results.

Dana R. Hermanson

Director of Research

Corporate Governance Center

Coles College of Business

Kennesaw State University

Kennesaw, Ga.

Your article on "The Best and Worst Boards" was well done. I am a strong supporter of independent directors. My company, Baker Hughes Inc., limits the number of inside directors on its board, and outside directors' firms are barred from doing consulting, legal, or other work for the company. Interlocking directorships are also out, and a 10-year tenure rule is in place.

In addition, now directors are added based on the skills needed to enhance the existing board. Baker Hughes' corporate-governance policy has been in effect since 1991, which makes the company an early leader in implementing a sound, independent policy.

James D. Woods

Chairman Emeritus

Baker Hughes Inc.

Houston

Congratulations on the survey of corporate governance. I hope that European companies will follow the U.S lead. What causes a great deal of confusion is the role of outside directors in strategy determination. The article states correctly that "a board's primary responsibility lies in ensuring that strategic plans undergo rigorous scrutiny." In other words, the outside directors "audit" the strategies developed by the executive directors. But the article says earlier that it is important for directors to be active, critical participants in determining a company's strategies.

This can be misunderstood. The auditing and approval of plans is good; co-determination of strategies is not.

Laurens van den Muyzenberg

Muyzenberg Management

Consultants Ltd.

Ascot, England

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