Chapter 14
Building an Effective Board
Does your company have the right directors on the board? As directors look around the boardroom table, they must be confident that fellow directors are people who can successfully work together and, if necessary, go to war with, putting reputations and possibly personal assets in their hands. CEOs and senior management team members, and of course the company's shareholders, also need to be confident that the men and women providing corporate oversight do the job well.
The quality of boards of directors has for years been on the minds of Congressional leaders, regulators, shareholders, and the public, and the volume rose with the financial system's near meltdown. An article in Newsweek was clear in its condemnation:
The failure of the financial system in 2008 wasn't simply a massive failure of common sense, regulation, and leadership. It was also a failure of corporate governance . . . [Boards are] supposed to be there to act almost like a governor on an engine, if it's running out of control at least to slow it down. Ideally they're supposed to monitor, advise, provide contacts to the company, and help it grow. But at the very least, they're supposed to keep it from blowing up.1
The article's focus turns to board composition, saying, “Unfortunately, boards are a narrow group who come from the same backgrounds as the CEOs. They tend to see the world the same way the CEOs do.”
The near meltdown provides some of the impetus for the SEC rules ...
