MIT Sloan Management Review

Corporate Strategy, Leadership and Organizational Studies

 

Are Professional Board Directors the Answer?

By Eugene H. Fram

January 15, 2005

Companies that are having trouble filling board positions should consider a new type of director: well-established professionals who devote all of their work, time and energies to corporate board activities.

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As a result of the recent wave of corporate scandals and the ensuing regulatory changes, corporate boards in the United States have been facing an increasing number of demands. Companies now have bigger agendas for their board directors, requiring deeper reviews of policy topics, such as ethics codes, internal controls and director performance evaluations. Audit committees are meeting more frequently, and directors are being asked to devote more time to their duties, including the review of comprehensive board reports.

At the same time, the pool of available candidates to fill board positions has been shrinking. Increasing numbers of active senior managers have been avoiding — and will continue to avoid — outside director responsibilities, due primarily to personal choice or the mandates of their own boards. The business community clearly is moving away from what used to be the common practice of senior executives serving simultaneously on the boards of four or five companies. (For a detailed discussion of these and other issues, see “The Changing Face of Corporate Boards” by Edward E. Lawler III and David L. Finegold, p. 67.)

One obvious solution is to recruit retired senior managers to take more active roles as directors. But boards would have to be certain that the skills, knowledge and — perhaps most importantly — motivation of any such candidates are all present in sufficient quantity. Because... To read the complete article, login or sign-up using the form below.

 
 

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