According to public filings, about 96% of the boards of Standard & Poor’s 500 (S&P 500) companies had a lead or presiding director in 2008. That was not always the case; in fact, that percentage represents a four-fold increase since 2003. The greater prevalence of lead directors is a byproduct of the passage of landmark U.S. corporate governance reform legislation — the Sarbanes-Oxley Act — in 2002. The passage of Sarbanes-Oxley, and the subsequent increase in the number of lead directors, arose from a growing public distrust of management and board “insiders” in the wake of a series of multibillion-dollar financial debacles such as Enron Corp. and WorldCom Inc.

One mandate of Sarbanes-Oxley — which was subsequently clarified by regulations issued by the U.S. Securities and Exchange Commission (SEC) and the New York Stock Exchange (NYSE) — is a requirement that independent directors on the board of a U.S. public company meet not only as part of the full board but also separately and apart from management and non-independent directors. The lead or presiding director role was institutionalized by the need to have a director chair such meetings of the independent directors. (The terms presiding director and lead director have come to be used interchangeably; as a practical matter, the use of the term lead director predominates.)

The new governance rules also required... To read the complete article, login or sign-up using the form below.