Here are a few highlights from the speech:
"In an effort to think about the board of directors of the future, we need to start with what we expect the board to do today and the rules we have set governing how directors are selected, how they function and how they relate to shareholders - not only the legal rules but also the aspirational "best practices" that we have allowed to influence corporate and director behavior. We also need to look at how corporate management and boards are perceived by the media, the public and elected officials in the post-financial crisis era.
We expect boards to:
- Choose the CEO, monitor his or her performance and have a detailed succession plan in case the CEO becomes unavailable or fails to meet performance expectations.
- Provide business and strategic advice to management and approve the company’s long term strategy.
- Determine the company’s risk appetite (financial, safety, reputation, etc.) and monitor the management of those risks.
- Monitor the performance of the corporation and evaluate it against the economy as a whole and the performance of peer companies.
- Monitor the corporation’s compliance with legal and regulatory requirements and respond appropriately to “red flags.”
- Take center stage whenever there is a proposed transaction that creates a seeming conflict between the best interests of stockholders and those of management, and sometimes even when the conflict is more imagined than real, including takeovers.
- Set the standards of social responsibility of the company, including human rights, and monitor performance and compliance with those standards.
- Oversee government and community relations.
- Determine executive compensation.
- Interface with shareholders.
- Plan for and deal with crises.
- Approve the company’s ethical standards and programs and take responsibility for “tone at the top.”
- Monitor and evaluate the board’s own performance and seek continuous improvement."
- The trend to smaller boards will be reversed in order to have a sufficient number of independent directors for the audit, nominating and compensation committees and to add directors who have special expertise and are not necessarily independent.
- A separate risk committee will likely become common at companies where risk plays a significant role.
- Time demands of board service will result in more use of modern conferencing and communication technology; companies will have very frequent special meetings and resort widely to outside experts.
- In a few years the seperation of the Chairman and CEO role will be more widespread.
- The lives of CEOs and board of directors will become more challenging.
Posts
