The Spotlight on Boards
- Current focus on the performance of corporate boards prompts revisiting what is expected from the board of directors of a major public company – not just the legal rules, but also the aspirational “best practices” that have come to have almost as much influence on board and company behavior.
- 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.
- Plan for and deal with crises, specially crises like HP where the tenure of the CEO is in question, BP where there has been a major disaster or J&J and Toyota where hard-earned reputation is threatened by product failure.
- Determine executive compensation, achieving the delicate balance of enabling the company to recruit, retain and incentivize the most talented executives, while avoiding media and populist criticism for “excessive” compensation
- Interview and nominate director candidates, monitor and evaluate the board’s own performance and seek continuous improvement in board performance.
- Provide business and strategic advice to management and approve the company’s budgets and long-term strategy
- Determine the company’s risk appetite (financial, safety, reputation, etc.), set state-of-the-art standards for managing risk 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.
- Set state-of-the-art standards for compliance with legal and regulatory requirements, monitor compliance 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, 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.
- Pay close attention to investor relations and interface with shareholders in appropriate situations.
- Adopt corporate governance guidelines and committee charters.
- Martin Lipton
Posted by David Schatz