Boardroom decision-making processes have largely been shielded from view. Pulling back the curtain reveals several principles that can make your board better.
In the aftermath of seismic debacles like those that toppled Enron and WorldCom—as well as several noteworthy but more modest tremors, such as Disney's estimated $140 million payout to dismissed president Michael Ovitz— corporate boards have been shaken up and made over. They have more independent directors these days, and nearly all of them (up from roughly a third just a few years ago) have appointed lead or presiding directors to help ensure the board's vigilance in company affairs. Corporations now disclose directors' salaries and the names of committee members on their Web sites as well as in SEC documents. Sarbanes-Oxley legislation requires boards to maintain an audit committee consisting entirely of independent directors. Researchers have found that most of the changes are for the good: Along with other increasingly common board features—the existence of independent nominating committees, for instance, and requirements that directors own company stock—they have a positive effect on company performance.
Such visible structural changes, however, don't go to the heart of a board's work: making the choices that shape, for good or ill, a company's future. Which decisions boards own and how those calls are made are largely hidden from public view. Unlike the outer trappings of good governance, the inner workings of the boardroom haven't faced widespread investor or regulatory review.
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