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Corporate governance III

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Corporate governance III

Corporate governance will not improve until the following rules are adopted.

One: All directors should be independent of and unrelated to the company. The CEO should not be a board member, but should be invited to make presentations to and answer questions from the Board.

Two: No senior officer of a company should serve on the Board of any other public company. For directors to fulfill their fiduciary responsibilities, they must devote a considerable amount of time and effort to their jobs. Senior officers of companies, university presidents, and other individuals with full-time positions should not be directors of public companies. Being a director is s afull-time job.

Three: No one should be on the Board of a company for more than 5 or 6 years. The regular infusion of new people should bring new insights into board discussions, should reduce the tendency for directors to get close with senior officers, and should bring a broader perspective to Boards.

Four: No one should serve on more than 2 or 3 Boards at any one time. Directors should be well compensated. The compensation should not be linked to the performance of any individual company.

Five: Directors should provide full disclosure of their deliberations and decisions to the public.

Six: Director liability should be greatly restricted so that directors would have less incentive to abrogate their responsibilities by hiring and relying on the advice of external experts. Eliminate the liability to reduce the need for directors to resort to cover my ass strategies.

Seven: Each company should randomly select its directors from a pool of qualified individuals. We can debate what qualifies a person to be part of this pool, but age and management experience should not be among the criteria.


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1 Comment

  1. Darryl Coleman September 29, 2009

    I finally decided to write a comment on your blog. I just wanted to say good job. I really enjoy reading your posts.

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