April 02, 2004
The Board of Directors: What Do We Want?
Posted by Gordon Smith

One of my students, Joost Kap, pointed out an interesting article on non-executive directors from The Economist. The article points out the tension in our current drive for director independence, making an argument that I have made to my students on many occasions over the years: as directors become more independent, they may become less informed in the day-to-day affairs of the corporation.

We have two models of the board in our collective head. In one model, the directors are strategists, helping to channel the operations of the company through big picture decisions. In the other model, the directors are police officers, watching over management's shoulders. While there is some overlap in these two visions, they dictate different policy prescriptions. Most importantly for present purposes, the police officer model elevates independence above all other traits, while the strategizer model elevates business acumen and diminishes the importance of independence.

With all of the new demands on directors in the wake of Enron, outside directors have proven more difficult to recruit. In a recent book, Colin Carter and Jay Lorsch propose the appointment of non-independent, non-executive directors. These are people who "know the business well but don't work for it." Hmm. Given my newly displayed business acumen, perhaps I should offer my services?

Corporate Governance | Bookmark

TrackBacks (0)

TrackBack URL for this entry:

Links to weblogs that reference The Board of Directors: What Do We Want?:

Recent Comments
Popular Threads
Search The Glom
The Glom on Twitter
Archives by Topic
Archives by Date
January 2019
Sun Mon Tue Wed Thu Fri Sat
    1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31    
Miscellaneous Links