A Healthy Governance Environment
For any new model to work, boards of directors must be able to operate in an environment that promotes rather than inhibits effectively carrying out oversight activities. Since we're looking to the future, we can identify several areas where the environment needs to evolve in order to enable and facilitate governance success.
Shareholders have legitimate concerns about the extent to which they can affect director elections and otherwise have a say in governance issues. At the same time neither corporate America nor shareholders will be best served if companies must endure upheaval at the board level. If the shareholder power pendulum swings too far, we may be faced with frequent turnover of directors, large numbers of dissident directors, and boards unable to come to consensus. A result may be an adversarial board-CEO relationship, distracted senior management, and disrupted corporate performance. Directors spending time campaigning or otherwise politicking and CEOs dealing with dysfunctional boards serve no good purpose, and will be both distracting and destructive.
As noted, I've seen boards where directors were selected by constituent groups, and I can assure you it's not a pretty picture. Board meetings sank into finger pointing and shouting matches, with a result of not just failing to add value but actually destroying it. In one case, the company was on the verge of failure and forced into an unwanted merger. In another, ...