The Best and Worst Boards of 1996: Measuring Corporate Governance

By Lear, Robert W.; Yavitz, Boris | Chief Executive (U.S.), November 1996 | Go to article overview

The Best and Worst Boards of 1996: Measuring Corporate Governance


Lear, Robert W., Yavitz, Boris, Chief Executive (U.S.)


More and more companies have seen the light about corporate governance and are implementing formal policies such as CEO and board evaluations. But a dismaying number choose to remain in the dark.

By all rights, nearly every American public company should have embraced the idea that its board should comprise a majority of independent directors who participate effectively in their organization's corporate-governance processes. After all, for decades, the Securities and Exchange Commission, National Association of Corporate Directors, institutional shareholders, business writers, teachers, and consultants constantly have clamored for all companies to improve their board structures and procedures.

However, apparently some CEOs and directors don't read, don't listen, or just don't care. This is the conclusion we reached in our fourth time screening several hundred proxy statements before choosing our Best and Worst Boards of 1996. While the strong trend toward "enlightened corporate governance" continues-with many more boards appointing governance committees, issuing corporate-governance policies, adopting formal CEO and board evaluation programs, and taking a chunk of their pay in company stock-we still found, to our dismay, a number of companies whose CEOs and directors seem to have thumbed their noses at such strategies. Often, such companies are found in the entertainment and financial industries and are likely to show heavy stock holdings by top management or family members. They are also likely to be headed by highprofile, publicly visible CEOs, who may-sooner or later-fall into the trap of believing their own press clippings.

The boards of such corporations usually are composed of several insiders and/or directors who do business with the company. Generally, there is little evidence of effective, independent participation by the directors in board affairs. It is difficult to see how independent and small shareholder interests are properly represented.

The five companies we selected as having the worst boards represent some interesting variations on this theme. Some of these boards are exceedingly small, others quite large. They come from a variety of industries-gaming, steel, food, aluminum/forest products, and retail-and are products of very different histories. They are all dominated by CEOs who can readily muster majority support from insider or beholden directors.

We do not pretend to use scientific, statistically accurate methods in our study of America's boards. We talked to

dozens of corporate observers-Chief Executive magazine readers and other CEOs, academics, investors, shareholders, and writers-and asked their suggestions as to both good and bad performers. We read news stories and saved clippings. Altogether, during the past year, we screened about 250 companies with more than $250 million in revenues. We examined all our potential candidates' 1995 proxy statements covering the 1994 calendar year before making our choices.

The criteria for determining what constitutes a "good" or a "bad" board (see sidebar, "The Hallmarks of an Effective Board") are continuously refined, but our fundamental principles remain much the same as they were four years ago when we began this exercise. As in our previous three analyses, we didn't rank these boards. because each is unique in its own composition, structure, and presentation.

ln this year's review, we found perhaps 100 companies or so that would have been serious candidates for our five best boards four years ago. Thus, much progress is being made, and it is spread across a majority of the corporations we analyzed. Still, some others haven't seen the light yet-some of them leading companies that should know better and provide a corporategovertance model for their less successful brethern. And though their corporate-goverance policies may not have affected their performance to date, if you walk a tightrope for a while, there's always a possibility you will fall off. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The Best and Worst Boards of 1996: Measuring Corporate Governance
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.