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THE GOVERNING CLASSTo The Editor:I read with interest the article, “Performance In The Boardroom: The Best And Worst Boards Of …


To The Editor:

I read with interest the article, “Performance In The Boardroom: The Best And Worst Boards Of 1994” (CE: November/December 1994), by Robert W. Lear and Boris Yavitz. The topic of corporate governance and the board’s oversight role is both timely and timeless.

As corporate governance is evolving, so is the role of the director. Consider the fact that until the mid-1980s, corporate governance within the U.S. was more a topic for legal and academic scholars than investors. Benjamin Graham and David I. Dodd tried for nearly 50 years to convince investors of the simple premise that “the choice of a common stock is a single act; its ownership is a continuing process, certainly there is just as much reason to exercise care and judgment in being a stockholder as in becoming a shareholder.”

Interestingly enough, two of the CE authors’ selections, Texaco and General Motors, were once targets for poor performance. Texaco made great progress and was honored by CalPERS for its corporate-governance efforts.

Bear Stearns also deserves mention as a public company that still thinks it is a partnership. Bear Stearns recently added more insiders to what is already an oversized board. Alan “Ace” Greenberg once asked me what Bear could do to improve its corporate-governance profile. I was remiss in not pointing out the obvious.

Focusing attention on “non-performing assets” such as the board of directors can bring about change. The National Association of Corporate Directors report entitled, “Performance Evaluation of Chief Executive Officers, Boards, and Directors…” provides additional refinements in the evolution of the American corporate-governance experience.

Dale M. Hanson

Chief Executive

American Partners Capital Group

Sacramento, CA

To The Editor:

I think Robert Lear and Boris Yavitz did a good job of analyzing corporate-governance for CE. I especially commend “The Hallmarks Of An Effective Board,” which includes consensus about such things as board size, outsider-insider ratio, conflicts of interest, demographic balance, stock ownership, committee structure, and independence. Some effective boards won’t fit the pattern entirely, but on the whole, these criteria make sense.

Over time, I hope we can add one more criterion: that the board sets objectives-mainly qualitative-for itself and its performance. This is the next logical step after a board gets its structural and governance modus operandi in order. A board might emphasize strategy, succession planning, or other things, depending on the enterprise’s current needs and dovetailing with management’s objectives and planning cycles. These objectives might be addressed both through committee work and full board deliberation. Explicit board objectives can make for a better working relationship between the board and management-and that is in the interest of the enterprise and its shareholders.

Barbara Hackman Franklin

Former U.S. Secretary of Commerce

To The Editor:

“The Best And Worst Boards Of 1994” was an outstanding article and very thoughtfully done.

There is a direct correlation between strong, independent boards and positive performance. However, as in all areas, a distinction must be made between form and substance. This article clearly demonstrates the impact of this precept as it compares strong and weak boards. Those companies with weak boards never gave themselves a chance. These boards are poorly structured with ineffective committees, infrequent meetings, and too many insiders and former CEOs, In some cases, too much stock ownership at the board level calls into question individual agendas, which may hinder performance.

Good governance creates value, but only strong boards can produce good governance. q

Hicks B. Waldron


Boardroom Consultants

New York

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