As voters mark ballots to change legislatures and boardrooms this fall, thoughts naturally turn to matters of state. I am reminded of Benjamin Franklin’s quip about America. When a woman asked him what kind of government she would have, he replied: “A Republic, if you can keep it.”
Over the past decade, there has been a growing federalization of corporate governance—spelled “Sarbanes-Oxley” and “Dodd-Frank.” Federalization means practices that used to be up to the discretion of directors to shape and do are now dictated and mandated. Our Boardroom Confidence Index, which debuts in this issue, indicates glimmers of optimism, but they are faint.
Good corporate governance is our “republic.” Will we keep it in the face of changes? Proxy access is the law of the land. Its champions call it democratic. Its opponents deem it divisive. But all agree on one thing: No matter what happens, proxy access need not destroy the good governance practices boards have built over the decades. NACD can help directors respond constructively to federalization.
Dodd-Frank will only be as effective as the rules it generates. To paraphrase an old saying, betwixt the law and the rule is many a slip—and that concerns us. Reliable sources tell us that the bill has more than 240 rule-making provisions and requires nearly 80 reports—22 of them on a regular basis. NACD is commenting on any new rules or reports that affect the boardroom and we encourage our members to do so as well.
This issue of NACD Directorship focuses on counterpoints to the federalizing trend, including advances in executive and director education and progress in risk assessment. Our Washington Update column summarizes some enlightened comments the SEC is receiving as it turns the law into rules. Turning to the entrepreneurial and nonprofit sectors, readers will be cheered by news of smaller boards getting big talent—and impressed by Kaiser’s tale of proactive self-evaluation.
In my humble opinion, we will keep good governance alive. But only if we continue to find it among us and keep it going. I pledge to try. Will you?