Despite the clear benefits of committees (including the opportunity for increased focus on risks of particular concern to the company), a complex committee structure with numerous standing committees poses its own risk: a fragmented or “balkanized” environment, in which each standing committee is focused on its own area of oversight, with no one, including the full board, having the “big picture” of the company’s risks.
The role of the entire board is to ensure that it sees the fullest possible picture about the company’s risks, and that its committee structure enables appropriate focus on the key risks to the business.
NACD’s Key Governance Principles:
The National Association of Corporate Directors’ guidelines titled “Key Agreed Principles to Strengthen Corporate Governance for U.S. Publicly Traded Com-panies,” ask directors to begin the dialogue in their own boardrooms about what steps can be taken to help restore confidence in American business.
“Now directors must demonstrate marked action, exploring new ways to strengthen corporate governance,” said Kenneth Daly, president and CEO of the National Association of Corporate Directors at the annual corporate governance conference in Washington, D.C. “Many corporate boards have recognized the critical issues and adjusted their practices to perform in these unprecedented times. Directors must continue taking the necessary steps to restore public and investor confidence, an important ingredient of economic recovery.”
The principles, drafted pro bono by Ira Millstein and Holly Gregory and colleagues at Weil, Gotshal & Manges, are as follows:
1. Board responsibility for governance: Governance structures and practices should be designed by the board to position the board to fulfill its duties effectively and efficiently.
2. Corporate governance transparency: Governance structures and practices should be transparent— and transparency is more important than strictly following any particular set of best practice recommendations.
3. Director competency and commitment: Governance structures and practices should be designed to ensure competency and commitment of directors.
4. Board accountability and objectivity: Governance structures and practices should be designed to ensure the accountability of the board to share-holders and the objectivity of board decisions.
5. Independent board leadership: Governance structures and practices should be designed to provide some form of leadership for the board distinct from management.
6. Integrity, ethics, and responsibility: Governance structures and practices should be designed to promote an appropriate corporate culture of in-tegrity, ethics, and corporate social responsibility.
7. Attention to information, agenda, and strategy: Governance structures and practices should be designed to support the board in determining its own priorities, resultant agenda, and information needs, and to assist the board in focusing on strategy (and associated risks).
8. Protection against board entrenchment: Governance structures and practices should encourage the board to refresh itself.
9. Shareholder input in director selection: Governance structures and practices should be designed to encourage meaningful shareholder involvement in the selection of directors.
10. Shareholder communications: Governance structures and practices should be designed to encourage communication with shareholders.
BRC Commissioners (with primary affiliations and representative board seats):
Co-Chairs
Reatha Clark King, PhD; General Mills Foundation; Former president and chair, Lenox Group
William J. Fallon; Admiral, U.S. Navy (Ret.); Neural IQ; Government Systems; Tilwell Petroleum
Commissioners
Dennis Beresford, The University of Georgia; Fannie Mae; Kimberly-Clark; Legg Mason
Alfred R. Berkeley III, Pipeline Financial Group; ACI Worldwide; Johns Hopkins University, RealPage
John Castellani, Business Roundtable
Peter Clapman, Governance for Owners; AARP Mutual Funds; iPass
Theodore Dysart, Heidrick & Struggles; Worcester Polytechnic Institute
Charles Elson, University of Delaware, Weinberg Center for Corporate Governance; HealthSouth
Cynthia Fornelli, Center for Audit Quality
Holly Gregory, Weil, Gotshal & Manges
The Honorable Barbara Franklin, Barbara Franklin Enterprises; Aetna; American Funds; Dow Chemical
Robert Hallagan, Korn/Ferry International; Berkshire Life Insurance; ResCare
Michele Hooper, The Directors’ Council; AstraZeneca; PPG Industries; UnitedHealth Group; Warner Music Group
Cynthia Jamison, Tatum; B&G Foods; Tractor Supply Co.
David Landsittel, Committee of Sponsoring Organizations (COSO); Burnham Investors’ Trust; Molex
Steven Lazarus, ARCH Venture Partners; Rand Corp.
Mary Pat McCarthy, KPMG’s Audit Committee Institute
William McCracken, Computer Associates
Ira Millstein, Weil, Gotshal & Manges; Millstein Center for Corporate Governance and Performance at Yale University
David A. Nadler, Vice Chairman, Marsh & McLennan
John Olson, Gibson, Dunn & Crutcher; Georgetown University Law Center
Michael Oxley, Baker, Hostetler; Nasdaq OMX
Jonathan Sokobin, Office of Risk Assessment, U.S. Securities and Exchange Commission
John Stout, Fredrikson & Byron; St. Thomas University; American Bar Association; Center for International Private Enterprise; Milestone Growth Fund
David Swinford, Pearl Meyer & Partners
The Honorable E. Norman Veasey, Weil, Gotshal & Manges; Former Chief Justice, Delaware Supreme Court
William White, Northwestern University, Bell & Howell (Ret.); Intermatic
Karen Hastie Williams, Crowell & Moring; Continental Air; Chubb; Gannett; SunTrust Bank; Washington Gas
Alex Wittenberg, Partner, Oliver Wyman
Brian Wolohan, Public Company Accounting Oversight Board (PCAOB)
Ex Officio
Kenneth Daly, NACD
Peter R. Gleason, NACD
Technical Advisor
Oliver Wyman