Silicon Valley Company Boards Improving

Silicon Valley companies have reshaped their corporate boards in the wake of the landmark Sarbanes-Oxley Act of 2002 and new stock market rules, according to a survey released today as reported by The San Jose Mercury News.

The survey reports that virtually all directors are independent outsiders and tech companies are splitting the roles of chairman and CEO. Moreover, nearly half have officially appointed a lead director, according to an examination of 100 tech companies by Spencer Stuart, an executive search firm that specializes in recruiting directors.

The Sarbanes-Oxley rules, implemented after the Enron fiasco, have been controversial in Silicon Valley. Noted venture capitalist Tom Perkins--who is credited with exposing the spying scandal last year at Hewlett-Packard--has complained that many directors are fixated on complying with rules rather than guiding companies.

But John Ware, senior director of Spencer Stuart's Silicon Valley office in San Mateo, told the newspaper that regulatory pressures have spurred companies to appoint directors with more financial expertise, train them better, and weed out directors who were sitting on too many boards to be effective.

The firm's survey indicates that five years after Sarbanes-Oxley took effect, outsiders comprise 83 percent of directors of valley companies, up from 75 percent in 2003. Ninety-seven percent of companies have a designated financial expert on their audit committees, compared with 11 percent in 2003. And almost two-thirds of valley companies split the roles of chief executive and board chairman, compared with 35 percent of Standard & Poor's 500 companies.

“Silicon Valley is not a place for cronies,” Ware said. “It is a place to work, and it's a place where boards are independent from the CEO. That was an evolution at some companies, and not necessarily easily done.”