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| | | 05/10/07 - Denver, CO | Philip Anschutz. Joesph Nacchio. Ken Lay. Jeffrey Skilling. Dennis Kozlowski. John Rigas. Bernie Ebbers. In a not so strange way, the nation owes a debt of gratitude to each and every one of you. Yes, you and your as-yet-unnamed brethren in an elite new League of Extraordinary Gentlemen have effectively brought about a revolution in corporate governance in America.
Although 99.9 percent of American CEOs are honestly and openly doing the right thing for their shareholders day in and day out, thanks to the minority in this very special club, there are clear signs coming from boardrooms in Colorado and across America of a trend toward widespread acceptance and application of smart policies and independent
practices by directors that will change the fundamental way corporations manage themselves from now on. And that's a good thing.
The Sarbanes-Oxley Act, New York Stock Exchange, Securities and Exchange Commission, Financial Accounting Standards Board, New York State Attorney General Eliot Spitzer, other prosecutors and shareholders all have spurred corporate directors to begin flexing their muscles in the boardroom. They are doing just that, and many CEOs I know are welcoming the sea change by working more closely with their boards than ever before. And that's a smart thing.
In fact, what we may be seeing is the eventual emergence of a new generation of corporate directors, men and women motivated by a dedication to service above self who are eagerly marching to the beat of a different drummer under the banner of positive change. That's a welcome development, because the last thing corporate America needs now is for its best and brightest to drop out, go into a hole, and lament that the whole thing is somebody else's problem. With all that's happened since the implosion of Enron in December 2001, they couldn't be blamed if they did; but instead, I believe directors are taking back the boardroom in coups across the country. Despite higher D&O insurance, increased personal and financial liability, and significantly increased time demands, most are staying on and many new potential directors are eagerly entering the pipeline, ready to serve.
CEOs with whom I work are reporting important changes on their boards, such as:- Increased power is vesting itself in the committee structure.
- There is director pushback to the CEO as boards and their committees recognize the importance of independence.
- Audit committees are routinely seeking outside accounting counsel.
- Compensation committees are more frequently prone to get input from financial experts – and their peers on other boards.
- Executive team compensation reviews are becoming more stringent and are more performance based.
- The appointment of lead directors has increased by about 30 percent in the past year alone, and a balance of power is being achieved with the CEO.
- Boards are requesting and getting better information from management; boards are asking more questions.
- Committee meetings are taking more time.
- Governance committees involved in director selection are seeking advice from outside consultants – many for the first time.
- Published surveys show that about 50 percent of American public companies are providing "significant" hikes in director compensation as director workload increases and directorships evolve into real jobs.
I hope I am not being naïve, but I truly believe that the boardroom revolution currently under way may not be so much a reaction to the threats of federal indictment, perp walks and shareholder lawsuits as it is the result of a general realization by CEOs and boards that common sense, clear vision, planning, execution and an old-fashioned
dedication to honesty and integrity will grow company value and get corporate America humming again – and restore consumer confidence in business as well.
Valant is president and CEO of Denver-based Valant & Co., a business performance improvement consultancy with more than 30 years of experience in helping business and industry to grow bottom-line profits. |
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