February/March 2009 / Governance
Board Primacy Under Attack
Under the banner of good corporate governance, groups with a variety of interests ranging from short-term return on investment to environmental activism are poised to gain greater corporate control and change the way we need to think about corporate management. Demanding say-on-pay, independent lead directors, dissident access to corporate proxy machinery and other reforms, this broad coalition is gaining the ear of Congress and the regulatory bodies. Notably, President Obama, has endorsed advisory stockholder votes on executive compensation.
Defenders of the board’s traditional role see the directors owing duty to a varied constituency. A key player, the Delaware courts, has so far held to the view that attacks distract boards from their primary mission of providing strategic guidance.
The pressure on board autonomy will intensify. Public outrage at traditional management and compensation-setting practices, congressional scrutiny of governance, and federal involvement in entities being bailed out by taxpayers all add to the pressures changing corporate management.
Given current economic conditions, the growth of foreign capital markets and acceptance of their management practices, real change in board governance and its domination of management seems plausible.
