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Excellence in the Boardroom

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Excellence in the Boardroom

Best Practices In Corporate Directorship

Wiley,

15 min read
10 take-aways
Text available

What's inside?

Management cannot govern a company; boards cannot manage a company.

Editorial Rating

9

Qualities

  • Innovative
  • Applicable

Recommendation

That creaking sound you hear is Bill Dimma closing the barn door after Enron already got out. Dimma sounds a late, but nevertheless critical, wakeup call for U.S. corporations: They must institute policies of sound corporate governance at the board of directors level if they are to succeed and survive. About 80% of Fortune 500 companies combine the roles of chairman of the board and CEO, violating Dimma’s rule number one - separate powers. getAbstract.com recommends that the management and directors of every one of these companies read Dimma’s book and implement the measures that he prescribes.

Summary

Begin With A Vision

What would an ideal board of directors look like - a board that could rescue a company from poor decision making or an Enron-like fiasco before it ever happened? Here’s a vision of the ideal board:

  • The Chairman of the Board and CEO are different people. Many companies don’t follow this advice and still succeed. However, the division of power is almost invariably preferable, in terms of corporate governance. Moreover, the chairman ought not be the retired CEO.
  • The board has seven to 12 members. Any more, and discussion evolves into speech making. Any fewer, and diversity and experience are limited.
  • The board contains no more than two members of management. The CEO becomes markedly less candid, as does the board, when other members of management are included.
  • There are at least four board committees for larger companies: audit, compensation and human relations, nominating committees and governance. In certain industries, you will see investment, public affairs and environmental committees as well. Members of management are not committee members.
  • The committees are small: three or four members is ample. Given a ...

About the Author

William Dimma has served on the boards of Capstone Investments, American Eco Corp.; Home Trust Co., Magellan Aerospace, Monsanto Canada, Polysar Chemical, Sears Canada, London Life Insurance, Toronto Star Newspapers and Union Carbide Canada and about 40 other companies.

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