21st Century Corporate Board.

• Author: Lorsch, Jay W.

One may wonder why we need another book about boards of directors. Two reasons occur to me. One is to provide those concerned with and involved in corporate governance a perspective on how boards have evolved in the last several decades. The other is to provide ideas and recommendations for improving the functioning of boards looking to the future, or as Ralph Ward puts it, toward the 21st Century.

Ward has done a commendable job apropos the first reason. In the first section of the book, "How Boards Got This Way," he provides an interesting, accurate description of the evolution of the institution of boards of directors of publicly owned corporations in the United States. Especially useful is the description of events during the past two decades when there has been so much change both in the legal framework surrounding boards and in the ways they actually function. He correctly identifies the important role that public pension funds, like CalPERS, have played in the process, as well as the important court decisions, especially in Delaware, which have effected directors duties, especially in the event of takeovers or other changes in control of ownership.

My only concern with this portion of the book is around certain events in boardrooms, about which I happen to have more information than is widely available through published sources. For example, in Ward's description of events leading to the resignation of James Robinson at American Express, he accepts the view widely publicized by the media that Rollie Warner was justified in his bill of particulars against Robinson. A closer look at the evidence (presented in two American Express case studies that I authored for Harvard Business School) suggests that this view is too simplistic. In fact, Robinson and the board had agreed to a plan for fixing the company's problems, and company documents, security analysts, and certain press reports indicated progress was being made in implementing this strategy. The real problem in my view was that the board had no process for evaluating the company's or Robinson's progress in correcting these serious problems. This provided the opening for Warner's one-sided view of events and the "lynching" of Robinson.

However, it is unrealistic to expect Ward to have investigated each such situation in detail. His history is generally accurate, even if it is based primarily on press reports. Thus I urge even the serious reader interested in obtaining perspective on...