Black box.

• Position: EDITOR'S NOTE

I AM WRITING THIS the day after the government's lodging of civil fraud charges against Goldman Sachs. The term "black box" is being bandied about, referring to the utterly mysterious ways that financial institutions like Goldman conduct their businesses--totally opaque to outsiders' eyes, resolute in their secrecy, and resisting transparency that would allay suspicions of behavior "unfriendly" to markets in general and their trading partners in particular.

If we take that definition of black box and apply it to the board of directors of public companies, we see that it fits like a glove.

Boards are as secret as they come. Leon Panetta, then a corporate director, used the term "sealed chamber" back in 2003 when he wrote an article for Directors & Boards in which he questioned whether this mode was appropriate for demonstrating the board's leadership. "Can we end the long tradition of the boardroom as a sealed chamber from which we issue only unanimous endorsements of management's actions and results?" he asked (see page 26). His question remains unanswered. There is still precious little light that emanates from this chamber that would yield understanding to the outside world of how a board is performing its leadership role.

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Sure, one can go to the proxy and see who is sitting on the board and the roles that they are assigned to. We know how often the board meets, what the members are paid, and how much ownership they have in the corporation. So, yes, there are some things we do know.

But there are things we don't know. Chiefly, we don't know what the board is doing to protect and perpetuate the enterprise.

Management typically resists making transparent any consequential board...