A boardroom enigma.

• Author: Dalton, Dan R.
• Position: ROAD TO XL - Excerpt

Ed. Note: In 2003 we asked governance experts Dan Dalton and Catherine Daily of the Kelley School of Business at Indiana University to explore the director emeritus position. There seemed to be almost nothing in the governance literature on this elusive designation. Our instincts were spot on. The resulting article, "The Enigma of the Emeritus Director" [Fall 2003], has since its publication been one of the most requested articles that we have published in our 40-year history. Following is an excerpt from their four-page article.

Informed by the Sarbanes-Oxley Act and guidelines enacted by the Securities and Exchange Commission, the New York Stock Exchange, and Nasdaq, we have all improved our corporate governance vocabulary. Most observers would recognize the distinction between inside and outside directors, the notion of an affiliated director, the issues regarding the same person serving simultaneously as CEO and board chairperson, and the role of lead directors.

There is, however, yet another director, about whom all of these sources are silent --the director emeritus. Indeed, the director emeritus is something of a mystery.

The expression "emeritus" is an honorary title conferred after a person's retirement, usually corresponding to the last title held during active service. The designation is used commonly in the academic community, occasionally in the not-for-profit sector, and, now, more frequently in the private sector. While a cursory review of proxy materials and other relevant documents indicates that the emeritus title is reserved for relatively few directors, those numbers are increasing.

We have identified at least three models of emeritus status.

There are cases in which the emeritus designation seems to be wholly honorary and suggests no formal, continuing relationship with the company. William R. Hewlett, co founder of Hewlett Packard, was perhaps...