Directors must update operating procedures.

Ineffective governance by a corporation's board of directors may lead to sagging stock prices and financial malaise for the company. Yet, many corporate boardrooms still function the way they did 20 to 50 years ago, University of Illinois researchers point out. Such outmoded operating procedures seriously may limit their ability to govern effectively, maintain Howard Thomas, dean of the university's College of Commerce, and Donald O'Neal, professor of management.

In a three-year study of corporate boards, they surveyed and interviewed more than 80 chief executive officers and corporate directors from 40 companies, ranging in size from $10,000,000 to $17,000,000,000 in gross sales. Among their findings:

* Directors often aren't held accountable for their decisions. The performance of individual directors rarely is evaluated, and then only informally. The board's performance also is assessed infrequently, and there is no procedure that enables the shareholders to ask a board member to step down, even if he or she is performing inadequately. The most frequent reason directors leave is because they have reached the board's mandatory retirement age.

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