Directors' etiquette in a changing boardroom: the dynamic in the boardroom--and outside of it--may be somewhat different than in the past, but the core issues of what constitutes good governance and a high-performing board are unchanged.

• Author: Hart, Susan
• Position: Spencer Stuart * Governance Letter

IN THE POST-ENRON, post-Sarbanes-Oxley era, boards are under more pressure than ever to be independent from management and to possess consummate financial expertise. While there is no shortage of information about the new regulations and the measures companies must take to comply, little is heard about how these changes are affecting the way directors interact with one another and with management. What is the impact on the regulatory changes on boardroom etiquette and the day-to-day workings of the board?

One thing is incontrovertible: Boards are under the microscope, and directors' behavior is being scrutinized by almost everyone. "The shades are up. The lights are on. There is a heightened awareness among directors and management of internal and external communication and how things look," explains Jim Gordon, a recently retired 27-year veteran director of Liz Claiborne Inc.

"There is new attention to the 'optics' of a particular decision," notes Gordon. "Even though the conclusions may be supportable, in the best interest of the shareholders and in compliance, people--directors and management--are asking themselves, 'How will this look in The Wall Street Journal?' This is no longer back-of-mind."

Increased communication

The heightened scrutiny has resulted in a shift in the personal dynamics of board members. There has been a remarkable uptick in the amount and frequency of communication outside of meetings, both between directors and between directors and management.

The boardroom experiences of Richard Roedel, director and audit committee chair for Dade Behring Holdings Inc., Brightpoint Inc., and Take-Two Interactive Software Inc., can attest to this. "Good communication, both among board members and between directors and the leadership team, is critical to the functioning of the board," he comments. "And I could not conceive of a more engaged, communicative board than Dade Behring's."

Prior to each meeting, directors actively participate in shaping the agenda. At the actual meetings, the chairman/CEO solicits directors' views regarding the company's operations and strategic direction. Communication and participation are taken very seriously.

In fact, explains Roedel, "We are in the process of establishing board extranets for two of my boards, Dade Behring and Brightpoint, and considering this for Take-Two. This will create one centralized repository of all board-related information--with sections devoted to the committees, corporate...