'Directors, board of': the 'up' chapter; A gem of governance wit and wisdom, newly dusted off.

• Author: Townsend, Robert
• Position: ENDNOTE

Ed. Note: Robert Townsend's venerable management text, Up the Organization, returned to print in 2007 in a special edition. First published in 1970, the runaway bestseller galvanized the business world with the author's hard-slap directives for executive leadership. Townsend was a banker at American Express Co. before becoming president and chairman of Avis Rent-a-Car and making a name for himself in the pantheon of management gurus. He died in 1998.

THE HUGE, successful company is a dinosaur, but it has one decisive advantage over the middle-size outfit that's trying to grow public; also over the established company that's in trouble enough to be ready for change. The advantage: most big companies have turned their boards of directors into non-boards. The chief executive has put his backseat drivers to sleep.

This achievement has to be understood to be admired. In the years that I've spent on various boards I've never heard a single suggestion from a director (made as a director at a board meeting) that produced any result at all.

While ostensibly the seat of all power and responsibility, directors are usually the friends of the chief executive put there to keep him safely in office. They meet once a month, gaze at the financial window dressing (never at the operating figures by which managers run the business), listen to the chief and his team talk superficially about the state of the operation, ask a couple of dutiful questions, make token suggestions (courteously recorded and subsequently ignored), and adjourn until next month.

Over their doodles around the table, alert directors spend their time in silent worry about their personal obligations and liabilities in a business they can't know enough about to understand. The danger is that their consciences, or fears, may inspire them now and then to dabble, all in the name of responsibility.

Two simple tactics have been devised and time-tested in large organizations to head off this threat.

First, make sure that the board is composed partly of outsiders and partly of officers. Since all the important questions relate to the performance of key men and their divisions, no important questions will be asked. To do so would be a breach of etiquette, an insult to somebody at the table. Nor will any officer-director with an instinct for self-preservation (and a modicum of respect for the ignorance of the outside directors) ever bring a new or controversial idea before the board.

Second, be sure...