'The governance system is sound.' (Chairman's Agenda: Balancing Shareholder Interests)

• Author: Atwater, H. Bruce, Jr.

|The Governance System Is Sound'

A most visible and vocal spokesman among U.S. chief executives on corporate governance issues is H.B. Atwater Jr., Chairman and Chief Executive Officer of General Mills Inc. He has addressed in many forums over the past several years issues of management/shareholder relations arising from the increasing institutionalization of corporate ownership. He affirms with gusto the strengths of the present governance processes, but is also ready to recognize certain weaknesses within the system that can be improved. The observations in this article are drawn from his comments at a corporate governance workshop held at the Wharton School of Business, under the auspices of the school's SEI Center for Advanced Studies in Management.

On Innovation and Risk Taking: "American competitiveness and corporate performance are essentially the same thing. Competition is the central element of performance. To put it very simply, success is driven by being better - meaningfully better - than your competitors. Increasingly, timing is vitally important. For instance, in the food business, the company that first gets to the market with a new idea tends to get an index of sales of 100. The second player will tend to get 50, and the third player, if it even can get on the shelf, might be lucky to get an index of 25.

"It is not good enough to be third with an idea. You essentially have to be first with the idea and with the proper execution of it. To move rapidly and to innovate ahead of your competitors frequently means you have to act on incomplete information. You also have to recognize that you will have failures. If, in fact, every risk you took were 100% ensured of success, there would be no profit factor and no opportunity."

On the Corporate Governance |Tension': "The continual process of innovation and risk taking presents what I call the corporate governance |tension.' It is a tension between innovation and control. It exists at all levels of governance. If you look at the world economic scene, the contest between the centrally planned, control-oriented economies and the freer or more innovative economies has been won by the forces for innovation. In management, the command-and-control pyramidal hierarchy doesn't work anymore. Enablement, innovation, and risk taking throughout a corporation are absolutely central to success. Certain divisions tend to get a |let's not make any mistakes' attitude, while others are more risk-oriented. Almost without exception, the more innovative ones do well. To put it another way, if you absolutely intend to make no mistakes, that may be the biggest mistake you can make."

On What Is Good Corporate Governance: "I would argue that good long-term performance is, in fact, the measurement of good corporate governance. If a company has been performing well over the long term, I think it can be said that it has been governed...