Foundation principles of good governance: Drexel's Director's Dialogue 2010 truly brought together theory and practice as we explored how value is created.

• Author: Walkling, Ralph A.
• Position: EVIDENCE AND PERSPECTIVES

WHAT DO YOU GET when you fill a room with 25 leading executives, directors, and academics to talk about their latest challenges in corporate governance? Discussion, debate, enthusiasm, and ideas.

I have argued before in this column that academia and business are natural partners to share, develop, and advocate ideas on best practices in governance. Toward that end, Drexel University just completed its second annual Director's Dialogue, a one-day program focused on challenges in the boardroom. Speakers, panelists, and session leaders included Jack Brennan, retired chairman and CEO of the Vanguard Group; Raj Gupta, former chairman and CEO of Rohm and Haas Co.; Richard Jaffe, partner of Ballard Spahr and chair of the Governance Center's advisory board; Pat McGurn of RiskMetrics; Scott Baugess of the SEC; Teresa Iannaconi and Jerry Maginnis of KPMG; Damien Park of Hedge Fund Solutions; Don Chew of Morgan Stanley; and Jim Dunigan of PNC Bank.

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Jack Brennan set the tone when he asserted, "Management, directors, and owners must understand that you build value through mutual respect. Great companies don't just 'tolerate' shareholders, they relish them as owners." I cannot begin to do justice to the collective wisdom of our group in a short column. However, I can outline some themes of the day.

Alignment of Interests: All ideas in governance come back to the alignment of interests between owners and managers. Compensation is the logical start for that alignment. Brennan noted that the best publicly traded firms are managed like private companies. In the private arena, there is a natural alignment of interests because executives have 'skin in the game': the owners are the managers. Restricted stock and other forms of long-term compensation can help align interests. However, as one CEO noted, it is not wise for an executive to put his or her entire wealth into one stock. The pay package must be effective in aligning interests, but competitive enough to attract the best talent.

Understanding and Communicating: To align interests you need understanding, and that involves communication. From the company's viewpoint, the proxy statement is the primary communications tool of management. But communication is a two-way street: It is vital to know your shareholders and listen to their ideas and concerns. Communications from shareholders occur through direct interactions, but are also evident in more subtle ways. These include votes in...