Harvard Business Review on Corporate Governance.

• Author: SHERMAN, HOWARD D.
• Position: Review

Published by Harvard Business School Press, Boston, Mass., 227 pages, $19.95

BY ANY MEASURE, Harvard Business Review on Corporate Governance is an important new contribution to the field. A thoughtful, balanced collection of articles and roundtable discussions by leading academics, corporate officers, and board members, the book offers a wide range of practical suggestions and background discussions on many important board-related issues.

With experience in governance as both a corporate and shareholder adviser, I found it notable that the HBR even undertook a publication like this one. As stated by more than one contributor, the days of rubber-stamp boards are over. No longer an honorary position, the demands on today's directors are significant and continue to grow. Many of the authors focus then on how directors can improve their own performance as board members. Professor Jay Lorsch, for example, addresses a variety of ways to empower the board; Gordon Donaldson focuses on one specific new tool, the strategic audit. Both chapters make for fascinating reading.

One reason the volume works so well is that it moves from theory to concrete suggestions from CEOs and directors who have unassailable experience. While one may quibble with some of the specific recommendations, the authors' practical advice gives the reader a benchmark for discussion.

Harvard's Walter Salmon, for example, avows that "only three insiders belong on board: the CEO, the COO, and the CFO"; while Campbell Soup's David Johnson, writing during his previous tenure as CEO (a position he again recently assumed), offers a model board that includes "no more than two members of management -- the CEO and the CEO's probable successor." On director compensation, Salmon suggests that "a five-year period before stock restrictions lapse or options can be exercised is a sensible horizon for directors." On succession planning, Gillette's former chairman and CEO, Alfred Zeien, suggests that "the succession process begin about four years before the chief executive is expected to step down," with Ford's former CEO, Philip Caldwell, emphasizing the importance of an effective management development program to ensure there is a viable pool of internal candidates for the top job.

All are in agreement that the retired CEO should not serve on the board. As a droll George Kennedy, former chairman of Mallinckrodt Group, puts it, "My feeling is that upon retirement the CEO becomes the exclusive...