HBS focus: the reality of corporate boards: as Harvard Business School celebrates its first century, it can take pride in being a pioneer in exploring what transpires in the boardroom ... and how it helped shape the evolution of enlightened governance.

• Author: Lorsch, Jay W.
• Position: GOVERNANCE LEADERSHIP - Harvard Business School

As HARVARD BUSINESS SCHOOL (HBS) marks its centennial this year, it is an appropriate moment to reflect on the role its faculty has taken in shaping the functioning of corporate boards. Most familiar to readers of DIRECTORS &BOARDS will be the work published in the last decade by myself (Pawns and Potentates: The Reality of Corporate Boards with Elizabeth Maclver [1989] and Back to the Drawing Board: Designing Corporate Boards for a Complex World with Colin Carter [2004]) and by Rakesh Khurana (Searching for a Corporate Savior: The Irrational Quest for Charistmatic CEOs [2002]), and numerous articles in DIRECTORS & BOARDS Harvad Business Review, and other publications by myself and colleagues like Elilzabeth Mentgomery Krishna Palepu, John Quelch, William Sahlnan, and Walter Salmon.

More interesting and less well known is the fact that HBS faculty interest in and writing about corporate boards goes back 50 years, and in spite of the passage of time there are consistent themes underlying this work. There have been three bursts of interest in the topic--in the 1940s, in the 1970s, and that which I described above during the past decade.

The work in the '40s was stimulated by Prof. Melvin T. Copeland, who, at the time, was director of HBS's Division of Research (an internal funding foundation and publishing arm). Copeland had been interested in corporate boards for over 30 years and stimulated several younger faculty members to do research on the topic (John C. Baker, later president of Ohio University; Myles Mace, whom I shall discuss later; and Andrew Towle, who was hired to work on the project). The work was initially developed and overseen by a faculty committee including Baker, Copeland, and two other senior professors, including one from Harvard Law School.

Three books were completed between 1945 and 1948: Directors and Their Functions: A Preliminary Study by Baker, The Board of Directors and Business Management by Copeland and Towle, and The Board of Directors in Small Corporations by Mace. The three books, while distinct in their findings and conclusions, had three things in common. All were short and were based on cases collected by the authors about specific companies and their boards. And all three were descriptive studies of boards--who was on them, what they did, how they related to management, and the difficulties they could encounter in carrying out their duties.

Research of continuing relevance

Perusing these books recently, I was struck by how many of the issues raised still had currency 50 years later. For example, Baker wrote about the board's role in selecting the president (now, of course, the CEO) and other senior officers and assuring management succession; in approving policies of broad significance (now we would call it strategic decisions); and in checking on the progress of the company, not only in immediate profits but also as to its devotion to fundamental responsibilities. Copeland and Towle presented a similar list of duties, but added that boards could and did encounter limits to their legal power, because of such factors as falling shareholder confidence, lack of support of the executive staff, or the limits of public opinion. Like Baker, they provided a list of qualities to use in selecting directors, which sounds very modern (see sidebar). Finally, they provided a list of the reasons directors serve on boards, which also seems very relevant today: to make a contribution; associate with outstanding people; business relationships; and, least important, money.

Mace's book was an outgrowth of his doctoral dissertation and his interest in new enterprises, and, in many respects, followed the structure of the other two books, but emphasized how these issues changed in the situation of new companies. For example, one point which seemed especially relevant in today's world of venture capital-backed boards is Mace's admonishment that directors in smaller companies must be...