Ideas about governance: The bad and the good.

• Author: HORTON, THOMAS R.
• Position: Brief Article

There are ideas whose time has not yet come, and others whose time should never come.

As THE MILLENNIUM approaches, lists of the "best and worst" appear everywhere. What are the best and worst ideas about directorship? Well, one good thing about bad ideas is that some of them are so bad that they sink of their own weight. To my mind, one such idea is the suggestion that corporate directors be federally or state-certified -- i.e., formally credentialed by the government as worthy for board service.

A bit of deja vu: Less than a decade ago, the British Institute of Management was sponsoring a movement to require that all managers be chartered managers, similar to the existing requirement that accountants be chartered, despite the obvious differences between the study and practice of accounting, which is clearly a profession, and that of management. (Ah, there's an old friend: the debate as to whether management is a profession...a matter perhaps best left for academicians to chew on.)

A related suggestion is that corporate boards recruit specialists to serve on their committees -- to seek, for example, potential members of audit and compensation committees through identifying, respectively, certified public accountants and compensation consultants who are open to board service. To my way of thinking, this constitutes another wrongheaded idea. Certainly any effective audit committee will include a member or two with solid expertise in financial reporting or analysis, but other board committees (e.g., finance and investment) and the board as a whole need this kind of talent as well.

Just what kind of talent does comprise an effective board? Most students of governance would emphasize an aggregation of needed skills, a team made up of carefully selected individuals whose achievements and areas of expertise span a variety of fields.

Recently, I asked a dozen experienced directors to call to mind the single most effective director with whom they had ever served and then, without divulging names, to describe just what distinguishes that person from others at a board meeting. Their responses were so similar that one would have thought they were all describing the same person: a director who speaks sparingly, seldom volunteers his or her opinion (and never early), and only rarely makes suggestions -- but on occasion quietly asks a wholly unexpected question, a query so powerful that it often alters the nature of the discussion and sometimes may even...