The board: independent and interdependent; The first quality enables us to preserve and protect; the second, to pursue higher standards of economic achievement.

• Author: Lewis, Kenneth D.
• Position: BOARD PRACTICES - Cover story

ONE OF THE TRUISMS of the past several years is that there is good governance and there is poor governance, and it's easy to tell them apart. With clear rules in hand, we can easily determine which companies are well governed and which are not. That, in any event, is the theory.

For the record, I believe that, all else being equal, most of what shareholder groups and regulators define as "good governance" actually is good for governance and good for business. Bank of America has a 95% rating for good governance from Institutional Shareholder Services (ISS), so it's not my intent to dispute the theory.

The most important phrase in the point I just made about the merits of good governance is "all else being equal." "All else," in this case, is the directors themselves, who occupy boardrooms across corporate America. We are not all equal. We all have talents. We all have flaws. And the boards we sit on vary in effectiveness--just as we, as individuals, vary in our ability to effectively perform our duties on behalf of the stakeholders we represent.

Running the plays

The components of good governance are real, and they are important. The quality of a company's directors and the relationships that enable them to govern the company are even more important. The governance structure, policies, and processes a company follows are like a playbook. The company can't function well without them, but by themselves they count for nothing. What makes the difference between a winning and a losing team is the talent, energy, dedication, enthusiasm, and character of the people running the plays.

That's the directors, and their job is not just to help the company avert disaster or avoid scandal. More often, their job is to help the company's management steer a strategic path toward growth and prosperity.

When individuals join a corporate board, they place a bet on the quality and integrity of the governance processes in place when they arrive, and those they are able to help put in place as members. They place a much bigger bet on the quality and integrity of the people they are joining, including management and fellow board members. When directors join people of good character, avoiding problems becomes much easier, and pursuing growth becomes a lot more fun.

Be wary of 'excessive independence'

Much of the debate about how we should define independence from a regulatory standpoint has been settled. But I have some thoughts on a more practical side to this issue.

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Independence is a very useful tool for insulating some functions--boards of directors, auditors, and outside accountants, in particular--from inappropriate influence or conflicts of interest. But excessive independence also has disadvantages.

By "excessive independence," I mean the lack of a meaningful relationship between directors and the companies they are charged with directing, or the lack of strong relationships between board members and CEOs.

By the New York Stock Exchange definition, our board is largely independent: I am the only one of our 19 members who is also...