Key organization issues for the board.

• Position: Board of directors

Long-term planning is the most critical issue directors say they face today. And companies are increasingly turning to noncash compensation for their boards of directors. These and other findings are contained in the 1991 Organization and Compensation of Boards of Directors, a recently released study conducted by Ernst & Young, the international professional services firm. The study reflects the thinking of 450 publicly held companies in 24 industries. An excerpt from the study follows.

Across corporations of all sizes and industry groups, board members agree that serving the shareholders' interest is the most important function of the board. In that context, ensuring long-term corporate survival and viable growth are concerns frequently cited by board members. The accompanying table displays what directors state as their primary responsibilities.

Directors see boards as being most influential on decisions regarding:

-- Compensation of top management;

-- Mergers and acquisitions;

-- Management succession;

-- Counseling top management;

-- Selection of senior executives;

-- Long-range strategic planning;

-- Capital expenditures.

Boards continue to focus time on the strategic planning process. Fifty-five percent of all companies report special sessions devoted exclusively to long-range strategic planning. However, only 23% of the directors report having strong influence in this area, and only 22% report that their approval of long-range strategic plans is required.

Board Evaluation. Despite calls for increased accountability of board members, this year's study shows that 10% of the reporting companies have formal mechanisms in place to evaluate the performance of the board as a whole (up from 7% in our 1988 study) and 9% of responding companies have a mechanism for evaluating the performance of individual directors (down one percentage point from our 1988 survey).

Service on Other Boards. As arguments for stronger boards continue to be voiced, demands placed on board members are likely to increase, and corporations are becoming more stringent in their expectations for commitment on the part of their directors.

Overall, 25% of the companies responding require approval before a director can serve on another board. As a sign that board members themselves are treating their existing commitments seriously, 25% of the respondents report rejecting service on other boards. Reasons cited include:

-- Lack of time;

-- Conflicts of interests; and

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