What does it take to be a good director? Let's get practical about director qualifications. These are the five attributes that provide the foundation for effective performance.

• Author: Ames, B. Charles

In the aftermath of the recent corporate governance horrors, a flurry of articles, laws, and regulations have delineated new standards for directors. Alert to opportunity, many leading business schools have created director "boot camps" to help directors, or would-be directors, prepare for their more demanding--and more scrutinized--roles. But this hyperactivity ignores a larger point. The essential qualifications of effective directors have not changed. And these qualifications cannot be decreed by statute. Adopting laws or regulations that include detailed definitions of independence or financial expertise or other qualifications that require pages of footnotes to explain is utter foolishness.

Proposing new legislation and regulations may give bureaucrats or politicos an ego kick and impress some voters, but the effort thus far represents the epitome of form over substance. For example, strict adherence to the current definition of a "financial expert" would preclude both Alan Greenspan and Warren Buffett from chairing an audit committee. Moreover, I personally know at least two very effective directors who, because of the new definition of director independence, have been disqualified from serving on their current boards. Why? Because they have a tangential relationship with a tertiary supplier. This is nitpicking, not reform.

Some of this nitpicking has discouraged foreign firms, such as Porsche AG, from attempting to list on the New York Stock Exchange. If our new laws cause some top-tier international companies to forsake our exchanges and instead list in London, that would place our markets in an unfortunate competitive position.

Granted, some of the reforms--especially those at the NYSE--have correctly raised the standards for director performance, but many others, such as Sarbanes-Oxley, have failed to recognize how counterproductive such ideas can sometimes be. At least one European observer has noted that, to date, some U.S. reforms show evidence of "panic."

Of course, there should be legal restrictions that prevent directors from serving if they have a relationship that represents a potential conflict of interest. And certainly every company should have a formal training program to make directors more knowledgeable about the companies they help run. However, trying to define in excruciating detail what constitutes directors' independence is a waste of time that does more harm than good. Similarly, creating a graduate school for...