Lifting the curtain on the boardroom: one of the most dramatic aspects of the new board transparency and board accountability is a better understanding of how boards work.

• Author: Kane, Karen
• Position: ROAD TO XL * WHAT CHANGED?

When Directors & Boards started publishing 40 years ago, little was known about what went on behind closed doors of the boardroom. Becoming a corporate director was often seen as the ideal way to cap a successful CEO's corporate career--a lifetime achievement award, a victory lap.

Yet the gradual evolution in board governance accelerated dramatically when the government began asserting itself after the crushing bankruptcies of Enron and WorldCom and later the global financial crisis.

The first of the sweeping regulations, the Sarbanes-Oxley Act of 2002, mandated strict reforms to improve financial disclosures and prevent ac counting fraud. Examples of this include the establishment of independent directors, especially in board committees; the appointment of lead directors; and the adoption of executive sessions at every meeting. But more far-reaching reforms were still to come following the global financial crisis of 2008-2009, with the passage of the 2,300-page Dodd-Frank Wall Street Reform and Consumer Protection Act, mandating an advisory vote on executive compensation, or "say on pay," and proxy access.

More precisely, the Securities and Exchange Commission adopted rules concerning shareholder recommendation of executive compensation in an advisory vote starting in 2011 for large companies. While smaller companies were given two additional years, by 2013 all public companies were required to ask their shareholders to approve the pay plans for CEOs and top executives.

And oh how the world of corporate governance continues to change.

Part and parcel of the advisory vote was a new role for directors--actively engaging with shareholders. It didn't happen immediately, but five years after Dodd-Frank it became routine for directors to talk to shareholders on a semi-regular basis. In essence, investors get to kick the tires, to test the directors chosen as their representatives and the efficacy of the board itself.

The say-on-pay vote, while only advisory, lifted the curtain on boardrooms. Seeing the opening, activist investors asserted themselves, using the new rules to get the boards attention. In the past few seasons, many activists proved that they only had to threaten a proxy fight to win concessions from the board, including the award of a board position.

As a result of the new regulations, board work has changed. Governance has become much more integrated. Financial analysts learn more about governance in their training. At the same...