Making faster, more complex decisions.

• Author: Cahouet, Frank V.
• Position: The 21st-century corporate board - Putting In Place the Right Board for the 21st Century

Dramatic transformation of the business context will require of boards different types of decisions and different expertise.

A CURSORY perusal of headlines about activist institutional investors and lead directors might cause observers to conclude that boards of directors of public companies have entered a period of sweeping change. In point of fact, the mission and duties of boards are not changing. What is changing and will continue to change is the business context in which a board must operate.

Since the emergence of the large publicly traded company, boards of directors have played the same well-defined role: Boards have always represented the interests of, and been responsible to, shareholders.

The board is an entity separate from management and should avoid involvement in day-to-day operations for which management is responsible. Instead, the board protects shareholder interests by:

* reviewing business strategies and goals set by management;

* reviewing standards for management performance;

* supporting management, as necessary, with counsel on macro issues; and

* intervening in operations only under extreme conditions.

Historically, board members have reflected collectively the special types of knowledge and expertise required to understand the business needs and challenges the company faces and to analyze the information and plans presented by management to the board. As the needs and challenges change, so should board composition.

My company, Mellon Bank Corp., provides a classic example of how transformations in the business context change both board composition and the nature of board decisions. For example, over the past several years, we have expanded the financial services we offer through a series of mergers and acquisitions. In the past, Mellon's board did not need the expertise to analyze these kinds of transactions. But today, the types of decisions our board must make are different. As a result, the board expertise required also is different. Yet the essential role and decisionmaking process remain the same.

No one can predict the future, but virtually everyone in the business community agrees that:

* the pace of business change is accelerating;

* the global economy is becoming more important;

* companies are reacting more quickly to marketplace changes; and

* technology is restructuring work processes and information flow in most industries.

We can assume that in the future a typical corporate board will spend more of...