Raising the bar on governance: are boards up to the task? As corporate misdeeds have raised questions around the roles and responsibilities of directors, boards are indeed changing. Some argue that the change hasn't been significant enough or swift enough.

• Author: Dittmar, Lee
• Position: GOVERNANCE

It was not that long ago that a seat on a corporate board was considered a plum assignment. Such a position brought stature and modest financial rewards without requiring much time, effort or personal risk. The activities of the board were not particularly transparent, and that seemed just fine to most people. Some observers would liken the state of affairs as similar to the popular Las Vegas adage: "What happens in the boardroom stays in the boardroom."

Today, however, due to a spate of high-profile scandals and other publicized cases of corporate misdeeds, the governance bar has been raised, for both company executives and board members. Corporate governance has gone from an esoteric to a general-interest topic, from the back pages of legal journals to the front pages of major newspapers. And along with its rise to prominence, there's been no lack of questions about the board's responsibility and just what is happening in boardrooms.

Indeed, boards and senior executives are now being more closely scrutinized and held to heightened standards of performance and ethics. As The Wall Street Journal noted in a Jan. 4 article on the demise of Robert Nardelli as The Home Depot's CEO and chairman: "In the post-Enron world, CEOs have been forced to respond to a widening array of shareholder advocates, hedge funds, private equity deal-makers, legislators, regulators, attorneys general, nongovernmental organizations and countless others who want a say in how publicly traded companies manage their affairs."

Given that Nardelli left with a $210 million parachute--while the company's stock price had dropped during his tenure--it's no surprise that shareholders are asking tough questions, especially directed to the board.

Now, most boards do understand that they are empowered and chartered by shareholders to oversee and govern the enterprise. Most board members take seriously the need to be very well prepared and knowledgeable and to deliver on shareholder expectations. And most recognize the need to work harder and smarter to make sure that the CEO is on target to have an accurate understanding of strategy and financial health to determine that the risks faced by the enterprise are understood and to monitor how well they are being dealt with by management.

Yet despite this increased awareness and effort, many boards still find themselves saddled with old methods and ways. Some feel they are in the dark when it comes to getting high-quality information. Many are still buried in data, without the resources to make sense of it all or to zero in on the information that really matters.

Most individuals involved with corporate governance express concern about the current situation and know that major corporate reforms in governance are needed. That was the message at the 4th annual Changing the Game Forum sponsored by the Center for Corporate Excellence last November, where a...