A much more thorough understanding of strategy.

Author:Batts, Warren L.
Position:The Shape of Things to Come - Brief Article

TODAY THE PRESSURE for companies to perform well relative to their peers is forcing directors to focus more and more on the strategy of the enterprise. It's already occurring to more directors that the tendency to rubber-stamp the CEO's game plan and then fire him or her if results are not forthcoming in short order -- CEOs hired from the outside now have a tenure of three years or less -- is not improving corporate results. Therefore, directors are putting more time and energy into thoroughly understanding the enterprise's strategy before they approve it. Then they are monitoring it much more closely and demanding mid-course corrections as soon as it appears off course.

Soon, directors must face up to the fact that executive compensation, particularly the CEO's, is violating the bounds of reason. The notion of granting huge numbers of stock options -- whose ultimate value has very little to do with executive performance -- makes less and less sense. More than likely, directors will either start granting performance-based options or using a method other than Black-Scholes to value them, such as assuming that the share price must grow 10% to 15% per year for the executives to achieve...

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