Peculiar proposals; circa 1992: beware of many of the suggestions for remedying what is supposedly wrong with governance.

• Author: Pratt, Jr., Edmund T.
• Position: In Memoriam

Ed. Note: During his 20 years as its chief executive, Edmund Pratt transformed Pfizer from "a diversified manufacturing company to a research-based pharmaceutical company' stated current Pfizer CEO Henry McKinnell in Mr. Pratt's New York Times obituary. That transformation made it into one of the most successful U.S. corporations. Not only did he have foresight in transforming the company's business model, Mr. Pratt was farsighted in driving its governance model. In recognition of that initiative, he was named Director of the Year in 1992 by the National Association of Corporate Directors. At that time, DIRECTORS & BOARDS published his remarks on accepting the award ["Keeping an Eye on America's Future," Winter 1993]. An excerpt from that article follows.

THOSE CLAMORING FOR CHANGE in corporate governance practices are absolutely right to think that the rubber stamp has no place in the boardroom. Effective directors have to monitor closely the performance of the companies we serve, evaluate their long-term plans and strategies, and stand prepared to offer advice and counsel to ensure the company's future. And if we see things are off track, and that management is not responding, we have to act decisively to protect the company's interests.

We can accomplish this only if our boardrooms are open to genuine dialogue and differing perspectives. In 1971, when Pfizer was 122 years old, we began to construct its first outside board by bringing on Felix Rohatyn.

Collegiality among directors is important, but not at the price of passivity. Felix once said he never sat on a board with such mutual trust and respect as Pfizer's. I hope he's right. But the trust he's talking about wasn't built on blind faith. It was hard-earned, built on the premise that everyone's views are heard and everyone speaks his mind. Sometimes it gets rough, but the end result is mutual respect and a stronger, more competitive company. Dialogue is also the key to the relationship between boards and institutional investors. These are, after all, the major shareholders in many companies.

Institutional investors have every right to look carefully at corporate performance. And we directors have every obligation to listen to their views. They expect a meaningful exchange of information about the companies in which they invest and about their prospects and strategies. To this they certainly are entitled.

By the same token, many current proposals to remedy what is supposedly wrong...