Present at the creation: a new era of transparency: the GM corporate governance guidelines that I helped develop were rightly called a Magna Carta for directors.

• Author: Millstein, Ira M.
• Position: ROAD TO XL * WHAT CHANGED? - Reprint

The General Motors directors were well aware that replacing certain members of management was not enough to make all of GM's problems disappear. During the previous decade, GM's shareholders had lost faith in the company. Also, the directors struggled with how they could ensure that GM would not make the same mistakes it had in the past, including a board unable to make independent decisions and management that could not cope with its current circumstances.

So the board and I met and we devised solutions to improve the company's corporate governance practices. These included addressing board-meeting efficiency, succession planning, professional development, independent directors meeting in the absence of management, annual director self-evaluations, and shareholder communications. While it may be common for today's boards to engage in these types of discussions, back when I was advising the GM board, it was almost unheard of.

Specifically, the directors, [in-house counsel] Harry Pearce, and I discussed establishing corporate governance guidelines for the effective governance of GM. Back then such guidelines pretty much didn't exist. In January 1994, the board issued the "Board Guidelines on Significant Corporate Governance Issues," designed to ensure active monitoring of management by an independent board.

The GM board adopted 28 corporate governance guidelines that I helped develop with the guidance of the directors. They were critical to the establishment of a new environment of "best practices" at the auto giant. Key provisions included independent board leadership through a separate chairman or lead director, independent director executive sessions, and annual formal board evaluations.

The guidelines codified many of the initiatives I had pressed for, including requiring that a substantial majority of directors be independent, that they have unrestricted access to management, and that they meet regularly on their own without management present. Requirements for an annual evaluation of the chairman and CEO, and a self-evaluation of the board itself and each of its committees, also ensured--at least in theory --the elimination of imperial CEO dominance and a new era of transparency between board members and top management. The GM corporate governance guidelines were called a Magna Carta for directors by the media and quickly gained the attention of corporate America.

Gaining traction

The GM Corporate Governance Guidelines gained real...