A 'quiet revolution' is underway.

• Author: Ferry, Richard M.
• Position: Demand for director performance standards - Putting In Place the Right Board for the 21st Century

There will be no free rides for the directors of tomorrow. The bottom line is performance, and directors will have to deliver.

CORPORATE GOVERNANCE continues to be a hot topic in American business. Our newspapers and magazines are filled with reports of CEO removals, board reshufflings, and lists from institutional shareholders of poorly governed corporations, the worst directors, and boards with excessive compensation.

What of all the recent moves companies say they've made to improve their corporate governance? The answer is, those moves are beginning to have an impact on corporate governance and, in so doing, causing boardroom turbulence. In short, a "quiet revolution" in America's corporate boardrooms is underway.

At Korn/Ferry, we recently looked at the current state of boards in American business in our 23rd Annual Board of Directors Study of more than 1,000 directors and chairmen. We found that:

* Boards are deeply and actively concerned with CEO performance and are doing something about it. Most have a formal program for evaluating the CEO, and nearly all regularly measure performance against a set of targets.

* Boards are showing concern about their own performance. Forty-nine percent have a formal committee that reviews board performance, and 59% have written guidelines for corporate governance policy.

* Directors are more active and independent in forming board structure and policies. Half of the boards surveyed have formal committees (corporate governance, nominating, board affairs, etc.) that review corporate governance procedures and board functions, with more and more committee chairman and members appointed by the board, not the CEO/chairman. Three-quarters hold executive sessions of the independent directors without the CEO present.

With this increased activity and responsibility, the job of the independent director is changing. It is more complicated as corporations evolve globally and advance technologically. It is more demanding as directors play larger and more involved roles.

It is not surprising, then, to find that boards are confronting a relatively new problem: where and how to find talented and experienced directors who have the time, interest, and conflict-free status to serve under these changing conditions.

The traditional source of independent directors -- active corporate CEOs -- is running dry. Because of time and work-pressure restraints, most CEOs limit the number of outside boards they will serve on to two...