The role and composition of the board of directors of the large publicly owned corporation.

The mid- to late 1970s was a time of great governance ferment, with business, legal, academic, and political constituencies squaring off on the role of the board in the conduct of corporate affairs. The following passage from The Business Roundtable's 1978 paper offers an insight into the major criticisms being leveled at the board of directors at that time, and some proposed procedural solutions.

Critics complain that:

* Directors do not spend enough time on board work to be effective. They routinely attend meetings, participate passively and collect a fee.

* Boards are hand-picked by the chief executive officer and are therefore submissive to him. They are rubber stamps.

* Shareholders have no voice in the nomination of directors.

* Directors are poorly informed on company matters and, therefore, poorly prepared for board discussions.

* Boards are too homogeneous. Directors are all cast from the same mold, and therefore will not "rock the boat."

In the [Roundtable paper], specific suggestions are presented, many of which reflect present practices in many large publicly owned companies. Taken together, they go far to reduce the bases of all such criticisms. Thus, the paper suggests:

* Concerning the role of directors, that directors, prepared by an effective information system, should participate in free and open discussion of corporate policies and actions at board meetings, should cope with key aspects of governance through Audit, Compensation and Nominating committee work, and as members of the fall board, have specific and vital corporate functions to perform.

* Concerning the selection of directors, that board succession and chief executive officer succession be the responsibility of the board; that a Nominating Committee composed of a majority of outside directors recommend to the board the choice of candidates for director and top management; that directors possess "... independence, an inquiring mind ... and broad experience." The paper endorses the tendency of U.S. corporations to move to a board structure based on a majority of outside directors. It is difficult to see a board so selected and populated as "submissive."

* Concerning the shareholder role in director selection, that the Securities and Exchange...