Statement on Corporate Governance.

• Position: Excerpt from The Business Roundtable's white paper - Business Roundtable 1997

Here is an excerpt from The Business Roundtable's white paper, Statement on Corporate Governance. The report is discussed in the accompanying interview with Walter V Shipley, who headed the BRT's governance task force.

The business roundtable wishes to emphasize that the principal objective of a business enterprise is to generate economic returns to its owners. Although the link between the forms of governance and economic performance is debated, The Business Roundtable believes that good corporate governance practices provide an important framework for a timely response by a corporation's board of directors to situations that may directly affect stockholder value. The absence of good corporate governance, even in a corporation that is performing wen financial may imply vulnerability for stockholders because the corporation is not optimally positioned to deal with financial or management challenges that may arise.

Many discussions of corporate governance focus on questions of form and abstract principle: Should a corporation have a non-executive chairman of the board? Should the board have a lead director? Should there be a limit on the number of boards on which a director serves? The Business Roundtable considers such questions important. indeed, much of this Statement is devoted to discussing them.

However, The Business Roundtable wishes to emphasize that the substance of good corporate governance is more important than its form; adoption of a set of rules or principles or of any particular practice or policy is not a substitute for, and does not itself assure, good corporate governance.

Examples of this point abound. A corporation with the best formal policies and processes for board involvement may be at risk if the chief executive officer is not genuinely receptive to relevant board input or if knowledgeable directors hesitate to express their views. A corporation can have excellent corporate governance structures and policies on paper, but if the CEO and the directors are not focused on stockholder value, it may be less likely the corporation will realize that value. Directors can satisfy the most demanding tests for independence, but if they do not have the personal stature and self-confidence to stand up to a non-performing CEO, the corporation may not be successful.

On the other hand, a corporation that lacks many of the so called "best practices" for corporate governance, or that does not memorialize its practices in formal...