Process is no substitute for personal engagement: yes, there are lots of new rules, but they can't supplant actual involvement with management.

• Author: Raymond, Doug
• Position: LEGAL BRIEF

BEFORE THE WORLD of corporate governance turned upside down, the role of the board of directors appeared reasonably straightforward. The board's basic function was to hire the senior officers and oversee their management of the company's business. This involved a reasonable amount of effort and diligence, but absent unusual circumstances (for instance, a possible change in control or allegations of wrongdoing), the directors' role was fairly well-defined.

The way the directors carry out their functions, and the consequences of doing so poorly, have been on center stage for the last several years. Sarbanes-Oxley, the NYSE and Nasdaq, Institutional Share-holder Services (ISS), and a host of others have provided mandates, qualifications, and recommendations for boards and board committees.

However well-intentioned these voices, something important may have been lost in the cacophony. Many commentators have criticized boards for being too subservient, too willing to accept management's proposals without independent review. Clearly, the recent history of corporate governance has given us some spectacular examples of unscrupulous and imperial executives as well as completely unsatisfactory oversight by overly compliant directors. There is no doubt that someone should have stepped in to correct the abuses before they got out of hand. But it is quite difficult to mandate a backbone. For this reason, many of the recent proposals have focused on board processes. Just a few of the proposals and/or new rules are:

* The independent directors should constitute a majority of the board and should meet in executive session without management.

* Directors should be subject to term limits, and each year a new director should come onto the board.

* Companies must adopt codes of ethics and publicly report waivers of the codes.

* The roles of CEO and chairman should be split, with the chairman being independent.

* The independent audit committee, and not management, should be responsible for hiring (and firing) the independent auditors and for approving permitted non-audit services.

Many of the new rules and proposals have their origin in the same concerns: While it may not be possible to force directors to challenge management's missteps and other shenanigans, we can establish processes that may encourage directors to do so. As a hothouse encourages the growth of a delicate flower, so executive sessions may foster an environment where directors are more willing...