The corporate board in our future.

• Author: Allen, William T.
• Position: The art of board directing

Twenty years from today, as now, productive board service will remain an art, not a science.

THE SOCIAL FORCES that over the last 20 years propelled dramatic change in our ideas of how corporate boards should be structured and function have been principally three: the movement toward a more integrated global market economy, resulting in ever more intense market competition in all markets; the remarkable growth in the stock holdings of institutional investors, especially those of public and private pension funds; and change in legal regulation, notably the Securities and Exchange Commission's regulation of proxy solicitations and, perhaps, change in the corporate law governing "hostile takeovers." These forces won't reverse themselves and, together with rapid technological innovation, can be expected to continue to produce pressure for change in management practices, organization structures, and governance.

Today, corporate boards are smaller, differently selected, and differently structured and compensated than they were 20 years ago. More fundamentally, the role expectations that attend board service have and are changing. Of course, fundamentals remain unchanged: a board cannot manage a business. Made up of individuals who devote substantially less than all of their time and attention to the corporation, even a board comprised of diligent, talented, and experienced business people lacks the deep information about the firm, its personnel, products, and competitors that is essential to formulate and execute sound business plans. The nature of the organization form itself mandates that outside directors recognize and appropriately defer to the superior information that generally informs management's decisions.

The fundamental social forces that have modified our conceptions and practices of corporate governance have not spent their force. They continue to press our business forms to achieve more efficient performance. While foreseeing the future is no more easily done by a judge than a businessman (indeed one might suppose the reverse), here are a few of the specifics that I imagine the next 20 years will witness.

First, concerning a close time horizon: I suppose the idea of a lead or senior director is so obviously a sensible and worthwhile idea that it will gradually become a standard practice. It often will not be a formal position, but here formality is less important than that a specifically defined and limited "senior" or leadership...