The hard work of directorship.

• Author: Gogel, Donald J.
• Position: Company director's need for having detailed knowledge of company products and services - Governance

Dramatic transformations in U.S. firms as they strive to become more competitive has deepened the involvement of boards of directors in the affairs of the companies they oversee. The recent wave of board activism at General Motors, American Express, Westinghouse, and Sears, Roebuck has received wide attention for having prompted management changes and corporate restructurings. At the same time, large institutional shareholders are seeking direct influence over corporate affairs, an initiative known as "relationship investing."

All of this activity stirs a broad and long-overdue debate on corporate governance. The real issue here is one of influence: Should directors or institutional investors take on additional responsibilities for operations and strategic decisionmaking?

Before answering this question with a "yes," directors and institutional investors should understand the time and hard work required to be effective in this role.

Directors of Clayton, Dubilier & Rice's portfolio companies have realized that being effective as a director usually requires four or five days a month. For example:

* In one month alone, two directors of Lexmark International Inc., a maker of printers, typewriters, keyboards, and office supplies, devoted three days to on-site operating reviews at the Lexington, Ky., plant.

* A director of The Scott Cos., maker of lawn care products, spent several days in London with company executives examining a potential acquisition.

* A director of the Homeland Stores supermarkets worked on labor issues in a two-day session at the firm's Oklahoma headquarters.

* And a director of APS, the auto parts company, helped formulate a new compensation and stock option plan.

As these efforts indicate, our investment firm works on a model of activist directors and investors. We typically control the board and hold a majority of a company's equity. Our directors tell us that to exercise their responsibilities properly they must immerse themselves in the dynamics of their companies and concentrate on specific tasks. This often requires substantive involvement in several important areas.

Getting a clear fix on competitive position. To make strong strategic judgments, directors or institutional investors need detailed knowledge of the competitive position of their company's products and services. This requires a thorough understanding of industry structure, supplier relations, customer needs, and other essentials of the business. In the...