The new normal.

• Author: Rock, Robert H.
• Position: LETTER FROM THE CHAIRMAN

WHEN JIM KRISTIE asked me to write a piece on "The New Normal" in board practice, my first thought was that not much had changed in the past year. Boards continue to be accountable for making certain the company is well run, and board members are still responsible for holding management accountable for performance. In my experience, strong, independent directors, who combine intelligence and experience with character and judgment, are continuing to ask tough questions and engender open debate that challenge management. In particular, executive sessions continue to both enable and embolden independent directors to become more forceful in exercising their oversight accountability, as evidenced by the ouster of seemingly unassailable chief executives at some of the nation's largest companies. The fundamental duties of boards remain the same, namely strategic planning, management succession, and compliance. These governance responsibilities are enduring.

[ILLUSTRATION OMITTED]

However, over the past year certain responsibilities have been ratcheted up, most notably risk management and a renewed emphasis on ethics. In some boards, the risk piece has been carved out of the audit committee and set up in a separate committee overseeing both financial and operational risks. At board meetings, risk management has become a prominent agenda item.

Although many overarching governance principles endure, the economic environment has undergone a sea change. The meltdown has challenged boards to take quick and decisive action to downsize their companies in the face of dramatic revenue declines, often in the range of 30-40%. Over the past year, boards have encouraged and often demanded a series of significant...