Early Call for Board Audit
The spotlight is on the board and will remain so with increasing intensity. It took some massive jolts like Penn Central, BarChris, Ampex, Lockheed, Equity Funding, and Gulf Oil to bring directors into the real world of corporate accountability. The pleasant, perfunctory, interested (but not too much so) complacency of many boardrooms is a thing of the past, or at least it better be.
Both government agencies and public interest organizations pose a threat to corporate autonomy if management does not move to increase its effectiveness at the board level, and indeed, at all levels. This move can be facilitated through conducting a detailed, full-scale audit of the board, its role, organization, membership, and working relationship with management. The audit will establish a sound working interaction between board and officers by fostering a mutual understanding of roles and responsibilities and by perfecting communications skills. In addition, a board audit provides a clear, objective and expert assessment of both real and potential board effectiveness, with suggestions for improvement and specific and explicit plans for implementing these improvements.
J. Keith Louden, president of The Corporate Director Inc., in "The Board Audit" [Winter 1977]. When Louden formed his firm in 1970, it was the only consulting organization to offer performance audits of corporate boards. He wrote a number of articles for DIRECTORS & BOARDS and served with great distinction on our editorial advisory board. He died in 1992 at age 89.
Where Was the Board?
Concern for the fragility of free enterprise has been amplified by a number of events. Rightly or wrongly, Watergate, inflation, Israeli boycotts and oil market explosions associated with OPEC, and foreign payments have cost business dearly. A scorecard, released in January 1977, of questionable payments made overseas by U.S. corporations shows 175 companies have admitted paying more than $300 million during the past six years. Alice T. Marlin, president of the Council of Economic Priorities, which compiled the figures, says: "The problem seems to be not so much one of lower foreign corporate standards as of low standards of U.S. corporate behavior and of competition among U.S. companies."
Carl Burgen of Business Week writes: "Where were the directors when the price-fixing, bribing, or polluting was going on? It soon became apparent that on the boards of scores of the biggest companies...