What I think I learned! A few lessons gained from long years spent in the boardroom and C-suite School of Hard Knocks--a school that awards no parchment diplomas but offers the opportunity to acquire an abundance of scar tissue.

• Author: Augustine, Norman R.
• Position: 35TH ANNIVERSARY EDITION

AS THAT GREAT PHILOSOPHER, Yogi Berra, would have said (or maybe it was "Dandy" Don Meredith of Dallas Cowboy fame): "Things aren't what they used to be, and never were."

One often hears spokespersons for public corporations convolutedly assuring the public that such firms are founts of democracy--but, at least by Madisonian principles they seem to fall a bit short. Yes, the corporate citizens (shareholders) do elect, by more-or-less secret ballot, their representatives once each year. And, yes, those rulers do in turn elect an executive team once each year. So far so good.

But there remains that little "untidiness" associated with the facts that rarely is there more than one candidate for each position on the "board of representatives," and even more rarely is there more than one candidate for each of the executive positions. Furthermore, the town meetings, where the state of the union is addressed, are sparsely attended--partly reflecting the fact that new issues cannot be raised at the meetings and the outcome of the voting is a fait accompli. Indeed, the presiding official not inconveniently has enough votes in his or her pocket to control any eventuality. And, when it comes to floor time, some of the citizenry is more equal--a lot more equal--than others.

So, is this strange form of "democracy" bad for corporate America ... and, more importantly, for its constituents? My proxy says, no, it is not: at least in comparison with the alternatives. Imperfect? Yes. But bad? No. One often hears it asserted that if our government were just designed to run like a business, things would be a lot better. But the Founding Fathers (apparently there were no Founding Mothers) seem to have quite intentionally tried to assure that our government does not operate like a business; that is, with a great deal of authority concentrated in a single individual's grasp. They accepted the inefficiencies of rule by committee, of numerous checks and balances, and of diffuse power as among the costs of freedom.

A worthy structure

But if a business is to survive in today's fast-moving global marketplace it must be nimble, possess decisive leadership, and be quick to make and implement decisions. A governance structure generally compatible with these objectives has in fact served American business quite well over the centuries--with a few notable exceptions when that concentration of power was abused by some overzealous leader. Those exceptions have often led to much-needed corrective oversight and regulation. The question for today, however, is whether that oversight and regulation will go too far in implementing the specious theory that if business were designed to run more like government, things would be a lot better.

As we criticize each new constraint placed on business we sometimes forget that it was only a few decades ago that boards were required to include outside directors--quite a revolutionary notion, indeed! On the other hand (as lawyers are want to advise), with all the new regulations put in place since Enron's end-run of the rules, there are two changes that in my judgment have had the greatest positive impact and are also the least onerous and least complex of the entire pile. The first of these is the mandate that there shall be an elected outside director to either chair the board or serve as a presiding director. The second is that the board shall meet periodically without anyone from management present. As strange as it may seem, until recently many boards did not embrace such obvious practices, other than for the perfunctory, single topic, once-a-year brief session to approve the compensation committee's recommendation as to how much the CEO should be paid.

The continuing search for balance in corporate governance--speed vs. checks, monitoring vs. agility, rules vs. innovation--has been superbly documented in the pases of DIRECTORS & BOARDS over the past 35 years. Its pages are a treasure trove of wisdom from which one can learn a great deal. I suppose it was in this spirit that the editor asked me to add to these pages some of my own lessons learned, presumably reflecting my having participated in over 500 board meetings of Fortune 100 companies and numerous meetings of not-for-profits and small firms in my career, not to mention recognizing the independence that results from my having "aged off" (as the event is politely termed by the cognoscenti) all my large corporate boards.

Some good fortune

Then, too, there is the happenstance of my having held the positions of chairman and CEO, chairman and not CEO, CEO and not chairman, and--for the majority of my career--not chairman or CEO. Further, through a degree of judiciousness on my own part, I had the good fortune to serve on boards of companies that embraced the highest ethical standards and thus never faced any real problems. Challenges, yes, but the kinds one can get through. Whatever the case, a lot has changed over the years--and, in my opinion, that change has in general been for the good. The days of the legendary "3-6-3" bank board meetings are over: "Set the borrowing rate at 3 percent, the lending rate at 6 percent, and be on the golf course by 3."

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Having also participated in numerous acquisitions, a few mergers, several divestitures, two major IPOs, various restructurings, and one sale of the company--along with having to advise two CEOs their services were no longer needed--I felt that I had seen it all. But then some totally new experience would invariably pop up. The standing record, to borrow poet Robert Service's words, for the strangest thing I ever did see, was the hostile takeover by Bill Agee--an attempt on the corporate life of the Martin Marietta Corp. by Bendix Corp. Bendix, under the leadership of its CEO, Bill Agee, struck without warning and before those of us at Martin Marietta could respond Bendix had collected some 72 percent of Martin Marietta's shares--widely considered among experts not to be a good situation from the intended victim's viewpoint. My predecessor as Martin Marietta's CEO, Tom Pownall, led our defense--and an imaginative defense it was. Before Bendix could stop us, we quickly bought a majority of Bendix's shares! The outcome was that Bendix may have owned us, but we owned Bendix. Business is quite different from politics--in politics it's dog eat dog, whereas in business it is just the opposite.

Further complicating the matter was the fact that we were competing with each other for new contracts and now, suddenly, it was in our best interest to lose those competitions--because we got...