What is the next big thing for boards?

• Author: Wilcox, John C.
• Position: THE NEXT BIG THING

Answer: A voice of their own.

During Directors & Boards' four decades, corporate boards have undergone an extraordinary evolution. It has been a long and stressful period of relentless change, with companies under pressure from a succession of gadflies, greenmailers, hostile bidders, shareholder activists, hedge funds, short sellers, high-frequency traders, as well as regulators, politicians, the media and special interest advocacy groups. But contrary to widespread concern that too much power was shifting to shareholders, the end result has been to confirm unconditionally that good corporate governance is invariably board-centric.

Boards today are more powerful, more visible and more accountable than ever before. They now have a real "job." Over and above their traditional role as trusted advisors to the CEO, directors have clearly defined responsibilities that cover a broad spectrum: long-term business strategy, capital structure and allocation, succession planning, audit and accounting policies, risk appetite, executive compensation, tone at the top, corporate culture, ethics, reputation, and ESG (environment, social responsibility and governance) policies. As amply recorded in the pages of Directors & Boards, today's boards are more independent, more diverse, more visible, younger, more tech savvy, and more directly accountable to the owners who elect them and to the wide range of constituencies affected by their actions.

What boards crucially still lack is a voice of their own. Given their position at the top of the decision-making pyramid, directors need better ways to explain in their own words how they are doing their job and how their decisions support the company's business strategy and goals.

"Transparency" is a hot topic in governance circles, but as a practical matter only minimal efforts have been made to bring sunlight into the boardroom. Europe's voluntary comply-or-explain governance system invites companies to provide a written explanation of their non-compliant governance decisions, but according to regulators the quality of explanations has been inadequate--boilerplate rather than substance. In the U.S., regulatory constraints on selective disclosure, fear of liability and a longstanding tradition of boardroom privacy continue to stand in the way of transparency.

Some important steps have been taken. It is now common for companies to publish corporate governance policy statements and a variety of codes and reports on...