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The Best and Worst Boards

The Best and Worst Boards. Business Week January 24, 2000 January, 1997. Attributes of a Good Board. INDEPENDENCE. Friends and cronies of the CEO are out. Crucial panels like audit should contain no insiders. Cross-directorships are taboo. QUALITY.

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The Best and Worst Boards

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  1. The Best and Worst Boards Business Week January 24, 2000 January, 1997

  2. Attributes of a Good Board • INDEPENDENCE. • Friends and cronies of the CEO are out. • Crucial panels like audit should contain no insiders. • Cross-directorships are taboo. • QUALITY. • Board meetings should include real, open debate. • Directors need to be familiar with managers and conditions in the field. • ACCOUNTABILITY. • Directors ought to hold serious stakes in the company. • They should also be prepared to challenge under-performing CEOs.

  3. Judging Independence • No more than two inside directors • No inside directors on its audit, nominating, & compensation committees • No outside members who directly or indirectly draw consulting, legal, or other fees from the company • No interlocking directorships • Extra points for meeting regularly without the CEO

  4. Accountability to Shareholders • All directors own a minimum of $100,000 in stock • Extra points for not offering pension benefits to BOD • Extra points for having elections every year • Boards meet at least four times per year • Audit committees meet at least three times per year • Lost points for BODs that fail to evaluate their performance

  5. Underinvested? Charles Blalack AMD 0 Reveta Bowers Disney 0 Richard Hackborn Microsoft 0 Charles Young Intel 200 David Abshire Ogden 288 Gary Wilson Disney 1,000 Aziz Syriana Occidental 1,450 Wilton Looney Rollins 1,500 George Nolley Occidental 2,280 Thomas Wyman AT&T 2,570

  6. Director Quality • Fully employed directors sit on no more than three corporate boards, and retired directors on no more than six • At least one outsider with experience in company’s core business • At least one outsider on audit committee with financial or accounting background • Extra points if at least one CEO of a company of similar size or stature • Directors attend 75% or more of meetings • Board has no more than 15 directors

  7. Stretched too thin? Ann McLaughlin 13 AMR, GM, Kellogg Raymond Troubh 13 Time Warner Frank Carlucci 12 Ashland Oil, Westinghouse Allen Jacobsen 11 3M, Prudential, Abbott Labs Willie Davis 10 Dow Chemical, Johnson Controls Vernon Jordan 10 Bankers Trust, Ryder Systems Claudine Malone 9 Dell, Hannaford, The Limited Joseph Califano 8 Kmart, Travelers, Warnaco Carl Reichardt 8 Columbia/HCA, Ford

  8. Too many no-shows? David K.P. Li Dow Jones, Westinghouse 45%, 40% Gareth Chang Mallinckrodt 44% Vernon Jordan Dow Jones 40% James Middleton Arco Cehmical 31% John Ong Ameritech 31% Donald Flynn Waste Management 30% Jill Barad Microsoft 29% Boone Powell, Jr. Abbott Labs 27% John Kluge Occidental 25% Sidney Poitier Disney 25%

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