A 20-member panel of leaders from business, academia, and regulatory agencies has released “Bridging Board Gaps,” a report designed to improve board performance and effectiveness through recommendations in critical areas of governance.
The Study Group on Corporate Boards, co-sponsored by Columbia Business School and the John L. Weinberg Center for Corporate Governance at the University of Delaware, calls for renewed commitment of corporate boards and suggests guidelines to improve board practices and standards along seven core dimensions: purpose, culture, leadership, information, advice, debate, and self-renewal. Funded by the Rockefeller Foundation, the report builds on past reforms and regulatory actions to focus on the gaps between governance ideals and realities and suggests practical solutions for boards of companies of all sizes and in all industries.
Glenn Hubbard, Dean and Russell L. Carson Professor of Finance and Economics, served as Study Group co-chair and noted that boards must address two kinds of gaps: oversight and expertise. Each is important, he said, and requires looking beyond process. “Many of the contributions to corporate governance in recent years focused inward to the board’s operations rather than outward to the board’s work in areas such as risk.”
Study Group co-chair Charles M. Elson, Edgar S. Woolard, Jr. Chair in Corporate Governance and director of the Weinberg Center at the University of Delaware, noted the need for boards to continue evolving. “Over the decades, boards have admirably moved from an advisory to a monitoring function,” Elson said. “Unfortunately, they still have to meet their potential.”
Frank Zarb, senior advisor, Hellman and Friedman, non-executive chairman, Promontory Financial Group, and a veteran of many corporate boards, added that the report is an initial step in igniting a broader and deeper review of board structure and function.
“The report is not meant to answer all the questions, but to encourage further examination of boards,” Zarb said. “The need for greater board expertise comes at an important time for securities markets. In the early 1970s, the stock market began to democratize, and today it includes tens of millions of middle class advisors, although board governance is essentially the same. Is this a reality we have to live with?”
Other members of the Study Group on Corporate Boards include: Peter Langerman, president and CEO of Franklin Mutual Advisers; The Honorable Arthur Levitt, senior advisor, Carlyle Group and former chairman, Securities and Exchange Commission; Eugene A. Ludwig, principal, Promontory Financial Group; The Honorable Paul O’Neill, special advisor, Blackstone, former Secretary of the Treasury; Reuben Mark, former CEO, Colgate Palmolive; Damon Silvers, policy director and special counsel, AFL-CIO; and The Honorable E. Norman Veasey, Chief Justice Delaware Supreme Court, Retired.