Executive Recruiter

Specializing in CEO and Corporate Director Recruiting

Streamlining Corporate Boards to Focus on CriticalFunctions

Corporate board work has become even more demanding in this era of activist shareholders, a 24/7 news cycle and the increased accountability of Sarbanes-Oxley. Corporate boards are looking for ways to streamlineoperations while remaining focused on fiduciary responsibilities toshareholders.One way to help boards stay focused on key issues is in creating a simplestructure. Boards that have established just three committees—audit,compensation, and corporate governance--have found a built-in efficiency. Itis critical to establish a charter for each committee so that committeemembers know the scope of their responsibility. Also, keeping thecommittees small has significant advantages. The audit committee remains a critical function for every board. What usedto be the committee for new members is now a focal point for boardoperation. It is not only helpful to have board members who have a financialbackground on this committee but someone who has actually been anauditor. Audit committee meetings have full agendas making it critical forcommittee members to be well prepared. Keeping the big picture in mind,the audit committee must manage the outside auditor as if his or herpersonal reputation depended on it because it does. It’s also important todefine the concept of control as it functions in the company. The compensation committee has also come under greater scrutiny fromoutsiders. With Web pages like paywatch.com, compensation committeemembers know that their decisions are placed under a microscope. Inaddition to the charter, the compensation committee should have memberswho understand how CEO pay actually works. They also recognize thatshareholders are not looking for an esoteric metric for judging success butrather focus on performance that delivers higher total return. By settingrequirements and then playing out various scenarios, the compensationcommittee is able to test the soundness of its judgment.

DENNIS C CAREY