Page 187 - Accelerating out of the Great Recession

ACCELERATING OUT OF THE GREAT RECESSION

percent increase in the minimum time spent by nonexecutive
directors on board matters and greater power to risk committees
to scrutinize and, if necessary, block large transactions.
The natural extension of this approach to corporate gover-
nance beyond the financial services sector is for all boards to
become much more familiar with the strategies of their enter-
prises—and most particularly with the risks being undertaken.
Management will find it increasingly difficult to bluff their
boards if the directors are well versed in the business.
Changes in the law notwithstanding, shareholders and man-
agement are already being more assertive about changing gov-
ernance structures. There is no single board model; boards need
to reflect the companies they are governing. In general, though,
boards need to explicitly address the complex issues of their
structures, the representation of necessary skills and industry
knowledge, and their relationship with management. This will
require the creation of a board and board committee structure
that are suitable for the size and complexity of the company, as
well as the introduction of an appropriate membership and
processes by which decisions are made.
These trends are clearly on the minds of executives at large.
In our survey, a significant majority (80 percent) expects a
greater role for nonexecutive directors in holding management
more accountable and in having a greater involvement in and
understanding of their company’s business.

■ A DIFFERENT PERSPECTIVE ON ETHICS ■

The financial crisis—and the resulting Great Recession—has
precipitated extensive debate about ethics in the world of busi-

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