Larta Opinion:
The Need for Educated Change in the Boardroom

November 4, 2002

by Charlene Miller, Founder
International Corporate Directors Institute and Global Associates, LLC

In the classic film Network, Peter Finch shouts out the window for the world to hear, "I'm mad as hell and I'm not going to take it anymore." No more corporate misconduct would be tolerated. Today, anyone and everyone is saying it.

Recent scandals and blatant unethical behavior by corporate board members and company CEOs has finally created such a toxic environment that stockholders, employees and the public in general are demanding change. It is possible for misconduct to reign when pension plans aren't tapped and jobs remain secure? The impetus for change becomes very powerful when you go to jail if you don't. Several issues stand out as glaring contradictions to good governance and the most imperative to change.

1. There was (and still is) an old boy's network operating in an embarrassingly high percentage of companies. The board is made up of the CEO's friends, i.e. drinking and golfing buddies. Thus, pleasing the CEO is more important than making good and hard business decisions. This idealogy is both incestuous and harmful, not only to the stockholders and employees, but the ultimately, the country's economic stability as well. In the future, only independent directors selected by independent nominating committees can and will be allowed. Michael Dell, founder of DELL, arguably one of the best-run companies in the country, states, "I already know what the insiders think. I need to know what the outsiders think." This emphasizes not only the legal neccessity of independent influence over a board, but the strategic importance of it. This must and will be new corporate modus operandi, not just because company officers are need to transcend to a new conscious, but new SEC rules and regulations will require it by law.

2. Directors need more education. It is ironic and amazing that there is a true lack of knowledge by a majority of Directors and CEOs, and a common reason why a high percentage of boards are not run well. It is not that there has been a "dumbing down" of CEOs and board members, it's simply that a demand for "best practices" and/or a core Board processes has yet to be made. A lack of core Board process is a reality in both public and private companies, including effective CEO succession. A large portion of public companies claim not to have any formal process at all. Privately held companies have even a greater problem, many of which are family controlled. Most Directors and Officers do not understand the risk and exposures they are liable for. Continuing education and Board Certification must be demanded as new regulations are already in place.

3. Major changes in attitude and commitment must be made to be a good, independent director. A well-run board will include the following core competencies as a whole: Accounting and Finance, Business Judgment (with a track record), Management and Leadership, Crisis Response, Industry Knowledge, International Markets, and Strategy and Vision. The board members should understand and be selected to represent all of these areas (a full set of skills). The board member must be willing to devote time to the board. This may mean limiting the number of boards on which he/she can sit. No intertwining board relationships, which includes sitting on one another's Board. Including allegiance to a CEO over the company and stockholders is not good. Again, continuing educational opportunities and requirements of potential and working board members and CEOs is a must.

4. The climate of business in America has been one of tolerance to unethical business practices and permission to not comply to rules and regulations. Ethics didn't disappear, they were simply ignored. Ethics is a culture demanded by the leader of the company. It is my belief that this generation of business leaders and the society that produced them are products of television and permissiveness in the schools. Non-ethical behavior--when the "bad guy" gets to win and there are no consequences has had a negative influence we now have to combat. Classes in business ethics must be part of an MBA program and mandatory as part of continuing education.

In the final analysis, I must emphasize the value of high quality ethical and committed independent directors. The necessary changes I have outlined are not only imperative to the future of corporate America but to the world. The changes must be made and must be made now. We are the model to the world.

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Charlene C. Miller’s boardroom consulting firm, International Corporate Directors Institute and Global Associates, LLC, practices nationally and internationally. It restructures boards with outside members for Boards of Directors, Boards of Trustees and Boards of Advisors in both the public and private sectors. Global Associates Directors, LLP has also begun a Business Accelerator Division for early stage companies.

Prior to Global, Ms. Miller was Founder and Managing Director of the MAG Group, a firm that identified and developed opportunities for western businesses seeking to expand into Central European markets. Additionally, Ms. Miller was Founder and CEO of CMI International with offices in Hong Kong and New York. This firm had the honor of being the first product development, private label company in the U.S. retail sector.

As well as being a member of the Committee of 200, the preeminent international organization for women entrepreneurs and corporate business leaders, Ms. Miller sits on various corporate and philanthropic boards. She is also a frequent speaker at Stanford, Harvard and Columbia Business Schools.