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Contents Foreword by Senator Paul S. Sarbanes Note on This Book by Jeffrey Rudman Introduction 1 How Did It Happen-Or Was It Always This Bad? My bleak historical portrayal of corporate America is not intended as a blanket condemnation of all publicly traded U.S. corporations. · The Good Old Days · The Great Bubble · Making the Numbers by "Making Up" the Numbers · Wealth Creation and Corporate Hero Worship · Corporate America Lost Its Moral Compass · Contributing Factors ( Legislative and Regulatory Corrective Action ( The Sarbanes-Oxley Road Map ( Early Assessment of Sarbanes-Oxley 2 Duty of Care and Duty of Loyalty It is the right, and obligation, of every director to be informed and to act deliberately, with the diligence and competence of a reasonably prudent person in a similar situation under similar circumstances. · Business Judgment Rule · Loss of Reputation and Embarrassment 3 Role of the Board of Directors Excellent companies stay excellent by regularly challenging themselves. · Why Serve as a Director? · CEO-Dominated Process ( The Undesirables · Structuring the Board to Accommodate the Corporation's Requirements ( Overcoming the Knowledge Gap ( An Important Learning Experience ( Questions the Directors Need to Answer ( Who Runs the Company? ( What Should Directors Do? ( Do We Need Professional Directors? 4 What Values and Qualities Should Directors Possess? The board has no room for insouciant directors who are not committed or who believe they can serve by being passive observers. · The Five I's ( Complementary Skills and Experience ( Preparation and Continuing Education ( Disagreement Is a Virtue, Not a Vice 5 Role of the CEO The CEO should seek to create a board meeting environment that encourages skepticism and serious discussion and enables board members to disagree constructively. · Know the Board · Setting the Tone and Corporate Culture · The CEO's Role in the Decision-Making Process · What the CEO Expects of the Board ( Avoiding Surprises 6 Board and Committee Meetings Avoid information overload and mind-numbing presentations. · Setting the Meeting Agendas · Risk of Information Overload · Concise, Focused, and Relevant Presentations · Size of the Board ( Frequency of Board Meetings · Executive Sessions · Lead or Presiding Director · Board Compensation 7 Committees of the Board Excessive CEO compensation is the "mad cow disease" of American boardrooms. · Audit Committee · Compensation Committee · Nominating and Governance Committee 8 Guidelines, Ethical Codes, and Legal Compliance What is needed is a proactive CEO whose message resonates throughout the corporation and instills all employees with the resolve to help create a corporate culture that nourishes integrity and ethical behavior, penetrating all aspects of the corporation's business and governance. ( Corporate Governance Guidelines ( Code of Conduct and Ethics ( Legal Compliance and the "Noisy Withdrawal" Quandary 9 Revolt of the Stockholders The 2003 and 2004 proxy seasons will be remembered as the time when stockholder activists took steps to change the way their corporations are governed, their directors are nominated, and their executives are compensated. · Stockholder Proposals and Rule 14a-8 · The Issues · New SEC Rules · Stockholder Nominations and Other Communications ( Stockholder Access ( Scorekeepers ( Stakeholders 10 Evaluation of Board Performance Self-assessment of directors' performance is receiving increasingly wide acceptance as board members realize that they are in the best position to evaluate their board performance. 11 Effect of Sarbanes-Oxley on Private Corporations Good corporate governance is good for business, whether the business is large or small, public, private, or even nonprofit. 12 Nonprofit Entities Trustees and directors of nonprofits would be well advised to consider adoption of changes in their ethical guidelines and codes of conduct along the lines currently favored by profit-motivated corporations. 13 Model Board of Directors The model board's membership includes individuals with diverse talents, experiences, personalities, instincts, and expertise that provide the composite skills that produce excellence in the boardroom. ( The Directors ( The Board ( A Few Parting Admonitions · The Essence of Excellence About the Author Index
Library of Congress Subject Headings for this publication: Corporate governance United States, Boards of directors United States, Directors of corporations United States, Common sense