Composing a Balanced and Effective Board to Meet New Governance Mandates

• Published in: The Business Lawyer Vol. 59; no. 2; pp. 421 - 452
• Main Authors: Olson, John F., Adams, Michael T.
• Format: Journal Article Trade Publication Article
• Language: English
• Published: Chicago Section of Business Law of the American Bar Association 01.02.2004; American Bar Association
• Subjects: Audit committees; Boards of directors; Business; Business management; Business structures; Commercial law; Congressional committees; Corporate directors; Corporate governance; Corporate planning; Corporate regulation; Corporations; Decision making; Group dynamics; Management; Methods; New stock market listings; Public companies; Public Company Accounting Reform & Investor Protection Act 2002-US; Scandals; Securities and Exchange Commission regulation; Securities markets; Selection; Shareholders; Stock exchanges; Stockholders; United States > US
• ISSN: 0007-6899

The enactment of the Sarbanes-Oxley Act of 2002 and the recent adoption of new corporate governance listing standards by the major American securities markets have resulted in a number of prescriptions that influence the selection of directors of U. S. public companies. These requirements are in some respects inconsistent with the traditional agency role of the monitoring board and, more important, may conflict with optimal functioning of the board as a group. The authors survey the literature on the role of the board and board dynamics, examine the new constraints and their impact on director qualification and selection, and offer ten practical suggestions for director selection that will help nominating and governance committees of public companies to assemble boards of directors that will effectively perform their critical monitoring functions in the new regulatory environment.