The Board of Directors 533- Discuss proposed major changes in the company’s strategy and direction,
major financing proposals, and other crucial issues, usually as proposed by
the CEO. - Formulate major policies regarding ethical or public responsibility mat-
ters, convey to the organization its expectation that the policies will be
adhered to, and ensure that policy violations are not tolerated. - Ensure, if feasible, that the CEO has identified a successor and is groom-
ing that person for the job. - Require the CEO to explain the rationale behind operating budgets,
major capital expenditures, acquisitions, divestments, dividends, person-
nel matters, and similar important plans. Accept these proposals if they
are consistent with the company’s strategy and the explanation is reason-
able. Other wise, require additional information. - Analyze reports on the company’s performance, raise questions to high-
light areas of possible concern, and suggest possible actions to improve
performance, always with the understanding that the CEO, not the
board, is responsible for performance. - Assure that financial information furnished to shareholders and other out-
side parties fairly presents the financial performance and status of the
company. Assure that internal controls are satisfactory. - Replace the CEO promptly if the board concludes the executive’s perfor-
mance is and will continue to be unsatisfactory. - Participate actively in decisions to elect or appoint directors.
- Decide on policies relating to the compensation of senior management,
including bonuses, incentives, and perquisites. Determine the compensa-
tion of the CEO. Review recommendations of the CEO and ratify the
compensation of other executives.
FOR FURTHER READING
American Bar Association Committee on Continuing Professional Education, Cor po-
rate Governance Institute: ALI-ABA Course of Study Materials(Philadelphia,
PA: American Law Institute, 2000).
,Corporate Director’s Guidebook(Chicago, IL: ABA, 1994).
American Law Institute-American Bar Association, Current Issues in Corporate
Governance: ALI-ABA Course of Study Materials(Philadelphia, PA: ALI-ABA,
1996).
American Society of Corporate Secretaries, Current Board Practices(New York:
ASCS, 2000).
Anderson, Charles A., and Robert N. Anthony, The New Corporate Directors(New
York: John Wiley, 1986).
Bawley, Dan, Corporate Governance and Accountability: What Role for the Regula-
tor, Director, and Auditor?(Westport, CT: Quorum, 1999).