Board of Directors: Current Issues In the News

Recent news articles have pointed to some general issues regarding a corporation’s board of directors.

New corporations may want to consider the composition of their board of directors in some detail, while existing corporations might want to periodically revisit the make up of its members as the business grows or evolves over time.


Board IndependenceThe Wall Street Journal pointed out last month that, “Shareholders like their corporate boards stocked with independent directors—men and women unencumbered by close ties to the company or its executives. The reasoning: Who better to act in the interest of investors?

“Today, most large companies can boast that their boards are overwhelmingly independent under rules laid down by the stock exchanges. Yet some of those independent directors have close ties to the companies and executives they oversee, or to one another.”

The Journal article added that, “Board independence has received more attention in recent years as activist investors have gotten more powerful…[I]nvestors and regulators alike are scrutinizing board actions more closely, and directors sometimes have been held accountable for corporate misdeeds and missteps… Some investors also are bothered by boards filled with longtime directors, reasoning that their long involvement with corporate strategy makes them less inclined to challenge top executives.”


Service on Multiple Boards– A separate Wall Street Journal article from January indicated that, “As directors face increased investor scrutiny and heavier workloads, four board seats now look like a lot…[M]ore companies are putting in place rules that limit how many other seats their directors can hold.”


Board Diversity– On January 27, The Wall Street Journal reported that, “Securities and Exchange Commission Chairman Mary Jo White outlined on Tuesday a busy agenda for what is likely to be her final full year at the helm of the SEC [Securities and Exchange Commission], with a range of initiatives focusing on boardroom diversity and executive compensation.

One new priority: possibly requiring companies to provide more details about the diversity of their directors. Ms. White, speaking at a securities conference in Coronado, Calif., said she is concerned that existing disclosures may not provide investors with enough information, according to people who attended the session.”

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