Degrees of change.

Robert Monks

Principal

Lens Governance Advisors LLC 

THE impression that this is a decline of the imperial CEO is an illusion and the only question I have is whether it's purposeful or random. First of all, the turnover isn't any numerically higher than it has been in the past. Most importantly, CEO pay continues to go up without any correlation to value added. In many cases, CEOs who appear to be dismissed are really reaping economic benefits. The SEC has been pushing for almost two years for the most modest capacity for shareholder involvement in nominating directors. The Business Roundtable, which consists solely of CEOs, was in effect shrieking that this would represent the end of Western civilization as we know it. So CEOs have been extremely public in opposing any genuine independence in membership of boards and they have been successful in preventing the SEC from permitting a token involvement by outside shareholders. We're left with the present system of self-perpetuating boards.

Wally Scott

Professor of Management

Northwestern University Kellogg School of

Management

CLEARLY, the nature of relationships with boards and their CEO has changed. Both boards and CEOs are looking much harder at their own performance and evaluating that performance in the light of increased media scrutiny and increased demands of shareholders. Boards' independence is at a higher level today than it was in years past. They are taking more time, spending more energy and making greater efforts to ensure all financial arrangements with CEOs and other senior corporate officers are consistent with shareholder interests and can survive outside scrutiny. The headline-seeking CEOs that became larger than their companies are less visible and toned down. Boards are taking more time to look at the competitive arrangements for other competitive companies. The movement of having to expense options is reducing the desire of using options as a part of compensation packages. There will always be problems that occur. But the public scrutiny and the litigation that has occurred have led governance in compensations in a healthy direction.

Nell Minow

Editor

The Corporate Library

IN the 1990s we were in love with the idea of the CEO as a rock star. As a result of that, we saw these outrageous pay packages and as a result of that, the board of directors who had been ineffective in general deteriorated further and became enablers to the most appalling excesses. Those boards of directors that were not Enron, WorldCom and Global Crossing realized that they were close to the brink of allowing those kinds of catastrophes to happen. Through advice of counsel, litigation and fear of embarrassments, those boards have become much more active and careful. Of course, there is always room for improvement. We need shareholders who are more outspoken, observant and effective to boards and management that are not doing a good job. Weyerhauser, at their annual shareholder meeting, did not allow shareholders to ask questions from the floor and questions had to be submitted in advance and they didn't even read them out loud. That kind of ostrich-like behavior is not going to be successful.

Lynn Turner 

Managing Director of Research

Glass Lewis & Co.

IT'S not just the CEOs. There are a number of changes systemically in the boardroom and elsewhere that have created a different culture. You're talking about changing people's behavior. People hate change. It takes five years for these changes to take root. If, on the other hand, the changes are undone and the roots are cut off, those changes are going to die and you will be back to where you were before. You've got 90 million investors in the marketplace and they need to keep pressing for those changes as well.

Charles Elson

Director

Center for Corporate Governance 

THE imperial CEO is less lively than he or she used o be. Boards have gotten a lot stronger in light of these various reforms and are taking their responsibilities more seriously and have become a more effective counterweight to CEO authority. The key is going to be board independence and board equity ownership. (Before) they were appointed by management and easily replaced by management. Management controlled the proxy process and the board. You had management without accountability. Shareholders are taking a much more active role on appointments. They are the owners and if they don't take responsibility, who will?