The 5 best and ... 5 worst boards of 1998.

Where once we had to scrape the bottom of the barrel to come up with five boards worthy of the "best" title, today we choose from dozens of worthy candidates. Clearly, things are looking up in board governance. But there are still plenty of companies that continue to exceed the bounds of common sense and good taste. Here's a look at the good, the bad, and the downright ugly.

This is our seventh year choosing the five best and worst boards in the U.S. for CE. As always, it's been an interesting and provocative experience. Is it a worthwhile effort? It's hard to tell what impact our studies and writings have had. it's heartening to have a firm like Dow Jones, which we picked last year as one of our worst boards, write to say that they restructured their board and issued a new statement of corporate governance principles, But it's disheartening to have a company like Disney, chosen two years ago as among the worst, do little or nothing to improve its board situation, despite the complaints of many of its shareholders.

On the whole, we see lots of progress in corporate governance. improved board composition has brought more women and minority directors and fewer insiders. Each year, we see fewer investment and commercial bankers, members of law firms, and consultants elected. Directors are paid in stock and stock options and less in cash. Fewer director pension plans are in effect. More and more companies have corporate governance committees, or the equivalent and the independent director's role in selecting new directors, appointing committee members, influencing management succession, and in evaluating the performance of CEOs, the boards, and the individual directors seems to be getting stronger. The trends are in the right direction.

While we are not yet in the position where most American firms have effective, excellent boards, we're getting closer each year. We now have five best boards, whereas six years ago we had to search hard for companies that could stand as good examples.

There are not nearly as many flagrant examples of poor governance as we formerly found with companies like Apple Computer, Occidental Petroleum, Archer Daniels Midland, W.R. Grace, Morrison Knudsen, etc. Yet too many companies still have simply not gotten around to improving corporate governance. In a free society, we can always expect that there will be individual companies, CEOs, and directors who exceed the bounds of common sense and good taste. And we will continue to point them out to you in Chief Executive.

BOARDS WITH VISION

Our five best boards this year are, for the most part, innovators in applying new and forthright forms of corporate governance to their company's policies and procedures.

All their board compositions are diversified, with women and minorities represented, and a minimal number of insiders. Few potential conflicts of interest are present, and the small number of beholden directors are of longstanding and high quality. Nearly all five have written corporate governance statements, maintain special committees assigned to oversee corporate governance procedures, and regularly evaluate the performance of the CEO and the board itself - indicating a conscious effort to achieve effective corporate governance.

That does not mean conformity - far from it. Our five "best boards" are doing some original and creative things that we have seldom seen done by other companies. Dana encourages all directors to attend all committee meetings and pays them attendance fees to do so. Monsanto pays a fiat fee of $90,000 each year, half of which is in options and the other half deferred, paid in restricted stock or cash. Pfizer has its own vice president of corporate governance. Summit offers a detailed documentation of its board procedures, a rarity in the banking industry. Praxair has followed a sound, consistent pattern since its inception five years ago.

Have such good corporate governance practices made these companies successful? While successful corporate management and leadership requires much, much more than an effective board, we like to think that these competent, well-run boards have been a significant contributing factor to the success of these five corporations. For each, five-year performance charts show superior results against the S&P 500 and relative to their peer competition.

DANA All the right stuff

By our standards, the Dana Corp. does just about everything right in the way of corporate governance. It has a 10-person, diversified, and talented board, with only two insiders, which met six times last year.

In addition to the standard audit, compensation, and finance committees, Dana has an advisory committee, which handles the selection and compensation of directors; all matters relating to board and committee structure, meeting, agenda, and schedules; and management succession planning. The advisory committee has a formal system of evaluation for each director in its process of nomination. Supplementing the formal board committees are advisory boards for Europe and Canada. One Dana director sits on each international advisory board.

Dana takes a unique approach to director compensation. In addition to a standard board retainer fee of $20,000 and a committee retainer of $2,500 ($5,000 for chairmen), a $1,000 fee is paid for each board or committee meeting attended. To encourage maximum participation, directors are also paid an attendance fee for all committee meetings they attend, whether or not they are officially members.

Dana discontinued its director retirement plan in 1996, substituting a stock option plan that grants 3,000 shares of stock annually. The company's executive compensation plan also seems well under control. It drives hard for the top 60 executives to meet stock ownership targets within five years. Thus, both the directors and the executives are building strong stock positions in the company.

Dana has been a good investment through the years. A $100 investment made in 1992 would have a value of $234 at the end of 1997. We believe that having a strong, experienced, involved board during this time was a contributing factor.

MONSANTO Innovative incentives

Yes, we know that Monsanto is being merged into American Home Products. But our official review date is the issuance of the current year's proxy statement - April 24, 1998, for Monsanto. As of that date, two major changes showed Monsanto's highly creative and thoughtful approach to corporate governance.

First, the company restructured its committees into four new standing committees (finance, public policy, science and technology, and people), an executive committee and one special committee.

Finance: Monitored the company's financial planning and structure, reviewed all financial programs including dividend policy, and appraised investment performance of pension and benefit plans. Also took over the full duties of the audit committee.

Public Policy: monitored company performance as it affects communities, customers, and the environment.

Science and Technology: reviewed the company's science and technology initiatives, including IT.

People: took over the duties of the compensation and the nominating committees, and handled executive succession and developed criteria for evaluating all director nominees. Also installed an entirely new executive incentive plan based on 50 percent premium-priced option to be achieve, d within five years by boosting net income and meeting EVA goals.

In addition, Monsanto had a seldom used executive committee, as well as a special committee for agricultural biotechnology matters, which approved acquisitions in the agri-tech field.

In 1997, the board eliminated board and committee retainer fees, suspended all grants of restricted stock, terminated the director retirement plan, and closed the company's charitable contribution program for directors. In place of these, directors were to receive annual compensation valued at $90,000 ($100,000 for chairs of committees), half in stock options and the other half by election in added options, cash now or later, or restricted common stock.

With nine members, Monsanto's was a small, prestigious board, although its composition deviates from our usual recommendations. Normally, we don't like to see bankers of any type on boards, but John Reed of Citibank had been a director since 1984. Also, we are usually wary of members from law firms, but Mickey Kantor is ex-Secretary of Commerce, so we won't quibble.

Monsanto's five-year performance chart showed the company was faring well and already in the midst of major directional changes when the deal with American Home Products was made. We can only hope that the creative corporate governance approach will be continued with American Home Products.

PFIZER Pioneering pays off.

Since our first Best & Worst Boards article for dE in 1992, we have refrained from commenting on any company for which either of us served as a director or consultant. But we think it's time to make an exception for Pfizer, which has been a client for many years. Pfizer was one of the first companies to publish its corporate governance principles and clearly state the policies in regard to the role and composition of its board, plus the functioning of the board and its committees. The company has already been selected as a top board by other magazines and has long been a leader in establishing sound corporate governance policies. Neither of us own or have ever owned any Pfizer stock.

One of Pfizer's most important committees is the corporate governance committee, which carries on all the duties of the nominating committee, recommends membership of all committees, advises on director compensation, and reviews job performance of top executives as well as all senior management succession plans. Pfizer also has a full-time vice president of corporate governance. As befits one of the five highest market-valued corporations in the world, Pfizer pays its directors well. The board retainer fee is $26,000, plus $2,400 for committees and $4,000 for committee chairmen. All meeting fees are $1,500. Payments can be taken in cash or in stock units. Each director is awarded 1,200 units of stock when they join the board and another 1,200 shares each year.

There are 14 directors. Four are present or former executives, including two executive vice presidents, who were added to the board in June of 1997. Effectively diversified for many years, the board has been almost completely remade since 1993, with only two outside directors, who served before 1993.

It's a hard-working board that held 10 meetings last year. The audit committee met six times, the corporate governance committee five times, and the executive compensation committee, during a period of skyrocketing Pfizer stock prices, met 12 times.

Pfizer has been enormously successful in the last five years, with an investment of $100 growing in value to $458. Having a solid corporate governance program in place during this time has proven wise planning.

SUMMIT BANCORP A bank standout.

By our definition, most banks have ineffective boards. They almost invariably choose as many of the CEOs of their biggest customers as they can fit into their boardrooms as directors. Their meetings are often as much social affairs as business operations. And, until the recent wave of mergers, most banking business was done without a great deal of board participation.

Now a small, regional bank, the Summit Bancorp of Princeton, NJ, has come up with a three-page, well-written, carefully crafted statement of its corporate governance principles. Summit clearly details the duties of directors, director qualifications and board structure, director remuneration, and general policies. And, rewardingly, the five-year performance graph shows Summit running well ahead of the S&P 500 and the banking peer group indices.

It's not a perfect example. The board is still quite large - 19, including five inside directors. But it's composed of a nicely diversified group of community and business executives, Summit still has a directors' retirement plan, but they require each director to own at least 1,000 shares of stock. There is no corporate governance committee, but the CEO's performance is formally reviewed annually by the compensation committee separately from its compensation review and the full board makes all committee appointments. The compensation committee report in the proxy statement was particularly well presented and the chairman of the compensation committee, Dermont Dunphy, is an independent business executive.

Altogether, the Summit proxy is a breath of banking corporate governance fresh air. Any director of any bank would do well to search for, read thoroughly, and then clamor for his own bank board to have such a statement of corporate governance principles. We say, "Well done, Summit!"

PRAXAIR Balanced since inception.

There's little unusual or revolutionary about Praxair's board, but it takes an admirably practical and consistent approach. When Praxair was spun off from Union Carbide in 1992, it adopted a thoughtful corporate governance plan. The 12-member board is composed of three inside executives, one woman, one minority, one foreigner, and collects an excellent coterie of skill and experience within its ranks. Only one change in board membership has been made since 1992, giving the new company the advantage of having had a continuous and competent board during its formative years.

Praxair has the fairly standard audit, compensation, and management development, finance, and pension committees. But it also has a public policy and nominating committee, which reviews company policies as to its corporate governance; its social, political, and public issues; and its health, safety, and environmental affairs.

Praxair requires officers to own specified amounts of company stock. (The CEO must own four times his base salary and 60 senior managers must hold stocks at least equal to base salary.) Directors receive a healthy $51,000 retainer, as well as $1,300 per board and committee meeting, and $5,000 for committee chairmen. Some or all of this compensation can be deferred in a "stock unit account." Each year, each director receives an option for 2,500 shares of Praxair stock.

The directors, management, and shareholders have all done well. The performance graph for Praxair's five-year lifespan ran well ahead of the S&P 500 and the company's peers. The many new corporations being formed these days via leveraged buyouts and spin-offs would do well to emulate the sound policies and practices of Praxair.

BOARDS WITH BLINDERS 

Our picks for the five worst boards this year vary widely in terms of industry served, board size, composition, and competence. Some posted impressive performance records, Others' earnings were either sharply cyclical or lackluster. What they have in common is the lack of independent, proactive oversight of company affairs. They're either not tuned in to what's going on or unable to observe events with a perspective sufficiently independent from corporate management.

In three of our five picks, boards seemed unaware of - or unwilling to comprehend - difficulties that, within a few short months, caused major upheavals and disruptions. In each case, a senior executive was forced out, at considerable cost to ongoing operations, morale, and shareholder concern. In four of the five boards, the lack of objectivity manifested itself with poorly thought out or markedly unjustified CEO compensation packages. While four out of the five boards were dominated by the company CEO, the fifth was dominated by a principal shareholder and his associates. Whatever the focus of domination, however, the results are the same: isolated board loyalty, potential for serious conflicts of interest, lack of independent judgment, and hampered oversight capability. In the long run, a truly independent and competent board serves the interests of all corporate constituencies: shareholders, employees, customers, and even the CEO who might have felt happier with a handpicked, loyal board.

CENDANT Disorganized and confused.

If one set out to deliberately design a bad board, one could hardly improve on Cendant's creation. Ironically, this board was deliberately designed as part of the "governance plan" adopted when HFS and CUC International merged and its problems were evident long before the situation reached a head and forced the decimation of Cendant's board.

The board was far too large to be effective: 28 directors in all. But far more destructive was the commitment to having 14 directors represent CUC International and 14 others represent HFS - and being designated as such! This divided loyalty was to be maintained for at least three years. Similarly, all committees were to maintain equal representation by both factions. Such an arrangement almost guaranteed a divisive "civil war." And it happened fast. Shortly after we researched this article, the discovery of relatively minor accounting irregularities in some former CUC divisions was announced. By the time we finished writing, Cendant's chairman had been forced out, and almost all the "CUC directors" had resigned.

The dual-loyalty board was only the beginning. The board consisted of 10 insiders. It abounded in "be-holden" directors: Two entrepreneurial lawyers were members of firms that do business with the company, a third lawyer was a vice chairman of the company who maintained a private practice that also provided legal services to the company. A vice chairman of Bear Stearns, which had actually orchestrated the merger, also served as a director. Two other members of the board actively participated in outside investments with Cendant's chairman.

Director independence was severely undermined by a host of potential conflicts of interest and internal dealing relationships. At least six members of the board had significant interests in partnerships or subsidiaries that did business with Cendant, its subsidiaries, and spin-offs.

A new executive committee, consisting of eight members - four from each faction - was created at the time of the merger. This committee also acted as the nominating committee and was designed to implement the much-flawed "governance plan" discussed above. The new, post-merger audit committee consisted of four members - again two and two, of course. All four can be deemed "beholden" to Cendant or its chairman - hardly a design to inspire confidence at a time when it was investigating serious allegations of fraud. The new compensation committee also consisted of four members, including one insider. The built-in director loyalty to each faction resulted in extremely generous compensation packages to both chairman and CEO.

We have been occasionally faulted for including in our worst boards list some companies that post good financial performance. Cendant's latest performance graph impressively outperformed the S&P 500 and its peer group. But within a few months the board was in shambles, and the stock had lost about half of its value. So much for assuming good short-term performance is proof of good governance.

OXFORD HEALTH PLANS Conflict leads to crash.

Here's another company whose last performance graph showed spectacular financial returns, only to come crashing down a few months later. Oxford's rapid growth, both geographically and in product offerings, outstripped its managerial and administrative capacity. Why didn't the board anticipate this dramatic downturn and try to restrain or redirect company management? The answer is quite simple: abysmal corporate governance practices. In contrast to Cendant's over-large board, Oxford's was probably too small, with only seven members. Furthermore, its composition did nothing to provide the missing strengths. Two insiders, normally an acceptable number, carried relatively more weight in this seven-person board than they would have in one of standard size.

A third board member was clearly "beholden" - the head of a corporation doing business with Oxford that involves payments of some $500,000 in fees. Of the four remaining members, two were involved in finance (broker/dealer and venture capital); one was a lawyer who has served on the White House staff and is now president of the Federation of American Health Systems; and only one was a senior executive with operating experience.

It should be noted that it was a series of major operating and strategic blunders that got Oxford into trouble, an area that its board was poorly positioned to oversee. Adding to the board's shortcomings was the conflict-of-interest position of Oxford's then-CEO. He personally owned 6.25 percent of Health Partners (HP), in which Oxford had invested some $25 million. The board itself, recognizing the potential for serious conflict, appointed a committee of independent directors to evaluate this investment "as a consequence of the CEO's interests in HP." The audit committee consisted of two members, had an extensive board charter, and met just once during 1996 and a total of four times in 1997. One cannot help wondering whether any of Oxford's subsequent difficulties would have been avoided if an effective audit committee had performed its assigned duties.

Despite a performance graph showing 1996 total returns at more than 10 times the NASDAQ market and health services indices, Oxford only managed to avoid total collapse through drastic refinancing and a major investment by Texas Pacific Group(TPG) in early 1998. Oxford's CEO was replaced by an experienced outsider, who also brought in new managers. We were surprised to note the subsequent changes made - and not made - in board composition. A June 1998 proxy statement revealed that all seven previous members, including the ex-CEO, remain on the board. The new CEO was named a director, and three members of TPG, the new investors, were added to the board. This is a strong "special interest" block and is probably not the optimal addition to a board that had already demonstrated its ineffectiveness.

LILCO A lack of supervision.

Prior to the transfer of the company's electric distribution facilities to a newly formed Long Island Power Authority, and its merger with MarketSpan, Lilco's board was generally representative of those of many utilities. These are usually diverse boards made up of political, governmental, academic, and celebrity representatives, and tend to be light on managerially sophisticated and experienced executives. This board consisted of 12 members, of whom three were insiders. Another three were academics, with distinguished backgrounds and services on prestigious associations or governmental agencies. Diversity and celebrity were perhaps best exemplified by two members: a well-known African American, former deputy mayor of New' York City and currently a member of a law firm; and a distinguished Hispanic woman, who is a former U.S. treasurer.

Two board members came from the financial community: One was a venture capitalist who also serves on seven named boards and "a number of other private companies." The second was a senior VP of a capital management corporation, authorized to underwrite and market public utility stock. A farm and farming corporation operator and a senior engineering executive of Raytheon Co. completed the board. In an unusual arrangement, a former director served as consulting director, to "advise and counsel the board and any of its committees on various matters." He received the same retainer and per-meeting fee as active directors, but could not vote.

The board's treatment of the CEO - who left Lilco at the time of the Lilco-Marketspan merger to become the CEO of Marketspan - was surprisingly magnanimous in the face of a generally lackluster LILCO performance over the past few years. First, the CEO's employment agreement was amended to extend beyond the normal retirement age, so that he would have been able to serve until the year 2002, followed by an additional five-year consulting period. Treating the LIPA transaction as a "Change of Control" also vested generous severance benefits in the CEO, with growth potential based on his age, highest salary level reached, highest bonus received, and length of service. Under the compensation plan, if he were to have retired in 1998, his annual retirement benefits would have been $895,000 - at a minimum.

Since LILCO was not highly popular with its customers and reportedly had the highest utility rates in the country, there was a loud outcry when the CEO's total compensation package was disclosed. His severance pay from LILCO as a result of the merger was put at $42 million. Public hearings were held at which the CEO failed to appear and pressure continued to mount. He was finally forced to resign from his new CEO position at MarketSpan Corp. One can't help but wonder what second thoughts LILCO's directors may have had about appropriate compensation and severance payments, if any.

OCCIDENTAL PETROLEUM Continuing CEO domination.

Much to our disappointment, this is the second time we have selected Occidental Petroleum as one of the five worst boards, When first cited in 1994, the board clearly reflected the personal preferences of Armand Hammer, its elderly, long-time CEO. We had hoped to see significant reforms under a new CEO. Unfortunately, a move toward a non-classified board will only be fully phased in by 2000. Also an age limit of 72 for directors has been adopted, which "grandfathers" four current members who are older than 80.

Today, almost seven years after the current CEO took over, the board still bears the strong imprint of CEO influence. Of 13 members, three are insiders; four are between ages 83 and 89. At least two directors should be viewed as beholden: the chairman of Donaldson, Lufkin & Jenrette, which does occasional business with Occidental, and a member of a law firm that received $454,000 in fees in 1987. The latter has served on the board for 41 years and has a consulting agreement with the company that will pay him a $25,000 annual fee for seven years after he ceases to serve as a director.

The board's inherent weakness is strongly apparent in its dealings with CEO compensation. In October 1997, the company entered into an amended, five-year agreement with the CEO, now 63. It attempts to bring the original contract "more in line with the corporation's compensation philosophy" - a philosophy that strongly emphasizes performance-based, incentive compensation rather than fixed salaries. By contrast, the 1991 agreement guaranteed the CEO a base salary of $1.9 million, a minimum annual bonus of 60 percent of base salary, a minimum of annual restricted stock grants equal to 101 percent of salary, plus an annual grant of at least 100,000 options. The board and the compensation committee took six years to conclude this was "an exception" to its general compensation philosophy. Its revision reduces base salary to $1.2 million, does not guarantee minimums to performance-based incentives, but retains generous retirement benefits.

For 1997, CEO compensation closely matched 1996 levels. The compensation committee concluded that while the options granted the CEO "in recent years have been at or near competitive levels, the aggregate value of his grants since becoming chairman was conservative." He therefore received a grant of 1 million shares, as against 200,000 shares in the previous year. Meanwhile, the performance graph shows the company consistently underperforming its peer group in each of the past five years. In only one of those years, 1994, did it slightly outperform the S&P 500 Index.

But perhaps the most provocative feature of the revision was the one-time payment made to compensate the CEO for benefits given up in the old agreement. He received a lump sum award of $95 million. Early in 1998, two shareholder derivative actions were launched, charging corporate waste, breach of fiduciary duty, and unjust enrichment, among other things. If today's board is an improvement over the board we criticized in 1994, it's not a dramatic one. Greater reforms may come as changes adopted are phased in, but for the moment it's still a spectacularly CEO-friendly board.

MICRON TECHNOLOGY Compliant composition

Here is a board totally dominated not by the company's CEO, but by its principal shareholder. John R. Simplot, 88, and J.R. Simplot Co. own some 15 percent of Micron's shares and leave no illusions as to whose board it is. It is a comparatively small board, consisting of eight members: One insider - the CEO - and four others, one of whom is the son of John Simplot, are or were officers of J.R. Simplot Co., making for a clear working majority. The remaining three members appear to be Boise businessmen involved in capital equipment, construction, automobile dealership, and land and cattle.

With this composition, it is almost impossible to avoid weighting the memberships of all key standing committees with "beholden" directors. Indeed, the audit committee consists of three members, one of whom is an ex-CEO of J.R. Simplot Co. The compensation committee is composed of John Simplot himself, a former senior vice president of J.R. Simplot Co., and an independent director.

The board is compensated in an unusual manner: Rather than an annual retainer, there's a $4,000 fee per meeting, plus 10,000 options upon joining the board, and 3,000 options per year thereafter, fully vested on the day of grant. No additional fees are paid for serving on any board committee. The board met 13 times in 1997, the audit committee twice, and the compensation committee four times. In September 1996, the committee and board approved a repricing of stock options previously awarded. In what is referred to as "an option exchange program," options with an exercise price of $80.25 were exchanged for options with an exercise price of $31.65. The exchange was "an acknowledgement by the board of the importance to the company of its employees and the importance to the employees of stock options." Options to purchase 3,649,309 shares were involved in this exchange.

The events underlying the option repricing are evident when Micron's performance graph is examined. For all five years, it outpaced both the S&P 500 and the S&P Electronics Index, but in 1995 it hit a spectacular peak: $2,548 of cumulative total return. The following year it dropped to $757, then rebounded to $1,480 in 1997. Without passing judgment on the wisdom of the repricing program, we note that the proxy statement on compensation committee interlocks and insider participation states that no members "were officers or employees of the company or any of its subsidiaries." This is technically correct, but suggests a greater degree of independence than actually exists. Whether intentionally or not, we could not tell from the proxy who serves as chairman of the compensation committee. Regardless of the source of board domination, Micron's directors are hardly a model of independence.

RELATED ARTICLE: Parameters of the Study

Our analysis was limited to pubic corporations of sufficient size to be listed on one or more of the major stock exchanges. Companies considered had at least $250 million in revenues.

* Criteria were established and board characteristics were assessed on the basis of published data, mainly annual reports, proxy statements, and a variety of directories.

* An important aspect of the time dimension needs to be emphasized. Today's boards are typically the end-products of a long history of director selection and structural evaluation. Many of the characteristics viewed unfavorably today were perfectly acceptable a few years ago.

* Except in one instance (see Pfizer), we intentionally omitted any corporations with which we are personally connected as directors or governance consultants.

RELATED ARTICLE: WORST

CENDANT: Kirk Shelton, 43, Vice Chairman of Cendant; Robert D, Kunisch, 56, Vice Chairman of Cendant; John D Snodgrass, 41, independent investor and ex-President, HFS; Robert T. Tucker, 56, Vice Chairman of Cendant; Stephen A. Greyser, 63, Chair Professor at the Harvard Business School; Carole G. Hankin, 55, Superintendent of Schools in Syosset, NY; Brian Mulroney, 58, ex-Prime Minister of Canada now partner in Ogilvy Renault law firm; Burton C, Perfit, 69, ex-Senior Vice President, Jack Eckerd Corp.; Robert W, Pittman, 44, President, America Online; E. John Rosenwold, Jr., 67, Vice Chairman, Bear Stearns; Christopher K. McLeod, 42, Vice Chairman of Cendant; Leonard S. Coleman, 49, President, National League of Professional Baseball Clubs; Robert E. Nederlander, 64, President, Nederlander Organization; T. Barnes Donnelley, 64, independent investor; Stanley M. Rumbough, Jr., 78, independent investor; Leonard Schutzman, 52, Chairman and CEO, Triad Capital Corp. of New York; Robert F. Smith, 65, ex-CEO, American Express Bank, Ltd,; Craig R, Stapleton, 52, President, Marsh & McLennan Real Estate Advisors; Walter A. Forbes, 55, Chairman of Cendant; Henry R. Silverman, 57, President and CEO of Cendant; Michael P. Monaco, 50, Vice Chairman and CEO; Stephen P. Holmes, 41, Vice Chairman of Cendant; James E. Buckman, 53, Senior Executive VP and General Counsel; Bartlett Burnap, 66, independent investor; Martin Edelman, 56, President, Chartwell, and partner of several Chartwell affiliates; Frederick Green, 59, President and Chairman, Golf Services; Anthony G, Petrello, 43, President and COO, Nabors Industries; Robert P, Rittereiser, 59, Chairman and CEO, Gruntal Financial LLC.

OXFORD HEALTH PLANS: Norman C. Payson, 50, CEO of Oxford; Stephen F. Wiggins, 40, ex-Chairman and CEO of Oxford; James B. Adamson, 49, Chairman, President and CEO, Flagstar Companies; Marcia J. Radosevich, 44, Chairman, President, and CEO, HPR; Robert B. Milligan, Jr., 47, Chairman, Wyndam Capital, LP: Fred F. Nazem, 56, President, Nazem; Benjamin F. Safirstein, 58, New York Regional VP and Medical Director of Oxford; Thomas A. Scully, 39, President, the Federation of American Health Systems; David Banderman, principal and co-founder of TPG; Jonathan J. Coslet, a TPG executive; James G, Coulter, principal ana co-founder of TPG

LONG ISLAND LIGHTING COMPANY: William J. Catocosinos, 67, Chairman and CEO of LILCO; John H. Talmage, 67, Partner in H. R. Talmage & Son Farm; Basil A, Paterson, 71, Partner in Meyer, Suozzi, English and Klein, PC; George Bugliarello, 70, Chancellor, Polytechnic University; George J. Sideris, 70, ex-Senior VP; A. James Barnes, 54, Dean, Indiana University School of Public and Environmental Affairs: Richard L. Schmalensee, 53, Director, Massachusetts institute of Technology Center for Energy and Environmental Policy Research; Renso L. Caporali, 64, Senior VP, Engineering aria Business Development, of Raytheon Co.; Peter O. Crisp, 64, Chairman, Venrock; Katherine D. Orteg, 62, ex-Treasurer of the U.S.; Vicki L. Fuller, 39, Senior VP, Alliance Capital Management Corporation; James T. Flynn, 63, President and COO of ULCO.

MICRON TECHNOLOGY: Steven R. Appleton, 37, Chairman, CEO, and President; James W, Bagley, 58, CEO, Lain Research Corp.; Jerry M. Hess, 59, Chairman and CEO, J. M. Hess Construction Co.; Robert A. Lothrop, 71, ex-Senior VP, J.R. Simplot Co.; Thomas T. Nicholson, 61, President, Mountain View Equipment; Don J. Simplot, 62, member of Office of the Chairman and Corporate VP of J.R, Simplot; John R, Simplot, 88, ex-Chairman, J.R. Simplot; Gordon C. Smith, 68, Secretary and Treasurer, SSI Management Corp. and ex-President and CEO, J.R. Simplot.

OCCIDENTAL PETROLEUM: Edward P. Djerejian, 59, Director, James A. Baker Ill Institute for Public Policy at Rice University; Ray R, Irani, 63, Chairman and CEO of Occidental; Dale R, Laurance, 52, President and Senior Operating Officer of Occidental; Irvin W. Maloney, 67, Chairman and CEO, Dataproducts Corp.; Aziz D. Syriani, 55, President and COO, The Olayan Group of Cos.; John S. Chalsty, 64, Chairman of Donaldson, Lufkin & Jenrette; Senator Albert Gore, Sr., 89, ex-Executive VP of Occidental, ex-U.S. Senator; Arthur Groman, 83, Senior Partner of Mitchell, Silberberg & Knupp law firm; J. Roger Hirl, 66, Executive VP of Occidental and CEO of Occidental Chemical Corporation; John W. Kluge, 83, Chairman and President, Metromedia Co.; George O. Nolley, 82, ranching and investments; Rodolfo Segovia, 61, President and CEO. Polipropileno del Caribe, S.A.; Rosemary Tomich, 60, Owner, Hope Cattle Co, and A.S. Tomich Construction Company, and Chairman and CEO, Livestock Clearing.

Source: board member listings reflect most recent proxy statements.

RELATED ARTICLE: The Hallmarks of an Effective Board

* Board size: Keep it relatively small - more than a handful of members (four or five), but less than a crowd (15 or more).

* Outsider/insider ratio: Limit yourself to one or two inside directors. Former CEOs, serving for a prescribed period, count as insiders.

* Potential conflicts of interest: Minimize the number of active investment bankers, legal counsel, commercial bankers, consultants, and interlocking directorships.

* Narrow special-interest groups: Minimize investors representing blocks of shares, relational investors, family members.

* Demographic balance: Maintain an appropriate mix of backgrounds, skills, and experience; recognition of capable women and minorities; relevant geographic dispersion.

* Stock ownership by directors: Encourage by means of fees or special stock grants.

* Committee structure: Establish a clear definition of responsibilities and functions of standing committees (Audit, Compensation, and Nominating).

* Form a "corporate governance" or "independent director" committee: Establish processes for CEO, board, and director performance evaluations.

The above characteristics applied in reverse typically represent needless "baggage" and curtail operating effectiveness. Cumulatively, such baggage can add up to a flawed or ineffective board.

RELATED ARTICLE: BEST

DANA: Benjamin F. Bailar, 63, Dean of Rice Business School; Edmund M. Carpenter, 56, Managing Director, Clayton, Dubilier & Rice; Eric Clark, 63, ex-Chairman, BICC Cables; Glen H. Hiner, 63, Chairman and CEO, Owens Corning; Joseph M. Magliochetti, 55, President of Dana; Marilyn R. Marks, 45, Chairman and CEO, Dorsey Trailers; Southwood J. Morcott, 59, Chairman and CEO of Dana; Richard B. Priory, 51, Chairman and CEO, Duke Energy; John D. Stevenson, 68, Counsel to Smith. Lyons, Torrance, Stevenson & Mayer; Theodore B. Sumner, Jr., 69, ex-Chairman, First Union National Bank of Charlotte.

SUMMIT BANCORP: John G. Collins, 61, Vice Chairman of Summit; Anne E. Estabrook, 53, Owner of Elberon Development Co.; George L. Miles, 56, President and CEO of WQED, Pittsburgh; Raymond Silverstein, 70, ex-Principal of Alloy, Silverstein Shapiro, Adams, Mulford & Co., accountants; Orin R, Smith, 62, Chairman and CEO, Engelhard Corp.; Thomas H. Hamilton, 67, Chairman. President, and CEO of Collective Bank; William R. Miller, 70, ex-Senior Vice President, Lenox China; James C. Brady, Jr., 62, Partner, Mill House Associates; T.J. Dermot Dunphy, 65, Chairman and CEO, Sealed Air Corp.; Fred G. Harvey, 69, Vice President, E & E Corp.; Francis J. Mertz, 60, President, Fairleigh Dickinson U., T. Joseph Semrod, 61, Chairman and CEO of Summit; Douglas G. Watson, 53, President and CEO, Novartis Corp.; S. Rodgers Benjamin, 71; Chairman and CEO, Flemington Fur Company; Robert L. Boyle, 62, Publisher Emeritus, The Dispatch; Robert G. Cox, 57, President of Summit; Elinor J, Ferdon, 61, President, Girl Scouts of U.S.A.; John R. Howell, 64, Vice Chairman of Summit: Joseph M. Tabak, 65, President and CEO, JPC Enterprises.

MONSANTO:. Philip Leder, 63, Chairman, Genetics Department, Harvard Medical School; John E. Robson, 67, ex-CEO, G.D. Searle & Co.; William D. Ruckelshaus, 65, Chairman, Browning Ferris; Michael Kantor, 58, Partner, Mayer, Brown & Platt, ex-Secretary of Commerce; Gwendolyn S. King, 57, ex-Senior Vice President, PECO Energy Company; John S. Reed, 58, Chairman, Citicorp and Citibank; Robert B, Shapiro, 59, Chairman and CEO of Monsanto; Robert M. Heyssel, 69, ex-President, Johns Hopkins Health System; Jacobus F. M. Peters, 66, ex-Chairman and CEO, AEGON, N.V.

PFIZER: W. Don Cornwell, 50, CEO, Granite Broadcasting; Henry A. McKinnell, 55, Executive V.P. of Pfizer; Dana G, Mead, 62, Chairman and CEO, Tenneco; Ruth J. Simmons, 52, President, Smith College; William C. Steere, 61, Chairman and CEO of Pfizer; Michael S. Brown, 57, Professor, Univ. of Texas Southwestern Medical Center; Constance J. Horner, 56, Guest Scholar, Brookings Institution; Thomas G. Labrecque, 59, President, Chase Manhattan Bank; Jean-Paul Valles, 61, Chairman, Minerals Technologies; M, Anthony Burns, 55, Chairman, President, and CEO, Ryder System; George B. Harvey, 67, ex-CEO, Pitney Bowes; Stanley O. Ikenberry, 63, President, American Council on Education; Harry P. Kamen, 64, Chairman and CEO," Metropolitan Life; John F, Niblack, 59, Executive V.P, of Pfizer.

PRAXAIR: Alejandro Achaval, 65, Chairman and CEO, IMEXTRADE S.A; John A. Clerico, 56, Executive Vice President and CFO of Praxair; C. Fred Fetterolf, 69, ex-President of Alcoa; Dale F. Frey, 65, ex-Vice President and Treasurer, General Electric; Claire W. Gargalli, 55, Vice Chairman, Diversified Search Cos.; Edgar G. Hotard, 54, President of Praxair; Ronald L, Kuehn, Jr., 62, Chairman, President, and CEO of Sonat; Raymond W, LeBoeuf, 51, Chairman and CEO, PPG Industries; H, William Lichtenberger, 62, Chairman and CEO of Praxair; Benjamin F. Payton, 65, President, Tuskegee U.; G. Jackson Ratcliffe, Jr., 61, CEO, Hubbell; H, Mitchell Watson, Jr., 60, President, Sigma Group of America.

Source: Board member listings reflect most recent proxy statements.

Formerly the CEO of F.&M. Schaefer (1972-1977), Robert W. Lear is chairman of CE's Advisory Board. He also teaches at Columbia Business School, where he is an executive-in-residence. With more than 50 years of corporate board experience, he has served as a director of a variety of corporate boards and continues to hold directorships with several firms.

Boris Yavitz is dean emeritus of Columbia Business School. He works as a governance consultant and has served on the boards of the Federal Reserve Bank of New York, J.C. Penney Co., Sterling Drug, Barnes Group, Crane Co., St. Regis Corp., Medusa Corp., and Israel Discount Bank of New York. He was also chairman of NACD's 1994 Blue Ribbon Commission on Corporate Governance. Both tear and Yavitz are principals of Lear, Yavitz & Associates.