Corporate Director: No More a Soft Touch
IT'S hardly surprising that NCR Corporation took out large advertisements last week urging people to call the 19 board members of mighty American Telephone & Telegraph Company - who were individually identified, along with their telephone numbers - to complain about AT&T's hostile takeover effort against NCR. A decade or so ago, shareholders might have been asked to call the home phones of AT&T management - the corporate president, or chief executive officer. Today, corporate boards have assumed more responsibility in determining company plans - reflecting pressure from shareholders to increase stock values.
``Corporate boards have become more assertive, more independent and more serious about their responsibilities,'' says Thomas Neff, president of SpencerStuart, an international executive search firm. ``Boards are also working harder than ever, both in terms of time and projects, because of the more substantive nature of the modern board,'' Mr. Neff says. SpencerStuart has just released a new report on trends within 100 multibillion-dollar US corporations that comprise what the firm calls its SpencerStuart Board Index (SSBI). The report, which is based on proxy data from the years 1980 and 1990, identifies the major changes now occurring in boards at such diverse companies as Boeing, DuPont, Eastman Kodak, Citicorp, General Motors, Merrill Lynch, Raytheon, Texaco, and United Technologies.
According to Mr. Neff, boards ``are smaller and more action-oriented than was the case a decade ago.''
Thus, he says, many corporations are better prepared than ever to handle the economic and technological changes confronting US industry during the next decade. But individual board members find their workload growing, as boards must deal with complicated decisions that were once left to the front office.
Mr. Neff's observations are shared by academic observers. ``It is very tough now to get people to join corporate boards,'' says Robert Hamada, professor of finance at the University of Chicago's Graduate School of Business.
Professor Hamada speaks from personal experience, himself serving on several corporate boards. ``There is a lot of litigation now, and board work is more time-consuming than ever. [Bank boards], for example, are required to meet once a month, whether the board meeting is needed or not.''
And although public interest groups and other activists often prod boards to diversify composition - to include more women, minorities, and independent directors not linked to management - corporate board work is not for everyone, Hamada says. ``A prominent person who can't read an income statement or a balance sheet is absolutely lost'' in board work, he says.
Boards, seeking to become leaner and more responsive, are creating subcommittees on which board members serve, the report shows. Among other findings:
Ten years ago the median board size for the 100 companies on the SSBI was 16. Today, it is 14. Mr. Neff predicts the typical board will have only 12 members by the year 2000.
Boards continue to diversify. Women and minorities are increasingly sought out, says Neff, although the most pronounced change is in the mix of outside (non-management) directors to inside directors. Currently, outside directors have a 3-to-1 ratio or higher over inside directors at 51 of the 100 companies.
Board terms are increasingly set at three years and staggered - to ensure board continuity in case of takeover attempts. The 1990 data shows that almost half the boards on the index now have three-year terms; in 1980, only nine boards did; most had one-year terms.
Boards increasingly have retirement plans for directors; 72 of the 100 companies now have such plans, compared to a dozen in 1980. Moreover, the trend is toward paying part of the retainers for service in company stock, a practice favored by Neff, who says it ties directors to the success of their companies.