That was then ... this is now: what progress has been made in corporate governance over the past three decades? To find out, we asked several Directors & Boards authors to revisit their classic articles.

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That was then ... this is now: what progress has been made in corporate governance over the past three decades? To find out, we asked several Directors & Boards authors to revisit their classic articles.

Improvement, yes, but dangers lurk

Ed. Note: Roderick M. Hills was chairman of the Securities and Exchange Commission when DIRECTORS & BOARDS was founded in 1976. He has been a leading advocate of effective corporate governance throughout a distinguished career in the public and private sectors. By 1994, when he authored "Boards Can Work!" for the journal, he had served as a director of 10 publicly traded companies, several of which were imperiled by financial and leadership crises. The article was a powerful summation of the state of governance, drawing upon his quarter century of board service both before and after his tenure at the SEC. Today he continues to serve on boards and has founded the Hills Program on Governance, an initiative of the Washington, D.C.-based Center for Strategic and International Studies that is a resource for executives, academics, and government officials seeking information on sound governance practices, particularly in emerging markets (www.hillsgovernance.org).

IN MY 1994 ARTICLE I asked:

* What can directors do that they are not doing?

* How can we get directors to do what they should?

* Are there enough independent directors?

* Who is to say whether they are or are not independent?

I opined: "There has been an enormous improvement in the staffing and operation of corporate boards in the 17 years since independent audit committees were required by the New York Stock Exchange." And I warned: "The danger, as I see it, is the temptation to use the proxy season rather than the board of directors to cure perceived mismanagement."

In place of proposals that would guarantee more proxy fights, I argued that "We could use ... a better process for putting and keeping directors in place [that] are sufficiently independent of management to protect the long-term interests of shareholders," and added that "Directors must be certain that the board's selection process is designed to provide that [needed] quality of independence.

"The remaining question," I noted, is "who is to say whether they are or are not independent" and that "a form of automatic monitoring is needed."

I am satisfied, even pleased, with what I said then. The Enron-era cases notwithstanding, I continue to believe that there has been a constant improvement in the governance of our publicly traded companies. I certainly believe that the there was then as there is now a need for a better process for putting and keeping directors in place that are sufficiently independent of management along with a better standard to decide whether the requisite independence exists. I also continue to believe that there is danger in the fact th...

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