Corporate stresses putting board members on their toes

By , Business correspondent of The Christian Science Monitor

There's nothing like recession, corporate takeovers, and major bank failures to push corporate boards toward more detailed participation in company decisions.

American companies are heading for ''a period of board activism,'' according to the latest annual Korn/Ferry International survey of 1,000 American corporate boards.

''For years, corporate boards have been considered kind of rubber stamps,'' comments John Schlueter, chairman of board services at the executive recruiting firm. But shareholder pressures, more complex management issues, and poor financial results at many corporations have sharpened board room attentiveness, he explains.

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This is partly backed up, the Korn/Ferry survey shows, by increased interest in recruiting chief executives for the board who come from outside companies and who have strong managerial and operations experience. Meanwhile, interest is lessening in those who offer professional services to the company, such as lawyers and bankers. Conflict of interest is one reason behind that trend.

But other signs point toward more active boards. The number and strength of board committees is on the rise. And board members now clock an average of 123 hours per year on board matters, compared with 89 hours five years ago.

Eugene Zuckert, a longtime lawyer and former secretary of the Air Force, says he's seen a ''big difference'' during his past 16 years on the board of the Martin Marietta Corporation.

''The board has become more questioning in a friendly sort of way,'' he says. ''You don't sit there and say you distrust management, but you become a lot more inquiring and ask a lot of tough questions.'' Mr. Zuckert believes it was fear of lawsuits from shareholders a number of years ago that prompted ''a herd instinct that boards ought to be a lot more vigilant.''

He believes audit committees - whose job is to keep finances and management fraud-free - ''have real muscle now.'' At Martin Marietta ''every committee is stronger,'' he says. ''Through our committee structure, the board is a lot better informed than it used to be.'' Zuckert adds that attendance at board meetings has increased, and so has time spent on board affairs.

Last fall, when Martin Marietta was fighting its way through the famed takeover battle involving Bendix, Allied, and United Technologies, the board met 16 times in a period of 30 days, Zuckert recalls. ''It was a crisis situation, obviously,'' he says, and one in which the board ''turned over a lot of new ground.''

The merger tussle forced the board to fine-tune its strategy on ''where we are going'' and determine that ''we want to be an independent company,'' Zuckert says. He points out, however, that the board and management are still in a ''gestation process'' in figuring out the kinds of businesses to hang on to and those it should drop.

''The substantial increase in mergers and acquisitions has created an environment where (boards) have to be more involved,'' comments David McLaughlin , general manager of the Hay Group, a management consulting and research firm. He adds that the business environment has become more complex, prompting boards to lend more of a guiding hand in strategic planning, financial goal setting, and some day-to-day operations. He ticks off a list of concerns now facing many boards: plant closings, golden parachutes, takeovers, and world banking problems.

Korn/Ferry's Mr. Schlueter says certain industries, such as autos, steel, and electronics and information, have boards ''in transition.'' Government regulation, foreign competition, and ''companies popping in and out of the computer business like never before'' have prompted more decisionmaking in the board room.

As demands on directors' time have increased, so has their compensation. In the last 10 years, total average payment to directors has more than doubled, to learning possibilities that candidates look for in serving on boards, and not necessarily monetary benefits.

Nevertheless, one reason compensation has been on the rise is not only to reward more time spent on board activities, but to try to give some companies a leg up in attracting competent candidates - more difficult now.

''A really well run company with an active board, and a reputation for that, probably stands a better chance than other companies (of finding suitable directors),'' says Jeremy Bacon, a senior research associate at the Conference Board. ''But when you are really looking for just the right person for your board, you may be looking for someone who is not available.''

Mr. Bacon says executives are more cautious about boards they will serve on. They are concerned about liability and that their future board may not have access to needed information, he explains. Also, ''certain candidates - like attorneys and so on - aren't as acceptable to companies as they used to be.''

Schlueter adds that retirement is taking directors out of the field and that the increased demands on those left is causing some of them to drop board positions they no longer have time for. The survey advises that ''company boards will be wise to stockpile rising executive stars'' to fill future slots.

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