It calls on corporate directors to redefine their roles with management, strengthen their independence, and improve practices and processes in their companies' key audit, compensation, and governance committees. The report focuses on best practices covering legal, regulatory, and stock exchange requirements and precedents established by the influential Delaware courts.   

"Recent settlements at WorldCom and Enron, which required directors to dip into their own pockets to satisfy irate investors, have made directors increasingly anxious to define their proper corporate role," said Dr. Carolyn Kay Brancato, Research Director, Global Corporate Governance Research Center. "This new report gives directors what they need to know about crucial developments on the legislative and regulatory front, and shows how to determine what are ‘best’ corporate governance practices and how to implement them."       

The study also examines basic legal requirements, as well as "management" skills that boards can and should adopt.  

"To ensure maximum board effectiveness, boards need to shift their entire emphasis," said Brancato. "They can no longer be just advisors who wait for management to come to them. Their new role requires that they provide active oversight of the company’s business to minimize corporate risk and promote creation of shareholder value."  

The report answers a broad array of questions being asked by directors, including how to spot and deal with accounting issue "red flags," which may indicate fraud, how to make compensation consultants accountable to the board, why the board needs to oversee a robust compliance program, what governance processes should be implemented to help restore public confidence in companies and capital markets, and why strong governance programs can reduce corporate risk.

New emphasis on strategy and risk

While most studies examine issues regulation-by-regulation, this report organizes information according to key topics: overall fiduciary responsibilities, the role of the board versus the role of management, the requirements for each committee and how boards go about assessing their own effectiveness. An expanded section deals with the issue of strategy and risk and shows boards how to examine their drivers of performance and evaluate their risks in such a way that everyone throughout the company understands the process.                    

The Conference Board's Corporate Governance Research Center will follow up materials in this report with a working group on Enterprise Risk Management and Corporate Governance and a research project on the role of the board in strategy and risk.      

The report spells out evolving director fiduciary requirements involving "care," "loyalty" and more recently the "duty of good faith" to determine what best practices are. It argues that directors must increasingly stay on top of new and evolving trends in corporate governance in order to satisfy their duties and protect themselves from legal liability.  

Access the report at http://www.conference-board.org/