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AOL/Time Warner and WorldCom:Corporate Governance and the Effects of the Deregulation Paradox
Unformatted Document Text:  25 3. Director Quality: Boards should include a minimum of two independent directors with experience in the company’s core business. Ideally, one of the board members should be a CEO of an equivalent size company. In addition, fully employed directors should not be involved with more than three boards, retirees no more than six. 4. Board Activism: Boards should periodically meet without management present. The goal should be to monitor CEO and senior management performance. The board should be prepared to react to potential problem areas when such issues emerge. 5. Director Commitment: Board members should be required to devote a substantial amount of time to the corporation (i.e. meeting more regularly). Absentee directors should be replaced; their replacement should be the responsibility of the Board not the CEO. All necessary, relevant and accurate information should be provided to all board members and ample time must be given to exhaust all issues at meetings. 6. Board Evaluation: There should be a proper mechanism for evaluating board members. The current practice where board members grade their own performance is no longer acceptable. Instead, directors should be subjected to the review of shareholders and regulators using a proper evaluation method. In the end, corporate governance is not about power but about ensuring that decisions are made effectively. That is why reforms of power relationships will not by themselves create more smoothly run organizations. According to Pound (2002), the first step to improving corporate governance is rethinking the role of directors. In most companies, the role of the governance system is only to put the right managers in place, monitor their progress, and replace them when they fail. Neither the board nor shareholders offer opinions on strategy or policy unless managers are clearly failing. What is needed is a system in which senior managers and the board truly collaborate on decisions and both regularly seek the input of shareholders. Siebens (2002) concurs and suggests that corporate boards must take into account the interests of all stakeholders, and demonstrate “a tendency toward a decent, fair and reliable direction….” (p. 110)

Authors: Gershon, Richard. and Alhassan, Abubakar.
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3. Director Quality: Boards should include a minimum of two independent directors
with experience in the company’s core business. Ideally, one of the board members
should be a CEO of an equivalent size company. In addition, fully employed directors
should not be involved with more than three boards, retirees no more than six.

4. Board Activism: Boards should periodically meet without management present.
The goal should be to monitor CEO and senior management performance. The board
should be prepared to react to potential problem areas when such issues emerge.

5. Director Commitment: Board members should be required to devote a substantial
amount of time to the corporation (i.e. meeting more regularly). Absentee directors
should be replaced; their replacement should be the responsibility of the Board not
the CEO. All necessary, relevant and accurate information should be provided to
all board members and ample time must be given to exhaust all issues at meetings.

6. Board Evaluation: There should be a proper mechanism for evaluating board members.
The current practice where board members grade their own performance is no longer
acceptable. Instead, directors should be subjected to the review of shareholders and
regulators using a proper evaluation method.
In the end, corporate governance is not about power but about ensuring that
decisions are made effectively. That is why reforms of power relationships will not by
themselves create more smoothly run organizations. According to Pound (2002), the first
step to improving corporate governance is rethinking the role of directors. In most
companies, the role of the governance system is only to put the right managers in place,
monitor their progress, and replace them when they fail. Neither the board nor shareholders
offer opinions on strategy or policy unless managers are clearly failing. What is needed is
a system in which senior managers and the board truly collaborate on decisions and both
regularly seek the input of shareholders. Siebens (2002) concurs and suggests that corporate
boards must take into account the interests of all stakeholders, and demonstrate “a tendency
toward a decent, fair and reliable direction….” (p. 110)


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