How Corporate Governance Changed in 25 Years

Boards still prefer active CEOs as directors. The difference now is that boards are finding it difficult to recruit active CEOs for director spots. More than 50 percent of CEOs in the S&P 500 serve on no outside boards. Only 26 percent of new directors in 2010 are active CEOs, vs. 53 percent a decade ago. Boards are having to look elsewhere for talent and are recruiting more retired CEOs, more divisional presidents, and more functional leaders. Boards also say they are searching for women and minorities, who remain insufficiently represented.

via How Corporate Governance Changed From 1986 to 2010 – BusinessWeek.

In my experience, the biggest change has been the fading influence of CEOs on the choice of directors. Whereas twenty-five years ago, many hand-picked their own monitors. Today, they typically only have veto power. Still, even with all the changes noted by Spencer Stuart, directors still seem to identify much more closely with management than with shareowners. They have also been very slow to recognize it doesn’t take a CEO or former CEO to make an excellent board member.

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