The Independent Director and the Investor: New Directions

If capitalism came to an end in 1996, its future historians would no doubt write that, at the level of governance, its last five years were its most tumultuous. We are living in a time of unprecedented upheaval in, or reform of, corporate governance, depending on one’s point of view. Around the western world, corporate boards are becoming much more vigorous in exercising their responsibilities. In some well-publicised cases, this has led to open conflict with senior management. Such conflict reflects the increased anxiety many boards are feeling about their companies’ stewardship and performance. Reflecting on just one country’s recent experience will make the point. Over the past few years, American Express, Citicorp, Digital, General Motors, Goodyear, IBM, Kodak, Sears and Westinghouse have each been subjected to major, independent director-driven upheaval. The directors of these and numerous other corporations have overridden senior executives to demand large-scale reforms, frequently involving a change of CEO. Usually behind such moves has been the increasing restiveness of activist shareholders. It has been said, with some justification, that we have moved from entrepreneurial capitalism to managerial capitalism and now to shareholder capitalism.