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Putting the corporate board to work
BOOK NOTES ; AND REVIEWSPutting the Corporate Board to Work
by Courtney C. Brown MacMillan, 1976 The reviewer, John D. Donnell, is a member o f the business administration faculty in the Graduate School o f Business, Indiana University, and is former editor-in-chief o f the American Business Law Journal.
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This little book is a thoughtful response by a long-time participant in and observer of large American corporations to some of the current criticism being directed at the boards of directors of these institutions. Courtney C. Brown, Dean Emeritus of the Columbia University School of Business, believes that most corporate boards have already changed in response to this criticism, but not enough. His principal proposal to give corporate boards more influence and independence is to establish a clear separation between the functions of the board, including its chairman, and those of the chief executive of the firm. He suggests that the board be headed by a full-time, or essentially full-time, chairman who would have no responsibility for the day-to-day operations; ultimate responsibility for operations would be held by the president as CEO. The major responsibilities of the board, led by the chairman and excluding all operating officers but the CEO, would be to establish broad policies and procedures for the corporation, to review performance and appraise personnel, and to take initiating responsibility for dealing with corporate so-
cial responsibility issues. How the board and the chairman are to carry out these responsibilities is not described in much detail. Dean Brown proposes what he calls "consensus management." The board would have "initiating responsibility for the relationship of the company to the society outside the corporation." As examples of concerns in this area, he mentions environmental and conservation problems, c o m m u n i t y tensions and the "social political posture of the corporation in matters that reach b e y o n d conformity to the minimum requirements of law." He would leave to operating management the initiating responsibility for recommendations for the commitment of corporate resources, the operating budget and proposals for administrative structures and procedures, including audit and control systems. He would give initiating responsibility to either "management or the board, depending on circumstances," for dealing with conflicts of interest within the company and between t h e company and outside interests, compensation of personnel, and arranging for management development and orderly succession. Brown proposes that the chairman "serve as the principal bridge to portray the company's activities to the public at large," but he does not explicitly state whether the chairman would direct any corporate p e r s o n n e l even the public relations department. Presumably he would expect the chairman and the board to utilize the regular staff personnel of the corporation for whatever assistance
BUSINESS HORIZONS
they need in developing their ideas, since he clearly disapproves of Mr. Justice Arthur J. Goldberg's proposal to furnish the board with a small staff not answerable to the operating organization. His admonition to the board to "avoid participating--i.e., interfering-in operations after purposes and programs have been discussed and adopted" suggests that he visualizes the chairman functioning in external relations as a policy maker rather than as a negotiator. These proposals for changing the functions of the board of directors are certainly not as controversial as those recently put forward by Ralph Nader's Corporate Accountability Research Group or law professor Christopher D. Stone. However, eliminating, as Brown proposes, the practice of combining the function of chairman of the board with that of CEO and that of having a substantial proportion of "inside directors" would clearly make it easier for the board to perform effectively the review and evaluation functions that all who have studied boards of directors agree they should perform. Having a full-time chairman without operating responsibilities would also enhance the board's policy-making or policy-approving functions. However, Brown does not address the issue of control of the proxy machinery in the hands of management. He approves the recent trend toward recruiting directors from wider circles and would like to see it extended so long as directors do not become primarily representatives of special interests. But even if, as he proposes, the board itself rather than the CEO controls nominations, this is likely to do little to allay the criticism that the board is a self-perpetuating clique likely to be coopted by, rather than independent of, operating management. If our largest corporations are to avoid having the structure of their boards prescribed by Congress, government agencies and judges, it would appear that there is an urgent need to institute changes such as those proposed by Dean Brown. It is hoped that others with
FEBRUARY 1977
firsthand acquaintance with corporate life will add their proposals to the debate and that corporations will undertake to experiment with them.
Project Management: How to Make it Work by Charles C. Martin AMACOM, 1976 The reviewer, William G. Ryan, is a faculty member in administrative and behavioral studies at Indiana University.
Although innumerable books and articles have been written about project management during the past fourteen years, the topic remains elusive, ill-defined and inadequately discussed. Accordingly, it would appear that the time is ripe for a definitive work. Therefore, both students and practitioners looked forward to the publication of Project Management: How to Make it Work, the author, Charles C. Martin, being an experienced manager of many projects. In this reviewer's opinion, the book unfortunately does not live up to expectations, nor does it fulfill the promise of the subtitle. What could have gone wrong? Martin begins with the bold statement: "Project management is a highly effective management tool. Let us see what a project is." This non sequitur sets the tone of the book. Somewhat as a debater who might seek victory b y inducing his opponent into accepting his assumptions, Martin seems to build his book on a questionable foundation by presenting his unsupported convictions about project management as facts. But, to this reviewer, they are not. It is a fact that there are projects. It is a fact that some companies, though not many, have adopted a project organization. It is true, but trivial, that some projects have been well managed and others have been poorly managed. But it does not follow that there is a special variety o f management called project management, which is a "highly effective management
93
by Courtney C. Brown MacMillan, 1976 The reviewer, John D. Donnell, is a member o f the business administration faculty in the Graduate School o f Business, Indiana University, and is former editor-in-chief o f the American Business Law Journal.
92
This little book is a thoughtful response by a long-time participant in and observer of large American corporations to some of the current criticism being directed at the boards of directors of these institutions. Courtney C. Brown, Dean Emeritus of the Columbia University School of Business, believes that most corporate boards have already changed in response to this criticism, but not enough. His principal proposal to give corporate boards more influence and independence is to establish a clear separation between the functions of the board, including its chairman, and those of the chief executive of the firm. He suggests that the board be headed by a full-time, or essentially full-time, chairman who would have no responsibility for the day-to-day operations; ultimate responsibility for operations would be held by the president as CEO. The major responsibilities of the board, led by the chairman and excluding all operating officers but the CEO, would be to establish broad policies and procedures for the corporation, to review performance and appraise personnel, and to take initiating responsibility for dealing with corporate so-
cial responsibility issues. How the board and the chairman are to carry out these responsibilities is not described in much detail. Dean Brown proposes what he calls "consensus management." The board would have "initiating responsibility for the relationship of the company to the society outside the corporation." As examples of concerns in this area, he mentions environmental and conservation problems, c o m m u n i t y tensions and the "social political posture of the corporation in matters that reach b e y o n d conformity to the minimum requirements of law." He would leave to operating management the initiating responsibility for recommendations for the commitment of corporate resources, the operating budget and proposals for administrative structures and procedures, including audit and control systems. He would give initiating responsibility to either "management or the board, depending on circumstances," for dealing with conflicts of interest within the company and between t h e company and outside interests, compensation of personnel, and arranging for management development and orderly succession. Brown proposes that the chairman "serve as the principal bridge to portray the company's activities to the public at large," but he does not explicitly state whether the chairman would direct any corporate p e r s o n n e l even the public relations department. Presumably he would expect the chairman and the board to utilize the regular staff personnel of the corporation for whatever assistance
BUSINESS HORIZONS
they need in developing their ideas, since he clearly disapproves of Mr. Justice Arthur J. Goldberg's proposal to furnish the board with a small staff not answerable to the operating organization. His admonition to the board to "avoid participating--i.e., interfering-in operations after purposes and programs have been discussed and adopted" suggests that he visualizes the chairman functioning in external relations as a policy maker rather than as a negotiator. These proposals for changing the functions of the board of directors are certainly not as controversial as those recently put forward by Ralph Nader's Corporate Accountability Research Group or law professor Christopher D. Stone. However, eliminating, as Brown proposes, the practice of combining the function of chairman of the board with that of CEO and that of having a substantial proportion of "inside directors" would clearly make it easier for the board to perform effectively the review and evaluation functions that all who have studied boards of directors agree they should perform. Having a full-time chairman without operating responsibilities would also enhance the board's policy-making or policy-approving functions. However, Brown does not address the issue of control of the proxy machinery in the hands of management. He approves the recent trend toward recruiting directors from wider circles and would like to see it extended so long as directors do not become primarily representatives of special interests. But even if, as he proposes, the board itself rather than the CEO controls nominations, this is likely to do little to allay the criticism that the board is a self-perpetuating clique likely to be coopted by, rather than independent of, operating management. If our largest corporations are to avoid having the structure of their boards prescribed by Congress, government agencies and judges, it would appear that there is an urgent need to institute changes such as those proposed by Dean Brown. It is hoped that others with
FEBRUARY 1977
firsthand acquaintance with corporate life will add their proposals to the debate and that corporations will undertake to experiment with them.
Project Management: How to Make it Work by Charles C. Martin AMACOM, 1976 The reviewer, William G. Ryan, is a faculty member in administrative and behavioral studies at Indiana University.
Although innumerable books and articles have been written about project management during the past fourteen years, the topic remains elusive, ill-defined and inadequately discussed. Accordingly, it would appear that the time is ripe for a definitive work. Therefore, both students and practitioners looked forward to the publication of Project Management: How to Make it Work, the author, Charles C. Martin, being an experienced manager of many projects. In this reviewer's opinion, the book unfortunately does not live up to expectations, nor does it fulfill the promise of the subtitle. What could have gone wrong? Martin begins with the bold statement: "Project management is a highly effective management tool. Let us see what a project is." This non sequitur sets the tone of the book. Somewhat as a debater who might seek victory b y inducing his opponent into accepting his assumptions, Martin seems to build his book on a questionable foundation by presenting his unsupported convictions about project management as facts. But, to this reviewer, they are not. It is a fact that there are projects. It is a fact that some companies, though not many, have adopted a project organization. It is true, but trivial, that some projects have been well managed and others have been poorly managed. But it does not follow that there is a special variety o f management called project management, which is a "highly effective management
93