There is a disease out there. It is attacking American business in many board rooms. And it is contributing to business crisis and even failure. It is insidious in its approach and deadly in its result. It must be guarded against with vigor and rooted out quickly whenever it shows its awful presence.

The disease is form. We see it everywhere in life, and often without serious consequences. But in the board room it can be deadly.

In our modern-day, post-industrial society, the board has emerged as the representative of the shareholders, an institutional body charged with holding management accountable for their performance and the performance of the shareholders' company. The board is vested with the power to manage the corporation. While this power is usually delegated, it is nevertheless a reserved power of the board and means that the board is ultimately responsible for the performance of the company in its charge.

Each director can come up with measures of performance, qualitative and quantitative, that are acceptable for a company in his or her charge. For my purpose, acceptable performance is maximizing company results and shareholder value in good times and minimizing adverse consequences in bad times. Without this two-sided test, we really cannot deal with the business reality of economic or business sector downturn, which is when a board is tested to its maximum.

You know you have joined a board that has the form disease when the management controls the meetings and the meetings seem pro forma in their content and result.

You know your board has the form disease when it lacks curiosity and fails to adjust to changing business realities, sometimes by just increasing the frequency of the meetings.

And you know the disease is robust when the board is unable to take aggressive action to address sustained sub-par performance by the management and the company.

In our economy, the board is part of a system, and if it is infected with the form disease, the whole system is at risk of failing.

Does your board have an independent chairman--not the CEO--who sets the agenda for meetings after consultation with other independent board members?

Does your board get briefed regularly on the industry in which your business operates and on the performance of your competition?

Is your board made up principally of outsiders of sufficient scope and experience to realistically assess, challenge, and contribute to the performance of the company overall?

Do your board members attend every scheduled meeting with rare exception?

Does your board employ scenario management or some other technique to anticipate the future and referee and prioritize the allocation of resources among the different units of the business?

Does your board vary the frequency of its meetings to adjust to the rhythm of the business?

Has your board made written grants of authority to the management of your company so that their ability to act without seeking board approval is clear?

If you answer any of these questions "no," then you may have the awful form disease.

Cure it with substance! Change those no's to yes's. Here are some practical reasons why.

The CEO has inherent authority to act within the authority granted by the board. But the board is a deliberative body, and thus benefits from the inquiry and experience of all its members. It just makes sense for the board to be involved when management faces critical issues.

In my opinion, nothing is more difficult than calling the change or turn, if you will, in the business of a company. Too often managements insist on staying the course in the face of increasingly adverse information. This leads to losses and delays the strong action needed for recovery. More importantly, it is not just that time is money, it is that money is time; and when a company is in crisis, when it has to survive the short term to get to the long tern, it needs all the time (money) it can get.

On the other hand, when a company is on a roll, it needs to judiciously press its bets. It has to be comforting to the management and its shareholders that directors of diverse experience, who are well-tested, are deciding on the risk profile for the company in an informed way.

My prescription to cure form with substance involves an assessment first of the way the corporate governance system is operating. My firm and I take a look at the communication among the parties to governance and search for the good and the bad. We look for conformity to standard business practice, asking: ·

• Does the board comprise an appropriate mix of attitude, talent, and experience to provide the rigor and judgment necessary to assure shareholder value will be maximized? ·
• Is the board organized in a way that allows it to address the key issues (whether of recurring or nonrecurring nature) facing a company? ·
• Is the management team that is in place capable of operating the business and competing in the marketplace? ·
• Does the management have a system in place that provides timely, accurate, and relevant information with which to lead the business? After all, if you can't measure it, you can't manage it. ·
• If the systems are in place, then are they being applied? If the information is there and the management is capable, then sustained good decision-making is expected. ·
• What has been the company's actual track record, and how does it compare to its competitors? ·
• Is the system balanced, or does it tend to be strong executive and weak board or weak executive and strong board? ·
• How can the system be improved?

Some analysis is involved in this process, but it is largely based on in-depth interviews of the board members and company management.

Let me be clear. I am not advocating micro-management. I am advocating that the relationship between a board and company management is one of cooperation, not competition. Management should relish its meetings with the board and take pleasure in keeping the board fully informed because of the added value to the company from the increased quality of decision making that results from inquiring, experienced minds.

So there you have it: substance over form. A winner for everyone involved. In my experience, it has produced the best outcomes possible time after time, whether the business is growing or contracting, is well capitalized or under capitalized, in an exciting business or stable one. And best outcome is that for which we, effective board members who take the job seriously, must strive.

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