I think we all know that the board is supposed to have a majority of independent directors (at least in public companies) and to challenge the executives running the organization. That is what “oversight” means.
But the board is also supposed to work with those same executives, sharing their insights and experience to complement that of the CEO and his team.
Often, and I have seen this many times, the board finds it difficult to exercise what one might call professional skepticism in listening to the management team. As they look at the CEO and CFO, they see people just like them – one of their class, just perhaps a little younger.
Yet, professional skepticism is needed – and it is their legal obligation.
Recently, a good friend mine, Diane Frankle of Kaye Scholer, touched on this as she analyzed a case involving Yahoo! and the compensation of an executive… Continue reading “The obligation of the board to challenge management”