Creating a New Culture: Balancing Director Oversight and Managing Entrepreneurship

“Corporate governance has entered a new era, but we have only begun to make the changes required to ensure ethical corporate behavior. The process is best viewed as an evolution, not a revolution. It is up to directors to ask the questions that will ensure U.S. business remains the most powerful economic force of our time.”   From the 2004 Goizueta Director’s Institute Summary of Proceedings-Executive Summary.

The 2004 Goizueta Directors Institute, presented by UPS, was held on May 26^th and 27^th at Emory University’s Goizueta Business School. Now it its second year, the Goizueta Director’s Institute has created a unique forum for board members and officers of publicly traded companies. More than 40 participants, representing over 80 boards, attended the session, which is designed to produce superior discussion among directors and well-known corporate governance thought leaders. Topics included shareholder involvement, audit committee responsibilities, litigation risk, and executive compensation. Discussions among panelists and attendees yielded both practical advice that attendees could take back to their respective companies, as well as forward looking analysis designed to influence corporate governance policy on multiple levels.

The following articles provide a glimpse into the conference proceedings, exploring the critical corporate governance issues officers and directors face in positioning their companies in the new regulatory environment. Atlanta-based UPS Corporation sponsored the second annual summit. According to UPS Chair and CEO Mike Eskew, “The most pressing issues facing corporations are the same things that face us as individuals—trust, values, openness. Laws and regulations cannot substitute for a strong, ethical culture that encourages board members and management to ask the right questions and do the right thing.”

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While the general public may find it difficult to follow the technical details in the recent rounds of corporate fraud, most people have strong feelings about executive compensation. And they are not positive. Executive compensation is the “lightning rod” issue of our time, members of the Goizueta Directors Institute (GDI) agreed at its recent annual meeting. These opinion leaders believe the some of the compensation excesses of the 1990s are still being played out, and that a new model is emerging that will better calibrate executive compensation with well-defined performance measures.

Have the new Sarbanes-Oxley regulations slowed entrepreneurship and innovation? How does a company create and maintain an ethical culture? Who is representing the shareholders?   These and other questions lay at the heart of the issues that companies and boards are confronting as they implement new governance practices or revamp current procedures. An excerpt from the Goizueta Director’s Institute 2004 Summary of Proceedings provides a view of the broad concepts and conclusions discussed at the Institute.