Martin Lipton on the Role of the Board of Directors

Abstract

In general, the function of the board of directors is both to help define the strategy of the firm, and to monitor its implementation. However, to balance these sometimes conflicting roles, a collegiate board culture is necessary. An overemphasis on director independence could detract from the board’s ability to function effectively. Maintaining a balance between the roles of monitor and coach, and creating an ethical corporate culture, enables the board to discharge its other duties efficiently, including CEO compensation, succession planning and investor relations. Looking forward, the nature of the board structure continues to evolve, and the rising influence of institutional investors will likely lead to the dismantling of some traditional takeover defences such as staggered boards and poison pills.