Opinion: How to Fix Corporate Boards

Yet it doesn't have to be this way. Boards are responsible at every company for hiring and firing the CEO. They are also the only interface the shareholders have with the running of a business. Every year (except in the case of staggered boards), shareholders have the ability to vote "for" or "against" each director being re-elected to the job. Sadly, many shareholders don't even bother to vote during these elections. For those who do, they overwhelmingly support the incumbent board, as re-election percentages are usually on the order of 90% to 95%.

If shareholders truly were to become engaged with the voting process, the result would be a much more responsive board of directors on their toes to represent their constituents and not just be in the back pocket of the CEO who appointed them.

Tougher questions would be asked at board meetings, and potential excessive risk-taking would be challenged earlier on. If only boards had been doing their jobs over the last six years instead of cheerleading and rubber-stamping, our economy wouldn't be facing such dire circumstances.

Sarbanes-Oxley Not the Answer

After the last bubble, when formerly billion dollar entities such as Enron, World Com, and Adelphi were shown to be shams, the U.S. government swooped in to improve corporate governance and overall financial and operational fiduciary oversight. The result was the Sarbanes-Oxley law, which required CEOs and CFOs to personally attest to the veracity of financial statements, prevented auditors from also consulting with businesses and supposedly improved the quality of boards of directors.