The Business Week Rating Process for Boards (2002)
Here's what we look for
in evaluating boards:
No more than two directors should be current or former company executives, and
none should do business with the company or accept consulting or legal fees from
it. The audit, compensation, and nominating committees should be made up solely
of independent directors.
Each director should own an equity stake in the company worth at least $150,000,
excluding stock options. The only exception: new board members who haven't had
time to build a large stake.
Boards should include at least one independent director with experience in the
company's core business and one who is the CEO of an equivalent-size company.
Fully employed directors should sit on no more than four boards, retirees no
more than seven. Each director should attend at least 75% of all meetings.
Boards should meet regularly without management present and should evaluate their
own performance every year. Audit committees should meet at least four times
a year. Board should be frugal on executive pay, decisive when planning a CEO
succession, diligent in oversight responsibilities, and quick to act when trouble
HOW WE RATED THEM: The BusinessWeek ratings were based on a survey
of 51 governance experts conducted for BusinessWeek by Harris Interactive,
a proxy analysis by BusinessWeek of companies identified by survey
respondents as having the "most effective" and "least effective" boards,
and an analysis of overall board performance by BusinessWeek editors. The proxy analysis
grades each company on the extent to which it meets 16 governance standards in
the areas of independence, accountability, and quality. Performance measures
include the board's handling of strategy, oversight, and executive pay. Data
were provided by the Investor Responsibility Research Center, the Corporate Library,
and Institutional Shareholder Services.