Personal Reflections on the State of the Board: What's right and what's wrong with the current system of corporate oversight: Interviews with Reginald Jones, Walter Wriston, and Victor Palmieri

Kristies, James


The Board as an Auditor of Management


When one thinks of U.S. business leaders, particularly those who came to the fore in the 1970s, Reginald H. Jones certainly rates high on any list. Indeed, a U.S. News & World Report survey in 1979 of some 1,400 American leaders voted Jones, then General Electric Co.'s Chairman and CEO, the country's most influential businessman. Two years later, Fortune magazine asked the CEOs of the top 500 corporations to name the best CEO on the list. "Jones's victory was resounding: one-third of the respondents picked him," according to Fortune. Jones retired from GE in April 1981, capping a career that began when he joined the company's business training course in 1939. Now 69, he serves as a Director of Bethlehem Steel Corp., Federated Department Stores, General Signal Corp., and several other corporate and pro bono boards.

Directors & Boards: Did you partake in the debate during the 1970s on the role of the board - such as the issues of greater accountability and independence of boards?

Reginald H. Jones: Indirectly, yes. We had a very active task force within the Business Roundtable on the subject of corporate governance. We ran a seminar where many of the academics who were specialists in this area got together and prepared a report. Then a group of us from the Business Roundtable met with the representatives of that academic committee, debated a range of issues, and came out with a statement entitled, "The Role and Composition of the Board of Directors of the Large Publicly Owned Corporation: Statement of the Business Roundtable." We went into basic considerations such as corporate legitimacy and corporate power of the board, functions of the board of directors, and the organization and composition of the board. It was a thoughtful piece of work. We distributed it in January 1978 - about the time that the New York Stock Exchange was requiring all its listed companies to have audit committees.

D&B: What is your personal concept of the role of the board of directors?

Jones: I have always said that the most precious asset of any corporation is its public franchise. I feel very strongly that our large publicly held corporations, on whose boards so many of us serve, are viewed in the United States today as quasi-public institutions. The corporation is going to exist only so long as the public wishes it to exist. And it is in its role as a supporter and an auditor of management - in determining the accountability of management for performance in the interest of the shareowners, the public, and other stakeholders - that the board is performing its most essential function. If it is to accomplish that function expeditiously and satisfactorily, the board's relationship with management has to be one that is not primarily adversarial, but rather is primarily supportive.

D&B: In your past writings and speeches, you placed great emphasis on the concept of innovation and corporate self-renewal. How can the board help foster this process?

Jones: It's very important that the board be apprised of the strategic planning of the corporation and be periodically updated on the plan. We make a point at General Electric of revealing our strategic plan to the full board annually, and then we make in-depth presentations to the board on certain aspects of the plan as the year wears on. A board should have an opportunity not just to listen to the plans that are presented, but also to react to them. It is in this way that the board can assure itself of the constant renewal of the enterprise.

D&B: General Electric is also one of only a handful of companies that has a science and technology committee of the board.

Jones: This is a very important way in which we can keep the board up-to-date on our efforts at innovation. The committee looks at major efforts we are making in certain fields of research, at new products we're considering, and new businesses we're developing.

D&B: Was that committee in existence when you became chairman?

Jones: Yes. My predecessor, Fred Borch, had done a major job of reorganizing the board, based on some studies that were made in the late 1960s, and at that time created the various committees that we have today. I was delighted with my inheritance.

  • This document was created from the article, "Personal Reflections on the State of the Board: What's right and what's wrong with the current system of corporate oversight: Interviews with Reginald Jones, Walter Wriston, and Victor Palmieri" by Walter B. Wriston for the Fall 1986 edition of "Directors and Boards." The original article is located in MS134.003.026.00030.
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