D&B: But not the perfect board member for maybe a more activist governance process?

Palmieri: It does seem to me that CEOs, more than anyone else at the table, tend to react reflexively to hard questions from other board members as essentially suggesting disloyalty.

D&B: Do you believe that the chairman of the board should not be the CEO?

Palmieri: Yes.

D&B: Is it realistic to think that this separation might become widespread some day?

Palmieri: Not very. CEOs will not be quick to give up the role of chairman, and boards will not be quick to insist on it for all the reasons we discussed.

D&B: Are information systems to the board adequate?

Palmieri: I think most companies are willing to give their directors meaningful information, but I'm not sure most boards want to take the time and trouble to understand it - particularly in the area of accounting information, where many directors surprisingly do not understand the financial statements of the company. They do not understand the auditing process. They do not understand the conventions which govern carrying values, write-downs, non-cash charges, tax credits, and so many of the items which creep into the bottom line but which, in effect, distort or tend to distort a realistic assessment of the company's operations.

D&B: Aren't some of the early warning signs of major failure contained in the financial statements?

Palmieri: They certainly should be. But then again there's a problem because I think the statistics show that something like 40-50 percent of the companies that enter bankruptcy have unqualified financials in the year before their entry into chapter proceedings. So it's not at all dear that the auditors are themselves sensitive to fundamental issues of economic viability. There ought to be a good many more qualified opinions than we see.