On the Boards

By Stephen Koepp

Serving on boards of directors at some companies was once a pleasant, undemanding hobby for business biggies. The directorships offered short hours, fine camaraderie, handsome pay and hardly any tough decisions. "Sitting on a board as little as 15 years ago was almost like going to a men's club," says Arjay Miller, former president of Ford and the current director of nine companies. "The chairman put his buddies on the board."

These days the director's job has become much tougher. Reason: stockholders and Government regulators, notably the Securities and Exchange Commission, have begun taking directors to task for failing to perform their duties properly. In a landmark decision last week, the Delaware Supreme Court ruled that ten former directors of Trans Union, a railroad-equipment leasing company, were financially liable for selling their company too hastily in 1980. A lawsuit filed on behalf of 10,000 shareholders claimed that the directors spent just two hours considering a purchase offer of $55 a share, or $688 million in total, while the company may have been worth as much as $70 a share. The ten directors could be held personally liable for the difference. In another stunning decision last December, the Federal Deposit Insurance Corporation fired nine directors at Chicago's Continental Illinois Bank, holding them partly to blame for the institution's near collapse in September.

Forced into a sharper awareness of their responsibilities, board members are beginning to take a more active role in corporate affairs. Directors at United Technologies in November conducted a probe that cleared Chairman Harry Gray of charges that he had bugged or wiretapped a former president of the company. The 15 directors of Union Carbide in December found themselves coping with the biggest industrial accident in history, the gas leak in Bhopal, India, that killed at least 2,500 people. The directors, meeting in an emergency four-hour session at Manhattan's Helmsley Palace Hotel, appointed four members to monitor the situation. Said Chairman Warren Anderson: "They were calm, concerned and interested in not ducking responsibility."

Directors are also spending more time on the job. The typical board member of a large corporation puts in 196 hours a year, up 40% from six years ago, according to the executive-recruiting firm Korn/Ferry International. As a result, executives are less inclined to pile up multiple directorships just for the sake of prestige. Sidney J. Weinberg, a legendary financier of the 1950s, once served on 31 boards. By comparison, his son John L. Weinberg, chairman of Wall Street's Goldman, Sachs & Co., holds only six director's posts. The pay remains lucrative. The consulting firm Towers, Perrin, Forster & Crosby reports that the median annual fee among large companies is $18,000, plus $700 per board meeting and expenses. The most prestigious director's posts pay much more in return for a heavy commitment of time. The director who serves as chairman of Du Pont's finance committee attends at least three dozen meetings a year. The fee: $147,000.

In particular demand for boards are women and minority-group members. Juanita Kreps, Secretary of Commerce under President Carter, serves on ten boards, including American Telephone & Telegraph and Chrysler. Leon H. Sullivan, the pastor of Philadelphia's Zion Baptist Church, serves on three corporate boards: General Motors, Mellon Bank and the Philadelphia Saving Fund Society.

While most directors willingly accept their additional responsibilities, they can be forgiven if they sometimes long for the days of the easygoing men's club. Wrote Robert Mueller, chairman of the Arthur D. Little consulting firm, in his book Behind the Boardroom Door: "At board meetings the one unmatched asset is the ability to yawn with your mouth closed."

With reporting by Adam Zagorin/New York