The regulatory oversight framework is broken. The SEC failed to regulate credit default swaps, loosened broker-dealer leverage restrictions at just the wrong time and failed to regulate dark-debt driven hedge fund activities. The Federal Reserve failed to impose reserve requirements on syndicators of collateralized loan or credit obligations. All that will change now.

Importantly, in its entire seventy-five year history, there has never been a visiting committee appointed to review the SEC. We need a committee of non-bureaucrats, non-industry groups, non-politicians, analogous to the visiting committees that accredit and review university excellence.

Meanwhile, there is going to be greater skepticism and scrutiny of board of director oversight than ever before, as a ripple effect of failed companies, regulatory tightening and the push for reform. In some ways, that is not a bad thing, because lax practices still exist, such as the increasing trend of front-loading board meetings with management presentations so detailed and so numerous as to numb the outside directors’ ability to assess strategy and examine any one problem with requisite focus. The ratio of minutes of director discussion to minutes of slide presentations has greatly diminished, as companies’ ability to mine and marshal presentation data has risen parabolically.

That process within the boardroom—that dynamic—needs to be managed by the board itself.

What’s Going On?

Despite greater intensity of director effort, the core challenge for directors trying to fulfill their roles in providing vision and vigilance for public companies remains the same: they passionately desire and dutifully need to know “what is going on” in the important areas of company strategy and management execution in order to do their director jobs well.

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