The 21st Century Board: What is an Effective Board?

Abstract

In this paper, we investigate the effectiveness of the board of directors and discuss some of the loopholes related to corporate boards in the 20th century as highlighted by many researchers. We use Enron Corporation as an underlying case as it symbolizes the biggest corporate fraud and corruption scandal that occurred in the past decade. This scandal has revealed many challenges that corporate boards face today. More relevantly, we provide several recommendations to improve the culture and effectiveness of modern corporate boards: an increase in board independence and board diversity, provide better access to information, and being more socially responsible. In essence, these recommended features of a 21st century board could help to prevent the same blunders that were made by Enron’s board members, which were detrimental to shareholders value.