Contents

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Chapter 1 Oversight by Groups of Board Members . . . . . . . . . . . . 1
Chapter 2 Group Influences on Individual Behavior . . . . . . . . . . 13
Chapter 3 Group Cognitive Limitations . . . . . . . . . . . . . . . . . . . . 29
Chapter 4 Group Polarization . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Chapter 5 Groupthink . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Chapter 6 Group Habitual Routines . . . . . . . . . . . . . . . . . . . . . . 61
Chapter 7 Group Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Chapter 8 Power, Coalition Formation, and Politicking . . . . . . . . 85
Chapter 9 Group Productivity Losses . . . . . . . . . . . . . . . . . . . . . 103
Chapter 10 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
 Preface
At first glance, our author team might look a little unusual: a junior
organizational behavior professor working with a senior management
accounting professor located at a different university. But we did not
think it was unusual at all. We are both interested in corporate gover-
nance in general and the functioning of boards of directors in particular.
For the purpose of studying this topic, our knowledge sets are comple-
mentary. The functioning of boards depends crucially on how the board
members interact with each other. An organizational behavior profes-
sor who specializes in applying social psychology theory to the business
world can bring a lot of relevant knowledge to the study of boards. So too
can a management accounting professor. Management accounting pro-
fessors study how managers use information for such purposes as choos-
ing and evaluating business strategies, finding and analyzing problems,
and evaluating managers’ performances and allocating incentives. These
are exactly the kinds of tasks on which board members spend much, if
not most, of their time. So our knowledge sets fit together nicely. What
we could do together on this project was much better than either of us
could have done alone.
In writing this book, we drew on knowledge from multiple sources.
We reviewed the research literature on the functioning of groups. While
almost none of that knowledge has been developed directly from stud-
ies of boards of directors, some of the knowledge that has been devel-
oped is clearly applicable to the boardroom setting. We also reviewed the
corporate governance literature. While very little of that literature draws
directly on findings in social psychology, some of it does discuss problems
that board members have in working together. It provides advice and
examples that we were able to link back to the research literature. To sup-
plement the theoretical literature, we participated in and observed board
meetings in multiple companies. Seeing boards in action was invalu-
able in helping us to develop the depth of knowledge needed to write
this book. We also interviewed many board members. These interviews
x PREFACE

enabled us to gather anecdotes and insights from a wide range of different

industries, companies, and board settings. We proceed from the point of
view that boards of directors are fundamentally groups, not simple aggre-
gations of individuals. Observations, interviews, and social-psychological
theory are, therefore, all essential to understanding how boards work.
We hope and intend that this book provides a nice blend of theory
and practice, rigor and relevance. It is not the final word on this subject
by any means, because there is so much that is yet to be learned. But we
believe that this book provides an accurate, concise summary of what is
known about this important topic at this point in time. We hope that
many who read the book will be alarmed at the implications and will
take steps to ameliorate the problems faced every day by boards and the
corporations they serve.
We would be remiss if we did not thankfully acknowledge the many
board members who allowed us to interview them or to observe their
board meetings. They must remain anonymous, but it is in these meet-
ings that we gathered much of the wisdom and illustrative examples that
are contained in this book. We want to acknowledge the helpful sugges-
tions of Kees de Kluyver, Fei Du, Mike Giordano, and Jay Lorsch. And
we are indebted to Mason Carpenter, our editor, who has been support-
ive and helpful from the start.
 CHAPTER 1

Oversight by Groups
of Board Members
In January 2001, CEO of Tyco International Dennis Kozlowski
received an employment contract from his board. Like many
CEOs, Kozlowski had served most of his tenure (almost 8 years)
without one. However, by 2000 he was asking for a contract. More
specifically, he was asking for one that included a clause stating
that conviction of a felony was not grounds for termination unless
it was materially injurious to the company and if “three quarters of
the board then voted to oust him.”1
Although many CEOs have negotiated contracts with gener-
ous terms, it was unique to include a felony as something that
would not amount to “just cause” for termination. But neither
this nor the strange timing of the contract request seemed to catch
board members’ attention. It is now speculated that the contract
was desired only after Kozlowski knew he was under investigation
for sales tax evasion.2
Four years later, Kozlowski was convicted of misappropriation of
hundreds of millions of dollars in corporate funds from Tyco, falsi-
fying business records, and violating business law. He was sentenced
to up to 25 years in prison. Tyco, an inspiring tale of free market
business success and once the most admired company in America,
was for a good portion of the decade a name synonymous with the
most egregious examples of corporate greed and fraud.3
How could this happen? How could a board of directors approve
a contract that removed its power to terminate a CEO even in the
case of criminal activity? How could the board of a growing and
reputable global conglomerate become so disconnected from its
governance role and exhibit such seemingly bad judgment?
2 BLIND SPOTS, BIASES, AND OTHER PATHOLOGIES IN THE BOARDROOM

The aim of this book is to shine a light on the dynamics and group pro-
cesses of boards of directors and to describe, particularly, how these dynam-
ics can cause perhaps nearly inevitable failures. These failures will occur
even in boards that are seemingly well constructed—for example, of the
right size and containing a good mix of highly qualified board members.
The spate of scandals, performance problems, and corporate failures
of recent years have caused increasing attention to be focused on boards
of directors. This is as it should be. Corporate governance is critically
important, and boards of directors are at the heart of the corporate gov-
ernance process. But the subject of board dynamics and particularly what
happens inside the boardroom is almost never explored, largely because
the actual board deliberations are seen to be highly sensitive and con-
fidential. But understanding group processes is fundamental to under-
standing why board failures like Tyco happen. In the following pages,
we describe how even “good” boards can develop blind spots, decision-
making biases, and other pathologies precisely because boards are—and
must operate as—groups.
Corporate governance encompasses the entire set of mechanisms
and processes by which business corporations are directed and man-
aged. Good corporate governance helps ensure achievement of long-term
objectives, satisfying shareholders and other stakeholders (e.g., creditors,
employees, customers, suppliers, local community), while complying
with legal and regulatory requirements. It helps corporations create eco-
nomic value and enhances investor confidence, which is essential for the
effective functioning of a market economy.
While there is no single, well-defined, agreed-upon model of good cor-
porate governance, everyone agrees that effectively functioning boards of
directors are essential. As observed in one publication of the National Asso-
ciation of Corporate Directors (NACD), boards are “the central mecha-
nism for oversight and accountability in our corporate governance system.”4
They are generally considered the front line of defense. As the duly elected
representatives of the shareholders, boards have both the ultimate decision-
making authority in the corporation and the ultimate accountability.
Boards are charged with governing the organization through broad
policies, objectives, and oversight. Among other things, they play impor-
tant roles in ensuring that the corporation complies with all laws and
 OVERSIGHT BY GROUPS OF BOARD MEMBERS 3

regulations; in selecting, appointing, and evaluating the CEO; and in

ensuring that resources are acquired and managed effectively and effi-
ciently to guarantee the continuity and success of the organization. The
ideal is for boards to challenge managers to strive for high performance,
to introduce them to both new business opportunities and contacts, to
coach them as necessary, and to hold them accountable. To make this
happen, dialogues with management should be open and constructive.
Boards should be proactive so as to avoid crises before they happen.
Resulting decisions should sometimes be bold, involving significant risk
taking, but always carefully considered and implemented.
Because of the central role played by boards of directors, major cor-
porate governance failures, which can be errors of either commission or
omission, must be, at least in part, failures of boards of directors. Inves-
tors, potential investors, regulators, and indeed all corporate stakeholders
are right to be concerned with how boards of directors perform. We have
seen that ideal board behavior and performance do not always happen.
Much has been written about board failures, and the identified causes
are many. Some boards are too large; others are too small. Some boards
have the wrong composition. They contain members who are not inde-
pendent of management, who lack requisite knowledge, or who have per-
sonal conflicts of interest. There are some “bad apple” directors who miss
meetings, who are unprepared, inattentive, or both when they do attend,
who do not understand the duties and responsibilities of a board member,
who are self-serving, or who have the wrong personalities. Some board
members are intimidated by management and are too weak to speak up,
and conversely, others try to dominate discussions and decision making.
Even with the right composition of members, boards operate with some
difficult constraints. The required tasks and legal responsibilities are daunt-
ingly broad and often ambiguous. For example, it is a challenge for board
members to maintain the appropriate level of engagement, thereby provid-
ing effective oversight without stepping over the “micromanaging” line to
meddle in affairs that are best left to management. And boards must rely
heavily on management for information, they have little or no direct staff
support, and they meet infrequently for only short periods of time.
But these problems of board size, composition, information, tim-
ing, and the overall difficulty of the job are not at all what this book
4 BLIND SPOTS, BIASES, AND OTHER PATHOLOGIES IN THE BOARDROOM

is about. In this book we show how seemingly ideal boards, those with
“best practice” size, composition, and structure, with enough staff sup-
port, and with enough time to consider issues carefully, can still fail to
provide good governance, simply because they fall victim to some prob-
lems inherent in all groups. That is, all groups of individuals who are try-
ing to work together for the common good are subject to some destructive
group dynamics that cause blind spots, biases, and other decision-making
pathologies. Recognizing these problems is a first necessary step. Only
then can steps be taken to avoid the problems, or at least to minimize
their consequences.

The Power of Groups

In theory, corporate oversight could be provided by an individual, perhaps
just a single oversight executive who has authority over the CEO. But even
if corporate oversight by a single individual were legally permissible—
which it is not—it would not be optimal.
Providing corporate oversight by a group of individuals has many
advantages. First, it is not wise to grant supreme power to a single indi-
vidual because it is too easy for that power to be misused. Second, the
aggregate knowledge, skills, insights, and business contacts that a board
group can apply to the issues at hand are far greater than those possessed
by any individual. Third, the combining of ideas in an oversight group
tends to minimize the biases and prejudices that might be present in any
individual. Unchecked, these biases could be seriously detrimental. And,
importantly, where they function well, the value provided by a group is
greater than the sum of the values contributed by each of its individual
members. Board members who are functioning as a team inform, stimu-
late, and challenge each other.

Corporate Governance Ideals

What does ideal corporate governance, and board composition and
behavior, look like? No general agreement exists, and hard empirical evi-
dence is sparse. But advice abounds. Corporate governance and, more
specific for our purposes, board “best practices” have been identified in
 OVERSIGHT BY GROUPS OF BOARD MEMBERS 5

many articles and books and also by activist investors, including pension
funds like California Public Employees’ Retirement System and some
private investment firms, such as Pershing Square Capital Management.
Many ideal board characteristics, and even some sets of best practices
intended as largely complete, are also revealed in the evaluation crite-
ria used by a number of outside agencies that rate corporations’ gover-
nance structures and processes. The most prominent of these agencies
are RiskMetrics Group (RMG), which acquired Institutional Shareholder
Services (ISS), The Corporate Library (TCL), Audit Integrity, and Gov-
ernance Metrics International (GMI). Several of these agencies use fairly
lengthy lists of best practices to make their ratings. For example, RMG’s
Corporate Governance Quotient (CGQ) ratings assess firms’ governance
in eight areas: (a) board structure and composition, (b) audit issues,
(c) charter and bylaw provisions, (d) laws of the state of incorporation,
(e) executive and director compensation, (f) qualitative factors, (g) director
and officer stock ownership, and (h) director education. ISS uses a total of
64 variables both individually and sometimes in combination to develop
the CGQ rating. On the other hand, TCL’s rating is more subjective and
considers just a few factors that are considered to be key indicators.
Research has shown that the differences between some of the ratings
are huge; a 2008 study done at Stanford University found that the corre-
lations between the various formal ratings are close to zero.5 To illustrate
the disparity with specifics, recently several major corporations, including
General Electric, Pfizer, and Wyeth, were given perfect “100” scores by
ISS but given “D” ratings by TCL. Some other companies, including
Home Depot, Lockheed Martin, 3M, and Xerox, were given perfect “10”
scores by GMI but rated as “F” by TCL.
This same Stanford study also tested the ability of the governance
ratings to predict important outcomes such as performance, accounting
restatements, and shareholder suits. All the ratings failed this test. The
findings revealed all the ratings had weak (i.e., economically trivial) to
nonexistent predictive power, except that RMG’s ratings had negative
predictive power. That is, the firms rated by RMG as being well governed
actually had poorer performance indicators—more class action lawsuits,
lower return on assets, and lower stock price performance.
6 BLIND SPOTS, BIASES, AND OTHER PATHOLOGIES IN THE BOARDROOM

These ratings provide numerical illustrations of how far we are from

having complete agreement as to what constitutes best corporate gover-
nance practice or even an understanding of what leads to effectiveness.
Still, there are some micro areas of agreement that provide elements of
what will be, eventually, a better developed theory of how to provide
effective corporate governance. Some of these areas of agreement relate
directly to boardroom practices.

Generally Agreed-Upon Ideals

In this section, taking from all or most of these sources of corporate gov-
ernance advice, we summarize what we consider to be the most salient,
noncontroversial prescriptions regarding board composition, structure,
and behavior. We take these prescriptions as a starting point for our dis-
cussions. Our presentation here is brief because discussing and analyzing
these prescriptions is not our focus. Our main thesis in this book is that
even if all these so-called best practices are followed, boards still face some
inherent blind spots, biases, and other pathologies that can cause failure.
These are among the boardroom characteristics about which there
seems to be general agreement:

1. Shareholder rights. The corporate governance structure and pro-

cesses should protect and facilitate the exercise of shareholder rights.
Shareholders should have the right to be sufficiently informed
about, and sometimes to participate in or at least express their views
about, key corporate decisions. Governance structures and practices
should be transparent to shareholders. Insider trading and abusive
self-interested behavior should be prohibited. Minority shareholders
should be protected from abusive actions of controlling sharehold-
ers. Antitakeover devices should not be used to shield management
and the board from accountability.
2. Board member behavior. Board members should be well informed
and act in good faith, with due diligence and care, in the best inter-
est of the company and the shareholders. While directors must nec-
essarily rely on management for information about the company,
board members must ensure that they have the requisite information
 OVERSIGHT BY GROUPS OF BOARD MEMBERS 7

to develop their own sense of priorities and views. They must devote
both the time and attention needed to fulfill their responsibilities.
3. Board size. The board of directors should not be too small or too
large.6 Although three is a practical minimum board size, in most
cases a board of three members is too small. This is because commit-
tees must have three outside board members. Thus, if the entire board
includes only three members, every board member would have to be
independent, and every board member would have to serve on every
board committee, which could mean quite a heavy workload.
Large boards have the potential advantage of including members
with varied industry, technical, and leadership expertise, which
opens up the possibility for more business opportunities. In addi-
tion, the additional resources spread the workload over more people
and potentially allow for more detailed discussions of issues.
There is evidence, however, that firms with relatively small boards
perform better than firms with very large boards.7 The larger the
board, the more unwieldy it becomes to involve each board member
actively in the discussions. Some experts suggest that the optimal
board size is perhaps in the range of seven to nine. But the optimal
size certainly varies with the size and complexity of the company.
For example, because of the need to include some industry experts, a
large conglomerate probably needs a larger board than does a smaller
firm in a single line of business.
4. Board composition. Many characteristics of the individual board
members are important. The rule that a majority of the board mem-
bers must be independent of management and the company is now
institutionalized in various government and stock market regula-
tions. In addition, some board members should have specialized
expertise, which includes knowledge of the industry and manage-
ment functions that are important to the company, such as finance,
marketing, and logistics. More generally, the board members should
be energetic and attentive, traits that are perhaps more likely in
directors who are younger and less busy.
5. Board structure. Some discussions and decision recommendations
should be delegated to committees. Committees tend to comprise
8 BLIND SPOTS, BIASES, AND OTHER PATHOLOGIES IN THE BOARDROOM

the board members who have the most relevant expertise. Since
committees are smaller in size than the full board group, it is easier
for all committee members to participate in detailed discussions of
issues. Specialized issues can be researched and vetted in the com-
mittees, and the committees’ recommendations can be approved
by the full board. At a minimum, three critical board committees
should be established: nominating/governance, audit, and compen-
sation. Other committees can be established, as necessary. The com-
mittees should meet regularly and on an additional as-needed basis.
To ensure that the full board is properly informed, communication
processes between committees and the full board must be effective.
6. Board leadership. Management should not have control over the
board’s agenda. One easy way to ensure that the board controls its
own agenda is to have an independent board chair; that is, the roles of
CEO and chair can be separated. But some boards maintain control
of the agenda by having it set by a “lead outside director.” The board
should hold regular executive sessions (i.e., without management
present), though meeting management is also important. The board
should be properly engaged. This requires effective leadership from a
leader who uses orderly processes to allow each director to contribute
his or her unique talents and perspectives to the issue at hand.
7. Board focus. The work of the board should be mostly future ori-
ented. It is tempting for boards to spend a great deal of time on
administrative formalities or focused on reviews of financial state-
ments and other reports of what has happened in the past. These
are the easy governance tasks. But boards should spend most of their
time focused on the future. That is where they add value.
8. Board evaluations. The board should evaluate itself regularly. Improve-
ments should be made as necessary. Board membership, structures,
and processes should evolve with the needs of the company.

This list of good-practice characteristics is certainly not complete. It

does, however, provide a sense of the types of areas that we will not be
discussing further in this book. We want to proceed by assuming that the
board is well constructed and organized so that we can focus on the group
decision-making pathologies that can occur in the boardroom anyway.
 OVERSIGHT BY GROUPS OF BOARD MEMBERS 9

It should be noted that some individual characteristics are not impor-

tant, at least by themselves; significant differences are and will always be
found among boards that are functioning effectively. For example, boards
can function effectively with many different operating styles. Some appar-
ently effective boards are quite formal, with meetings in an elaborate
boardroom, every board member in business attire, and strict adherence
to rules and procedures. Other boards are at the opposite extreme, with
meetings held in a more casual setting, board members dressed “com-
fortably,” and discussions more chaotic. Some board meetings are long;
others are short. Some board meetings are quite congenial, and others are
laden with tension. By themselves these factors are not primary indicators
of board success or failure.

The Dark Side of Groups

We now turn to our primary point of interest for this book. Even when
most or all the best practices such as those previously described are fol-
lowed, problems can occur. These problems occur simply because virtu-
ally all groups of individuals placed in decision-making roles, even those
trying to work together toward a common goal, have an inherently dark
side. Natural group tendencies can destroy or obscure the talents even of
highly intelligent, energetic, and well-intended individuals, causing collec-
tive blind spots, biases, and inefficiencies that can render boards ineffective.
Group biases can cause boards to misperceive risks and fail to see
problems where they really exist. Behavioral anchors, social norms, and
sometimes inherent natural suppression of dissent can cause groups
to tend toward conformity in perceptions and attitudes, even when
those perceptions and attitudes are wrong. Groups are prone to fram-
ing decisions in ways that none of the good decision makers on the
board would individually. And groups often waste time on unimport-
ant details, both when more important activities await and when meet-
ing time is severely limited. These are the subjects of the chapters that
follow. No group is immune to these destructive patterns, which makes
understanding them critically important from a governance standpoint.
These patterns can impair board effectiveness even when all the right
pieces (and people) are in place.
10 BLIND SPOTS, BIASES, AND OTHER PATHOLOGIES IN THE BOARDROOM

As a suggestive example, Enron likely was subject to one or more of the

destructive, hidden group blind spots or biases. On paper, Enron’s board
was seemingly near ideal. It was composed of sophisticated, distinguished
industry leaders, as well as widely recognized experts in finance, derivatives,
and accounting, each of whom had significant ownership stakes. The board
seemed to have an effective structure and ideal board and committee charters
and codes of conduct. The board met regularly, the board members were well
briefed, the meetings were well organized, and board members uniformly
described the internal board relations as “harmonious.”8 But something obvi-
ously went very wrong. A U.S. Senate subcommittee concluded, in part, that

the Enron Board of Directors failed to safeguard Enron sharehold-

ers and contributed to the collapse of the seventh largest public
company in the United States, by allowing Enron to engage in
high risk accounting, inappropriate conflict of interest transac-
tions, extensive undisclosed off-the-books activities, and excessive
executive compensation.9

Many experts and regulators have considered the Enron situation in gen-
eral, and the functioning of the Enron board in particular, and have sug-
gested reasons for the eventual failure. Undoubtedly, there were multiple
causes of the failure. But while it is difficult to say conclusively, without hav-
ing observed the board meetings, it seems likely that Enron was subject to
one or more of the destructive, hidden forces that are the focus of this book.
The same problems might have existed in other companies that have
suffered governance failures. These include major failures such as Tyco,
WorldCom, HealthSouth, Adelphia, Fannie Mae, AIG, and Citigroup,
and, to emphasize that this is not a problem solely in the United States,
also Royal Ahold (Netherlands), Parmalat (Italy), Lernout & Hauspie
(Belgium), Hyundai Motor Company (Korea), Ocean Grand Hold-
ings (Hong Kong), China Aviation Oil (Singapore), Guangdong Kelon
Electrical Holdings (China), and Satyam (India), just to mention a few.
Also included are other smaller corporate governance failures that have
resulted in problems, some of which are undoubtedly never detected,
such as poor investments, the granting of excessive executive compensa-
tion, biased evaluations of management, and misperceptions of risk.
 OVERSIGHT BY GROUPS OF BOARD MEMBERS 11

Overview of the Book

In the chapters that follow, we discuss the implications of the reality that
boards are not mere aggregations of individuals. They are, for both bet-
ter and worse, complex social systems. Because the positives of provid-
ing corporate oversight through multiperson boards are already widely
recognized, we focus on the possible negatives, which are often ignored.
We describe what we believe to be the most common blind spots, biases,
and other similar pathologies that can be caused by providing corporate
governance oversight through groups of individuals. We describe each of
the pathologies and their possible effects and illustrate their functioning
in a real or plausible board situation.
The book is organized as follows: Chapter 2 describes two common
ways in which individual behavior changes for the worse in a group set-
ting: social loafing and excessive group conformity. Chapter 3 discusses two
prominent cognitive limitations that occur in group level. One is a shared
information bias, a tendency for groups to discuss only information that
is already shared by all group members rather than exploring novel infor-
mation. The other is called pluralistic ignorance, a systematic underesti-
mation of the degree to which individuals’ concerns are shared by others.
Chapter 4 describes group polarization, a group tendency to make
more extreme, often riskier decisions than its members would individu-
ally. Chapter 5 describes groupthink, an extreme version of group confor-
mity that also includes some other distinctive and dysfunctional group
behaviors. Chapter 6 discusses how group habitual routines can entrench
behavior even when the behavior is not appropriate for the situations
being faced. Chapter 7 explains why conflict is inherent in group work
and how it can have deleterious effects on group processes and outcomes.
Chapter 8 explores the role of power in the group setting and how it
can be misused. Finally, chapter 9 discusses how working in groups often
causes productivity losses.
In our concluding chapter, we discuss how to counteract these
destructive group dynamics. One challenge in identifying and fixing the
harmful group processes we discuss is that many of the processes over-
lap, and their solutions can be somewhat contradictory. For example, all
groups have conformity pressures. But some conformity is good. And not
all groups fall victim to groupthink, even though groupthink is a version
12 BLIND SPOTS, BIASES, AND OTHER PATHOLOGIES IN THE BOARDROOM

of conformity. Further, conformity pressures may be reduced by making

groups less cohesive; however, reduced group cohesiveness is harmful for
other reasons. We discuss some inherent boardroom tensions and some
difficult trade-offs that must be made. While some of the phenomena
we discuss manifest themselves in similar behaviors, the phenomena are
conceptually separable. Their causes are different, as are the methods for
minimizing their harmful effects.
We proceed from the viewpoint that recognition of the potential
problems is the necessary first step. Only then can the effects of some
negative group tendencies be avoided or minimized. Some might be
addressed somewhat straightforwardly, through, for example, modified
board decision processes. Others are perhaps more challenging to deal
with. They might require alternate regulatory or administrative devices to
prevent the harmful outcomes from occurring.
We have two main goals for this book. First, we wish to provide
insights that are useful both for board members and for regulators who
are interested in improving corporate governance outcomes. Second, we
wish to provide insights that are useful for shaping expectations about the
degree and quality of oversight that corporate boards of directors can pro-
vide. There are some inherent limitations in what can be expected from
oversight provided by groups of board members. Everyone who is relying
on the effective functioning of boards of directors needs to understand
those limits.