This is a book for directors, CEOs, and other business leaders who want corporate governance to be the best it can be. Yes, boards have changed in recent years for the better. But they are not yet fully evolved. Most boards are in flux and still not living up to their potential of providing truly good governance—that is, governance that doesn’t just prevent misdeeds but actually improves the corporation. They haven’t figured out the “how” of adding value.

That’s where this book comes in. It provides the guidance boards need to go from being merely active and in full compliance to making an important contribution to the business. It is a road map for how boards can make the transition to the next step in their evolution, becoming a competitive advantage for their companies. And it is a guidebook for CEOs to see how they can get the most out of their boards.

Beginning with my doctoral work on governance at the Harvard Business School more than thirty years ago, I have closely studied the inner workings of boards. I haven’t performed quantitative or statistical correlations between corporate performance and variables of corporate governance. Frankly, such research doesn’t get to the causality of what leads to good governance. Rather, I have focused on what happens behind the curtain, so to speak, inside the boardroom. My first book on this subject, Boards at Work (published in 1998), described what the best boards were doing at that time.

Since then, through continued research and analysis, I have come to identify three factors that create the foundation for good governance. I have also identified the essential practices and collective behaviors needed to build that foundation—and to build on it. These are practices and behaviors I have observed to have a positive impact on governance for the companies that used them. That is, they seem to be causal factors. They can be adopted by any board to make good governance a reality.

My view of what makes governance good differs from that of so-called board watchers. To them, governance is measured by inputs—the processes and structures used by the board. To the contrary, I believe governance is measured by outputs—the value that a board adds to a corporation. A board’s practices are a means by which it can perform good governance, not ends in and of themselves.

Though this book mostly describes practices in the United States, the principles of a board’s work hold true around the world. Virtually all nations’ corporate codes charge some form of board with the task of ensuring the successful perpetuation of the firm over the long term. The influence of shareholders may be stronger in nations such as the United Kingdom or weaker in nations such as Korea. The composition of boards may emphasize employees in nations like Germany or emphasize independent directors in nations like the United States. Regardless of the differences in mechanics and rules, the board’s fundamental mandate is the same—and the characteristics necessary for it to function well are universal.

This book does not describe the myriad requirements for compliance. It doesn’t list the rules prescribed by Sarbanes-Oxley, for example, and by the stock market exchanges. CEOs, directors, and general counsels know these rules intimately by now, or have access to comprehensive sources of advice on compliance. The aim here is to prompt boards to continue their momentum, to build on their accomplishments to date, and to put in place the collective behaviors and practices that will allow them to deliver on the promise of good governance once and for all.

Chapter Two describes the three building blocks that are essential to move from Liberated, where most boards are today, to Progressive. These building blocks are not what external observers are focusing on. Board watchers have become preoccupied with the size of a board, the degree of independence, the number of committees and meetings, the separation of the CEO and Chair positions, and other such variables, none of which gets at the heart of Progressive governance. The true causal factors that lead to better governance are group dynamics, information architecture, and focus on substantive issues, which I outline.

Part Two of the book includes a chapter on each of the three building blocks, to present an in-depth look at the practices and collective behaviors that boards can use to transform themselves into Progressive boards. Chapter Three describes the practices that are essential to the board’s group dynamics, the first building block of Progressive boards. Readers will quickly understand how simple techniques can transform the manner in which directors interact with each other, and with management, and become a productive force for governance.

Chapter Four describes the best practices that Progressive boards use to ensure an efficient and productive exchange of information between management and the board. Getting the information architecture right has profound effects on the quality of dialogue in the boardroom.

Chapter 5 describes the best practices that Progressive boards use to focus on substantive issues. Boards’ time and attention are very precious. The trap some boards fall into is to allow their time to be dominated by routine financial monitoring and compliance activities. Progressive boards use simple tools to remind themselves of the most critical areas and improve the return on their time.

Part Three of the book includes a chapter on each of five substantive areas where boards can make their most important contributions: the right CEO and succession, CEO compensation, the right strategy, the leadership gene pool, and monitoring health, performance, and risk. In practice, boards tend to give these areas relatively little of their time and attention, yet these are the real opportunities for a board to become a true competitive advantage.

Chapter Six describes tools boards use to ensure they have the leadership they need today and in the future. The right CEO and succession remains job number one for all boards. Every board needs a succession process that draws on the judgments of all directors and leads to high-quality decisions.

Chapter Seven captures an emerging approach to defining CEO compensation, one that provides true alignment between CEO pay and performance. This is an area of critical importance and intense public scrutiny; it behooves all boards to pay close attention to the philosophy behind CEO compensation, as well as to the process of defining the package and the framework that links pay with performance.

Chapter Eight describes how boards can ensure they stand behind the right strategy. There are very specific practices that Progressive boards use with great effectiveness to get a full and shared understanding of strategy—a source of misunderstanding on Liberated boards—as well as to help shape the strategy. Appendix A builds on this chapter to present a sample of a strategy blueprint that can jump-start discussion.

Chapter Nine lays out the approach that Progressive boards use to make sure the company is developing its leaders at all levels. The leadership gene pool is an essential component of the company’s ability to create value and sustain a competitive advantage over the long term. And a strong leadership gene pool will make the CEO succession process more robust in the future.

Chapter Ten helps boards go beyond the usual in monitoring health, performance, and risk. Progressive boards dwell relatively little on routine financial figures that describe yesterday’s performance; they cut to the core issues of financial health, the factors that drive tomorrow’s performance, and the dangerous interactions of risk.

Finally, Part Four provides a pragmatic approach to maintaining momentum. Chapter Eleven contains advice on a range of less important factors under the rubric of board operations, including the logistics of board meetings. Chapter Twelve deals with investors, who are increasingly vocal constituencies. But not all investors are alike. Boards should know how to filter the legitimate concerns from the self-serving voices.

Appendix B is addressed to readers interested in pursuing research in this area. I propose an approach that will generate better insights into corporate governance and uncover the real factors that underlie effective governance. Resulting research will provide boards with better guidance on how to improve.

The board sits in a critical position in the modern free enterprise system. It has the responsibility, as well as the opportunity, to make a significant difference. The chapters that follow are suggestions to all directors so they can fulfill their responsibility and achieve their opportunity.