In this earlier post on the corporate case of the decade, it was noted that the outcome of the Disney-Ovitz trial may provide yet another reason for competent businesspersons to avoid serving as independent directors on boards in a business climate that already makes it increasingly difficult to find qualified board members. My own anecdotal experience is that businesspersons are avoiding board membership in droves.
This timely Wall Street Journal ($) article confirms my experience as business leaders converging on Davos, Switzerland this week for the World Economic Forum tell the Journal that they are increasingly saying “no thanks” to serving as independent members on outside boards of public companies:

Such anecdotal evidence is borne out by some hard statistics. In 1997, the chief executives of S&P 500 companies served on average on two outside boards, . . . Today, that number has fallen to an average of less than one, or 0.9%, outside board seats, . . . Until recently, about one in four companies had policies limiting the number of boards their CEOs served on, . . . Today, more than half of companies have such policies, . . .

One of the examples that the article uses for explaining the reasons for declining independent board membership is the experience of Michael D. Capellas, the former Compaq Computer Co. CEO who served on the Dynegy, Inc. board while at the helm of Compaq:

Mr. Capellas’s experience on the Dynegy board is a telling example of the changing dynamic of being a board member. While a director from May 2001 to June 2002, he recalls “we met four times a year [and] far less preparation was required. In fact, I would read the material the night before.”
Today, Mr. Capellas says, “if you are going to be on a board, you have to attend many more board meetings” and the reading material is “much more voluminous.” For example, the Dynegy board meets every other month, not counting about two other meetings via telephone, according to the company. What’s more, Dynegy’s current board members receive annual performance reviews by other board members.
Meanwhile, Mr. Capellas’s compensation as a Dynegy board member paled when compared to his salary as Compaq’s CEO. As a Dynergy director in 2001, he received an annual retainer of $30,000, plus $1,500 for each board meeting and $1,000 for each committee meeting. The same year, he was paid $3.8 million as Compaq’s CEO.
And the risks were increasing. In September 2002, Houston-based Dynegy, among the energy companies caught up in the corporate scandals of recent years, paid $3 million to settle civil charges brought by the U.S. Securities and Exchange Commission over irregular energy trades and some financial transactions that had been used to burnish the company’s financial results.
Though no directors were charged by the SEC in the September action, some current and former Dynegy directors have been named in related class-action lawsuits. Mr. Capellas, who quit the company’s board three months before the SEC settlement, isn’t a defendant in the class-action lawsuits. Since then, Dynegy has almost completely revamped its board, with 10 of its 12 directors joining over the last three years.
Mr. Capellas says he believes he and other Dynegy directors lived up to their responsibilities as board members. “I don’t believe there was any lack of preparation,” he says. “There were four board meetings scheduled but the board actually met many, many times. It’s just that to do the bread-and-butter stuff today, you have a lot more work to do.”

It is a sad commmentary on the state of American corporate governance when the main reason for declining board membership is that directors are concerned that they are not going to have the protection of the business judgment rule even after expending an inordinate amount of their time on the board matters.