For example, Nuevo Energy is affected by computing advances, E-commerce, consumer spending habits, and the relative health of foreign economies, none of which is directly related to energy. It is the board's task to bring a broad and diverse perspective to the company in order to balance management's somewhat more focused perspective on the energy industry. One hundred years ago, boards and management teams were the owners of companies. The reason for this arrangement is as relevant today as it was then-the alignment of management's and the board's interest with that of the shareholders. But conditions have changed in important ways over the past hundred years.
Companies are much larger.
Ownership is more diverse and predominantly in the hands of institutional investors who, for the most part, do not want board representation. In fact, almost none of the public funds have such representation. If prospective board members are not willing to make such an investment, then, frankly, they are not committed enough to be effective representatives of all the shareholders' interest. They are more likely to just go along with management's proposals rather than to engage in a constructive debate. Compensating board members with stock options does not produce sufficient alignment.