In the past, a typical director search would call for a recognized industry name with a large network of contacts who can either help get business, find strategic partners, or refer key executives. Frequently, directors were recommended and hired by the CEO. Many times the directors were CEO’s themselves, even sitting on each other’s boards. No wonder few were willing to rock the boat with tough questions.

That was then.

In response to the recent corporate scandals that brought the Sarbanes-Oxley Act and forthcoming SEC rules to the world of corporate governance, today company directors find themselves under intense pressure never before experienced. Board membership used to be seen as an honor and privilege, but must now be accepted as a serious responsibility with dire consequences if mishandled. Consequences that directors face include being sued for failing to perform their fiduciary duties.

What has not changed is the function the board serves. The main responsibility of the board of directors remains to hire, fire, and set compensation for the CEO. The board’s other responsibility is to oversee management, corporate strategy and the financial reports to investors. Directors should always perform these duties with candor, loyalty, and care.

What has changed is the criteria used for finding company directors, yet most people cannot agree on the specifics. Some think directors are the CEO’s sounding board while others think directors are the investors' watchdogs.

We see the criteria for directors covering four specific areas: time, functional expertise, courage, and independence.

Time
How much time do directors need to do their job? According to the National Association of Corporate Directors in Washington, directors annually spend about 250 hours on board-related work. But who has that kind of time?

In the past, favorite candidates for board searches have been other CEOs. But people with other important jobs may not have the necessary time required to sit on more than one or two boards. The time commitment is one reason why Jack Welch did not accept a single board seat until his last year at GE, and it wasn’t from lack of offers.

This time is used for gathering information, preparing for monthly board meetings, and asking tough questions (sometimes repeatedly). Directors must also be willing to spend time digging past the packaged information supplied by the company’s management.

Complementary Expertise
Because most boards have separate audit, compensation and nominating committees, most directors must have an understanding of either accounting practices, legal issues, or human resources. The strongest boards have a good mix of complementary expertise, with different directors capable of rolling up their sleeves to dig into different areas of the company.

Courage
From early evidence, the Tyco scandal seems to involve a board that was prone to rubber-stamping management’s decisions. Going forward, directors must have the courage to ask tough questions, as well as the persistence to keep asking until they receive a sufficient answer. A healthy dose of skepticism goes a long way, along with a strong moral compass.

Directors must be willing to challenge senior management’s assumptions, even asking whether the CEO would testify in court on the validity of the financials.

Independence
A director is considered independent who is not employed by the company and has no significant business relationship with it. The central theme throughout the recent scandals has been that boards have consisted of too many insiders, usually hand-picked by the CEO. “The board of directors hires the CEO, not vice versa.” SEC Chairman William Donaldson said at a recent Senate hearing.

Professional directors who make their living sitting on boards are usual