Boy, we've got trouble these days. Remember the characterization of Enron as the "smartest guys in the room"? The terrible strategic blunders so many financial companies have made -- moral hazard, indeed -- lend more credence to the folly of having too much faith in so-called "smart guys."   

So high-profile CEOs leave when things go wrong -- that's so in vogue lately, and often includes insultingly lucrative golden parachutes. Is that really enough? Behind the scenes, boards of directors are charged with protecting shareholder interests, and in too many cases they only seem to react once the disaster's already happened. And that doesn't do shareholders a lick of good.

It might become increasingly clear that failures along corporate governance lines could indicate a poisonous, high-risk environment for shareholders, indicating a systemic problem that must be addressed.   

Seeds of seediness?
Having an engaged board that really knows what's going on is easier said than done: It can be hard for board members to get accurate information, which is why shareholder activists often push for separating the CEO and chairman roles. There's also the "culture of the boardroom," that fraternal mindset when directors get too familiar with management -- and forget to push back. And of course, there's the fact that most directors only dedicate the equivalent of a few weeks a year to their duties. Still, that doesn't mean we shouldn't push for healthier changes.

After all, you could argue that sticking with the "status quo" helped us get to where we are now: A bunch of greedy, selfish losers, en masse, decided to do whatever looked good in the short term, and that's now slamming our entire economy. It seems to me shareholders should demand serious attention to corporate governance issues now. After all, beyond manager missteps, maybe we should question what the heck was going on with the boards when things were going awry.

I took a peek at The Corporate Library's corporate governance database -- a subscribers-only resource -- for a sampling of companies that have been caught in the fray: Citigroup (NYSE: C), Merrill Lynch (NYSE: MER), and Countrywide (NYSE: CFC). There were plenty of potential red flags, either related to who was on the boards (factors such as board tenure, age, and positions as CEOs at other public companies are among the factors investors might want to ponder, because these could reduce a board member's effectiveness or increase complacency), or shareholder-unfriendly policies in general. (All three had CEOs who also functioned as chairmen when the mistakes were made, and all three have been subject to shareholder proposals about limiting executive pay.)  

For example, The Corporate Library extracted data from proxy filings from the Securities and Exchange Commission that underlines the fact that Citigroup's board has a high concentration of active CEOs of other companies, which implies they might not have much time to devote to their responsibilities as board members. In addition, many are getting up there in age and have had long tenures.

Executive compensation has long been a red flag at Merrill Lynch. And of course, Stan O'Neal's exorbitant goodbye package was enough to bring on apoplectic fits. Despite the fall from grace, he has already found a place on Alcoa's (NYSE: AA) board. That sort of thing is probably not as rare as any of us would like to think.

At Countrywide, Angelo Mozilo's high pay always raised eyebrows, although it might have seemed less appalling when it still appeared business was good. (Granted, Mozilo has decided to forgo his severance package, but that doesn't change the fact that he participated in some suspiciously ill-timed dumping of stock during Countrywide's crisis.)

Investors can keep track of executives' compensation and just who's on a company's board by looking at these proxy filings -- or DEF-14As in the Edgar database -- before the company's annual meeting.

Change is good
We all must make our own judgments as to how serious such risks are with the stocks we own or are considering. But a smart long-term move would be to adjust what we're willing to pay for a stock -- or to decide if we're even interested at all -- based on corporate governance elements that inject risk.

To be fair, not many companies have the exemplary reputation that a company like Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) does. Even Costco (Nasdaq: COST), a company we nominated as one of the most shareholder-friendly companies around for our Fool Awards in December, has a red flag from The Corporate Library's point of view: Remember its stock options backdating incident (although one Fool pointed out how Costco made things right)? But there's no reason we shouldn't expect companies and boards to live up to high standards, either.

As much as we here at the Fool are always looking for good, honest, robust management teams at the companies whose shares we own, good, honest, robust boards are also important. Dismal missteps came to the surface in 2007; it's high time shareholders expected creative, proactive boards, and more indications that they're really fulfilling the task they've been given.