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With major companies battered by recession, the spotlight is on boards of directors to take more active roles in response to the crisis. But what should their priorities be? Fortune senior editor at large Geoff Colvin talked to two top consultants: management expert Ram Charan, whose latest book is Leadership in the Era of Economic Uncertainty, and Tom Neff, chairman of Spencer Stuart U.S., the executive-search firm. Key excerpts:

Q.: What should be the top items on a board’s agenda in 2009?

Ram Charan: The financial storm is not over. A number of companies I’m looking at are forecasting 10% to 20% declines in revenues. So the first and most important item for the board is to invest time to understand the cash issues, balance sheet issues, leverage issues, and liquidity issues. One- or two-hour presentations are not enough.

Second is rethinking targets for management. You want to motivate management, but you can’t just use the old targets with minor modifications; in this era, survival may be an issue.

Third is reevaluating the peer group against which you compare your company. Some of the old peers may be insolvent or may not be relevant because conditions have changed dramatically.

Fourth is rethinking compensation. Most compensation committee chairmen I’ve met never understood the Black-Scholes model for valuing stock options. If you don’t understand it, think of something else.

Tom Neff: Boards have to spend more time thinking about the unthinkable — scenarios that would have seemed irrational, maybe unimaginable, just a year ago. What if our lead bank disappears? What if we have a liquidity crisis? What if the Dow goes to 6,000? What if our stock keeps dropping and attracts raiders?

The other subject that boards need to focus more on is enterprise risk management. It’s not just risk in the sense that banks need to focus on it, but what are the risks in our business model, what are the global risks that could affect our business? It’s a holistic approach to the subject, and stress testing what we’re doing.

One other thought. Every seat in the boardroom is critically important, and boards need to think about that more strategically. In light of the new challenges and uncertainties, what kind of talent and expertise is needed that isn’t sitting around the table today? More directors will be resigning from boards, particularly active executives who just don’t have the time or the stomach for this anymore. So boards need to be thinking ahead and have a pipeline of people they’re talking to who could be directors.

Q.: Most boards are not very good at imagining all the things that could go wrong payday loans. Have you found any ways to help them expand their thinking?

Ram Charan: Yes, a couple of ways. In industrial companies a broad discussion of the balance sheet does not take place. It should focus on two simple questions: Where is the cash coming from, and where is it going? Boards need to really learn the balance sheet, debate it, get management’s input, see under different conditions what’s the financial risk, which has many, many components. That all needs to come out without the accounting mumbo jumbo. In some places that is happening.

Second, an industrial company I know now has a chief risk officer, and in the past six months he has laid out nine kinds of risks. He has taken the governance committee through it, and the board has discussed it.

Q.: What were the problems in compensation systems that contributed to a lot of the financial industry problems?

Tom Neff: Some of the management teams at financial firms have a huge equity stake, which used to be thought of as a good thing. But I believe that the motivations for driving profits produced risks that some of these institutions just couldn’t absorb. So you have to argue the measures were not correct. There was too much focus on growth in profits rather than growth in sound earnings. It’s not a good idea to be changing management’s objectives quarterly, but compensation committees will have the challenge of setting correct rewards for [executives] who are trying to hit a moving target.

Q.: Companies need better directors and the right directors, yet it seems inevitable that the demands and challenges of being a director are going to increase considerably, right?

Tom Neff: No question. The time demands have changed significantly. It’s routine now for boards and board committees to hold telephone meetings in between the regular meetings, and as the time commitment increases, the availability of certain people to allocate that time is just not there. And of course there’s the risks associated with it, particularly reputational risks. Boards will be in the spotlight like never before, and nobody wants to be part of a rogue’s gallery in an article about a company that’s failed.

Ram Charan: People are beginning to realize that boards can create value, and that some boards, by commission or omission, can destroy value.

Tom Neff: Board service is not for the faint of heart, particularly for the year we’re entering. 

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Confidence among consumers probably held near a record low in January as a growing number of Americans lost their jobs and houses, a private report may show.

The Conference Board’s sentiment index climbed to 39 this month from a December reading of 38 that was the lowest since records began in 1967, according to the median forecast of 69 economists surveyed by Bloomberg News. A separate report today may show the drop in home values accelerated in November.

Caterpillar Inc. and Home Depot Inc. were among companies yesterday that said they will cut at least 74,000 workers from payrolls in coming months as sales drop and the recession deepens. President Barack Obama is trying to drum up support for quick passage of a stimulus plan that aims to create jobs, cut taxes and boost infrastructure spending.

“We expect consumer confidence will remain depressed for the foreseeable future, putting considerable downward pressure on economic growth,” said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina.

The New York-based Conference Board’s report is due at 10 a.m. Forecasts in the Bloomberg survey ranged from 35 to 45. A 39 reading would be the third-lowest on record.

At 9 a.m., a report from S&P/Case-Shiller may show home prices in 20 major metropolitan areas declined 18.4 percent in the 12 months ended in November, the largest drop since record- keeping began in 2001, according to the Bloomberg survey.

Obama’s Plan

Obama’s administration will direct more of the second half of a $700 billion financial rescue plan to open up credit for consumers and businesses and stem home foreclosures, his spokesman said yesterday. The president has asked his economic advisers for recommendations “specifically addressing home foreclosures, addressing financial stability in banks,” White House Press Secretary Robert Gibbs said in a briefing payday loan companies.

Meanwhile, lawmakers are debating an $825 billion package of tax cuts and new federal spending that the president hopes will be passed by the middle of next month.

The U.S. recession, which began in December 2007, has so far cost 2.6 million jobs and is already the longest in a quarter century. Wachovia’s Silvia projects the jobless rate will climb to 9.5 percent by the end of 2010, the highest level since 1983. The rate was at 7.2 percent last month.

The world’s largest economy probably contracted at a 5.5 percent annual pace from October through December, the biggest drop since 1982, according to the median estimate in a Bloomberg News survey ahead of Commerce Department figures due Jan. 30.

Spending Slump

Consumer spending, the largest part of the economy, is forecast to have dropped at a 3.5 percent pace last quarter after slumping at a 3.8 percent rate the previous three months. It would be the first time purchases declined more than 3 percent in consecutive quarters since records began in 1947.

“We are in the midst of a global economic crisis,” Wal-Mart Stores Inc.’s vice chairman and future chief executive officer, Mike Duke, told employees of the world’s largest retailer yesterday. Bentonville, Arkansas-based Wal-Mart said this month that fourth-quarter profit will miss its forecast and predicted revenue in January will be little changed.

Fourth-quarter profit at Harley-Davidson Inc., the biggest U.S. motorcycle maker, dropped 58 percent and the company said Jan. 23 it plans to cut 1,100 jobs and close three facilities. The company declined to project earnings for this year and said it’s reducing shipments by as much as 13 percent to prevent excess inventory.

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Tribune Co. has selected Tom Ricketts, the head of a Chicago investment bank, as the lead bidder for the Chicago Cubs baseball team, after receiving support from the bankrupt media firm’s creditors, a source familiar with the sales process said.

Ricketts’ group will now get the right to finalize terms of an agreement to buy the storied team, known as the "lovable losers."

The process may not be over, however, as rival bidders could still choose to raise their bids. That means a group led by Marc Utay, a managing partner with New York-based private equity firm Clarion Capital Partners LLC, may still have a chance.

The sale would need approval from Major League Baseball team owners.

Earlier in the day, Tribune’s (TRBCQ) creditors blessed Rickett’s bid, said another source familiar with the committee’s key meeting.

The bids by Ricketts and Utay both valued the club at around $1 billion, including about $800 million in cash, said two sources familiar with the process.

Ricketts lived across from the Cubs’ home park of Wrigley Field — also a part of the sale along with a stake in a cable TV network — while attending college and met his wife in the bleacher seats there. He is chief executive of Incapital LLC and the son of the founder of TD Ameritrade Holding Corp .

Tribune had wrestled with the differences in the bids submitted by Ricketts and Utay, whose group includes Leo Hindery, who heads a private equity firm and previously ran YES Network, the TV channel of the New York Yankees baseball team, three sources familiar with the process said.

Ricketts’ bid had a "modest" amount more cash up front, while Utay’s offered a slightly higher overall value, the first source said. The collateral for Ricketts’ borrowings is TD Ameritrade securities, the source said.

A bid by Chicago real estate executive Hersh Klaff had fallen behind the other two, sources said.

Tribune officials and a spokesman for the attorneys representing the creditors declined to comment, as did Utay and Ricketts. Klaff could not be reached.

Tribune filed for Chapter 11 bankruptcy protection last month due to its heavy debt load and the weak U payday loans.S. publishing sector. It put the Cubs on the block in April 2007, when Tribune agreed to an $8.2 billion buyout led by real estate magnate Sam Zell.

Bidders are anxious to take control of the team, which has not won a World Series title since 1908 but has wide appeal due to its history and its national exposure on cable TV.

While the Cubs are not part of the bankruptcy, creditors must sign off on the deal because they will receive any proceeds. When Tribune first put the Cubs up for sale, analysts had said it could receive offers approaching $1.3 billion.

Summaries of the three bids were submitted to the Tribune’s unsecured creditors’ committee, which met in New York Thursday to discuss several matters including the Cubs, two sources said.

Approval from the creditors is expected by the end of the week and the aim is for Tribune, which owns the Chicago Tribune and Los Angeles Times newspapers, to be negotiating with just one party by Monday, the first source said.

Tribune has not submitted a winning bidder for approval by Major League Baseball, said a fourth source familiar with the process who asked not to be identified. An MLB spokesman referred questions to Tribune.

Any winning bidder will need 75% of the 30 team owners to approve the deal and that process can take up to two months as baseball officials investigate the potential new owner and the financial structure of the offer.

Tribune aims to negotiate final terms with a winning bidder before early February and possibly have a new owner in place by opening day in early April, Cubs Chairman Crane Kenney said previously. But several sources and bankruptcy court experts questioned whether the process can move that fast.

The Cubs open their season April 6 in Houston and their first game in Wrigley Field is April 13.

Separately, Tribune said Thursday that it is deregistering its debt securities. As a result, it said it will no longer have to file quarterly and annual financial reports or significant announcements with the U.S. Securities and Exchange Commission. 

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The Bank of Canada slashed its key interest rate to the lowest since the institution was founded in 1934 and signaled that more cuts may be needed to jolt the economy out of recession and stabilize credit markets.

Governor Mark Carney cut the target rate on overnight loans between commercial banks by half a point to 1 percent, lower than the previous record of 1.12 percent in 1958 when the rate was based on treasury-bill yields. The move was anticipated by 19 of 20 economists surveyed by Bloomberg News.

Canada’s move mimics efforts in the U.S., the U.K. and Japan to revive lending as credit markets reel from about $1 trillion of write-offs and losses. The collapse of financial firms such as Lehman Brothers Holdings Inc. and Fortis contributed to the worst global downturn since the Great Depression and helped push Canada into a recession for the first time since 1992.

“The Bank will continue to monitor carefully economic and financial developments in judging to what extent further monetary stimulus will be required,” policy makers said in a statement today from Ottawa, repeating a phrase they used to announce a reduction last month.

The economy will shrink through the middle of 2009 for an annual decline of 1.2 percent, the central bank said, scrapping an October prediction for an expansion of 0.6 percent. Canada’s inflation rate will be negative for two quarters this year due to lower energy prices, and policy makers said it won’t return to their 2 percent target until the first half of 2011.

‘Still Open’

“The door is still open for more cuts,” said Martin Lefebvre, a senior economist at Montreal’s Desjardins Group, Quebec’s largest credit union. “There’s no doubt in my mind they will cut again in March. The economic context is deteriorating.”

The Canadian dollar dropped 0.6 percent to C$1.2610 per U.S. dollar at 10:22 a.m. in Toronto, from C$1.2538 yesterday.

The country’s exports and domestic demand are falling and “it will take some time for financial conditions to normalize,” worldwide, the central bank said. Still, the bank said there are signs that “extraordinary measures” taken by policy makers worldwide are “starting to gain traction” and help markets.

The financial crisis has driven up banks’ borrowing costs and forced them to raise new capital. That in turn has made them reluctant to extend credit to consumers and businesses.

‘Credit-Worthy’

Bank of Canada officials and Finance Minister Jim Flaherty have said the country’s banks, rated the soundest last year by the World Economic Forum, have scope to expand lending.

Executives from the country’s biggest banks told Carney, 43, and Flaherty, 59, at a meeting this month that they continue to lend to “credit-worthy” clients.

Five banks including Royal Bank of Canada, Bank of Montreal and Toronto-Dominion Bank matched the Bank of Canada’s interest-rate cut today, after they and the rest of the biggest lenders failed to immediately match the full 75-basis point reduction in December low fee payday advance. The lenders today cut their prime rates to 3 percent from 3.5 percent.

Policy makers in Canada may be closer to trying a strategy known as quantitative easing, Carlos Leitao, chief economist at Laurentian Bank Securities in Montreal, said before the decision. That policy is designed to leave banks with so much free cash that they stop hoarding and expand lending. It can involve a central bank buying securities and creating money to pay for them.

Global Moves

The U.S. Federal Reserve cut its main interest rate to as low as zero on Dec. 16 and pledged to buy unlimited quantities of securities, after a series of policy moves failed to arrest what may be the worst recession since World War II. The Bank of England on Jan. 8 cut its main rate to 1.5 percent, the lowest since its founding in 1694, and last week the European Central Bank cut its benchmark rate to the lowest recorded level.

Canada’s economy is suffering from sluggish exports of goods such as lumber and cars and low prices for commodities such as oil and metals, causing a net job loss of 105,000 in November and December and a decrease in domestic demand.

Canadian factory owners posted the biggest monthly sales drop on record in November, with shipments abroad falling 6.4 percent, Statistics Canada reported earlier today from Ottawa. New orders dropped 13 percent that month, the agency said.

Fiscal Plan

The Bank of Canada’s stimulus may be followed next week by the biggest fiscal boost in decades.

Flaherty said Jan. 9 that his Jan. 27 budget will include a “substantial” deficit, Canada’s first in 12 years. The plan will generate a shortfall of between C$20 billion ($16 billion) and C$30 billion in the coming fiscal year, Prime Minister Stephen Harper said in an interview last month with CTV.

The central bank will update its forecasts for economic growth and inflation on Jan. 22. Today’s statement predicted that output would rebound in 2010, expanding by 3.8 percent.

Business executives in Canada say they’re struggling with the tightest credit climate since at least 2001, according to a central bank survey released Jan. 12.

Rate cuts may not boost spending right away because companies are too worried about the economic outlook to spend even if they have access to credit, Doug Munro, 46, president of Maritime-Ontario Freight Lines Limited, said Jan. 15 in an interview from Brampton, Ontario.

While Munro’s company has held on because it ships products such as foods that are in steady demand, the recession has him re-thinking plans to buy more containers and undertake a C$4 million, 15-acre expansion of his truck depot.

“My instinct is, with all of this trouble in the economy, maybe it would be better to wait,” he said.

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The ongoing saga of Steve Jobs’ health has been, to put it mildly, a soap opera.

There was the pancreatic cancer that no one knew about until Jobs declared it over; the strange and sudden weight loss; the ongoing rumors of a recurrence of cancer; the hormone imbalance that just last week Jobs declared was not going to hurt his ability to run the company.

And now, this cryptic but sad note: "During the past week I have learned that my health-related issues are more complex than I originally thought."

Apple’s stock has gyrated in concert with each set of rumors.

But should it have? Some governance experts believe that while Apple’s board may have been legally within its rights in how and when it has disclosed Jobs’ health woes, there is a lot more it could have done to help out its investors.

"When those rumors began months ago, it would have been advisable to be more transparent," says Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware.

"In the case of someone with such a high profile," Elson adds, "you have to be more forthcoming."

It is clear, from Jobs’ own memo last week, that he himself saw little reason to share what was going on.

"So now I’ve said more than I wanted to say, and all that I am going to say, about this," he wrote on Jan faxless payday loan. 5, just over a week before Wednesay’s announcement that he would take a leave of absence.

Now he has said a little bit more. But we still don’t know why he is leaving.

Elson says situations like this one show how critical it is to always have a valid succession plan in place, whether someone is sick or not. No matter how vital an executive may seem, things do happen, such as Roberto Goizueta’s lung cancer while running Coca-Cola and the heart attack of McDonald’s Jim Cantalupo.

And in Apple’s case, while Tim Cook has stepped ably into the job, the company has never - until now - given him the formal attention and support that might remind investors that Apple has been successful because of Jobs’ leadership, yes, but also because of the thousands of brilliant executives and employees below him.

"While all this speculation has been going on, why hasn’t the Street been more aware that there are other people?" wonders Elson. "There needs to be some assurance given to the public. The concern would be is the board or Mr. Jobs driving the process?"

Good question. 

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Automakers at the world’s premier auto show have pinned their hopes on “green” models but for some companies the immediate future is shaping up as a battle for survival.

U.S. auto sales dropped by 18 percent in 2008 to a 16-year low of 13.2 million, pushing financially strapped General Motors Corp and Chrysler to the brink of collapse.

In December the two were approved for $17.4 billion in emergency government loans. But the money has conditions that must be met as early as March and include more concessions from the United Auto Workers union and company debt holders.

“People are wondering, ‘Is the company going to make it? Is the company going to be viable?’” GM Chief Operating Officer Fritz Henderson told reporters at the Detroit auto show.

Henderson, vice chairman Bob Lutz and other GM executives said they were confident GM could make the changes it needs to turn itself around with U.S. government support. But they also indicated they could need further help along the way.

Ford Motor Co has not asked for government loans but told lawmakers last year it wanted a $9 billion line of credit from the government in case the U.S. economy worsens.

“We still believe there is a good chance for a recovery starting in the second half,” Ford’s Chief Financial Officer Lewis Booth said on Monday cheap payday loans.

Display rooms at the cavernous Cobo Center were filled as usual with dozens of shiny cars, trucks and other vehicles, with staff feather-dusting the models and media milling around a reduced number of exhibits.

A number of big automakers, including Nissan Motor Co, pulled out of the show this year to save money.

For those who remained, the stars of the show were a slew of new or improved fuel-efficient and eco-friendly “green” cars like the Toyota Prius and Chevrolet Volt, an all-electric sedan General Motors rolled out as a “concept” two years ago.

GM said it was on track to offer the revolutionary vehicle in November, 2010, and on Monday announced a major contract with Korean manufacturer LG Chem Ltd to make the batteries, the key to success for all new electric vehicles.

But uncertainty continued to trump hope for most.

Lutz, the biggest booster of the Volt, was asked if U.S. auto sales were going to recover to the 15-million unit level.

“Who the heck knows?” Lutz told reporters.

GREEN: TOO LITTLE, TOO LATE FOR BIG 3? 

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Detroit automakers are no longer in the driver’s seat when it comes to their own recovery. The U.S. economy is.

No matter what further concessions the United Auto Workers union makes, what debt relief the automakers win in talks with creditors and what kind of additional federal help is made available, U.S. consumers have to start buying cars again.

And a rebound in sales will be difficult, if not impossible, to come by for General Motors (GM, Fortune 500), Ford Motor (F, Fortune 500) and Chrysler LLC as long as the unemployment rate keeps rising.

This Friday’s jobs report is likely to show how difficult it will be for the Big Three to complete their promised turnarounds, even with billions of dollars in loans from the government.

Economists are forecasting a loss of 475,000 jobs in December. The outlook for employment for the rest of this year is similarly grim. The minutes of the most recent Federal Reserve meeting show that staff at the central bank expect the unemployment rate "to rise significantly into 2010."

Faced with this backdrop, independent auto analyst Erich Merkle said that even if auto sales bottomed out in early December, a month when all the major car manufacturers posted sales declines of at least 30%, it’s not certain when there will be a sustainable rebound in demand.

"It’s when we’ll have a meaningful upturn, that is the big question. We could conceivably crawl along the bottom for some time," he said.

To that end, J.D. Power & Associates is now forecasting 2009 industrywide sales of 11.4 million vehicles for the year.

While that’s up from the tremendously weak sales pace in the fourth quarter, it would be down 14% from the full year 2008 sales, and below the sales targets set by Ford and GM in their turnaround plans submitted to Congress.

It is clear that no automaker can make money with auto sales at currently depressed levels. Even industry sales and profit leader Toyota Motor (TM) has warned it is about to report its first operating loss as a public company.

Ford director of sales and industry analysis George Pipas said that Ford factored in lousy job reports when it presented its plans to Congress. But he added that it is possible industrywide sales could be better than expected, given that the Fed, Congress and the incoming Obama administration are all focused on stimulating the economy fast cash.

"When things are bad, the presumption is it will get worse or always be bad," he said. "That’s no more correct than the assumption in good times that things will always stay good."

In fact, some economists are forecasting a much sharper rebound in auto sales than now being assumed even by the automakers. Joseph Carson, chief economist at AllianceBernstein, said industrywide sales should reach 13 million this year, and that second-half sales could climb to above a 14 million annualized sales rate.

He said the massive economic stimulus plan likely to be passed by Congress, coupled with low interest rates, should lead to a much stronger rebound than many are expecting.

"If you go back and look at the severe recessions of the mid ’70s and early ’80s, from the trough to one year later, car and truck sales were up 30%," he said.

Carson added that the sharp cuts in production by the automakers in the past year will also set the stage for an eventual recovery.

But others think auto sales won’t be able to bounce back as fast this time given the depth of this recession.

Wilbur Ross, the private equity investor who is chairman of auto parts maker International Automotive Components Group, says that U.S. automakers should have been cutting production sooner.

Instead, he said they offered easy financing terms and cash back offers for too long in order to move cars at below cost. Those sales stole from future demand for their vehicles, he said.

"When you borrow from the future, eventually you run out of future," he said.

Because of that, Ross said the only way for the automakers to survive is to win further concessions from unions and creditors and shed excess dealerships. He is not predicting a major upturn in sales anytime soon.

"We don’t know for how long we’re likely to stay at these reduced levels," he said. 

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World stocks rose on the first trading day of the year after a dismal 2008, while the dollar gained. Crude oil and metal prices fell, as did government bonds.

Global stocks as measured by the MSCI world index were up 0.5%, with the pan-European FTSEurofirst 300 gaining 1.1%.

"The unprecedented events of 2008, and continuing fallout into 2009 will see a number of false dawns and continuing volatility throughout the coming year," said a trader at derivatives broker Blue Index in London.

Data still painted a bleak picture for the global economy after factories in China, India and Russia slashed output and jobs at a record pace in December.

Manufacturing activity in the euro zone also sank to a record survey low last month, below an already dire flash reading and the outlook remains grim as new orders also sagged to new lows.

The downturn in activity was accompanied by falling inflationary pressures, clearing the way for the European Central Bank to cut interest rates again when it meets later this month, as it is expected to do.

"The good news about this year is that people have been so pessimistic at the beginning of this year as opposed to being so optimistic at the beginning of last year, they may have overdone the pessimism," said Justin Urquhart Stewart, London-based investment director at Seven Investment Management.

"And that’s quite sensible because there are some huge challenges to face cash advance no fax. The thing people should remember is that equity markets generally recover in a recession but it’s like trying to fight your way through the dust after the explosion’s gone off."

The euro fell 0.3% to $1.395 and the yen also slipped against the dollar, which last year posted its firstly year gain against a basket of currencies since 2005.

As global demand weakened, oil prices remained in the doldrums after reaching their peak of $147 a barrel in July. Crude traded at around $41 a barrel, down more than 7%.

Gold also gave up gains, having started on a firm note in early trade, as the dollar bounced from lows, but expectations of more grim U.S. economic data could still ignite safe-haven buying from investors.

Prices in relatively risk-free government bonds also slipped. Yields in benchmark 10-year U.S. Treasurys ticked up 1 basis point, while the German 10-year Bund yields were 7.3 basis points higher at 3.022%.

Euro zone government bonds had a stellar year in 2008 with two-year yields falling around 50% and 10-year yields by a third as the market rallied due to the credit crunch and resulting economic downturn. 

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