How long must corporate boards look bad? A swath of scandals has eroded trust in US corporate conduct to levels last seen a century ago, when the abuses of monopolies ushered in an era of trust-busting. Having watched tumbling share prices batter capital markets and retirement plans, investors are now demanding that the government’s promises of reform be turned into action. A handful of the highest-profile scandals have called into question the integrity of US capitalism, and the longer uncertainty lingers over that question, the greater the risk that critical issues of corporate governance will be reduced to the currency of narrow political posturing.

The good news is that directors want to promote change: our survey of nearly 200 US corporate directors sitting on some 500 boards highlights a clear desire for substantial reform. These findings, bolstered by more than 50 interviews with directors, corporate-governance experts, and investors, show a growing concern among members of boards about whether those bodies truly understand the problems—including the risk of increased liability—that now confront business.

Our research and experience point...