(MONEY Magazine) – Richard Breeden spent the stormy Memorial Day weekend on his 78-foot yacht, racing from the Connecticut coast to Block Island and back. The all-night 185-mile trip through shifting winds, rain and choppy seas took Breeden and his crew 20 hours, about two more than the winning vessel. But Breeden, who has won the annual race in the past, loved every minute of it. Navigating rough waters is his specialty.

That may explain why Breeden, a restructuring specialist and former head of the Securities and Exchange Commission, accepted a court appointment last July to help right WorldCom, the bankrupt telecom company that admitted using phony accounting to hide $9 billion in costs. Already, he has cut incoming CEO Michael Capellas' guaranteed pay by $6 million and overseen the firing of some 50 executives who may not have been in on the fraud but didn't do enough to stop it.

Now Breeden hopes to transform WorldCom from a synonym for corporate malfeasance into a model of good governance. The key to his plan: a radical redesign of the board of directors. At WorldCom, says Breeden, the weakness of the board was at the heart of the company's descent into fraud. "When Bernie Ebbers was CEO, it was clear that this company was run for Mr. Ebbers alone," Breeden explains. Because staffers saw the board as a rubber stamp for Ebbers, they had no incentive to report abuses to the directors.

Breeden's proposals are to be presented to the court at the end of June. As part of its settlement with the SEC, managers of the reorganized company--which is expected to take the MCI name--will have to adopt his reforms or explain to the court why they aren't doing so. If the company accepts his reforms, Breeden believes that WorldCom can demonstrate to others how improved corporate governance can turn a company around. "There are lessons in the troubles at WorldCom that are applicable to all U.S. corporations," he says.

The Breeden program to strengthen the board begins by mandating that all directors except the company's CEO be independent. They would be barred from doing paid consulting work for the company and their compensation would be all cash, not the typical mix of cash and stock options. They would be required to invest half of that cash, after taxes, in shares bought on the open market. Forcing directors to buy shares, Breeden argues, links their interests with those of other shareholders and does not dilute earnings. (In fact, he recommends that the company grant no stock options for five years. All executives would be paid in cash and restricted stock.)

But the proposal that is sparking the most interest among corporate-governance activists is to give shareholders a role in nominating directors, one of whom will be replaced each year. Breeden says he hasn't figured out the mechanics, partly because of Regulation FD, which bars the disclosure of information to only one group of shareholders. One possibility is that a group of WorldCom's largest shareholders would be invited to recommend which board member should step down and who should be nominated to fill the vacancy. If the board failed to take those suggestions, the shareholders could name a candidate who would be included in the proxy statement. Now dissident shareholders can offer an alternative slate of directors, but their names aren't in the proxy; getting the word out to shareholders is a costly endeavor that seldom works.

"If he gets access to the proxy for shareholders, then he deserves a medal in the corporate governance wars," says Nell Minow, editor of the Corporate Library. "I give the rest of the reforms a B--nice, but nothing special."

Breeden says that even without the shareholder nomination process, the WorldCom that he envisions would accomplish more in the way of corporate reform than any other company has attempted. At the very least, he hopes the changes will make clear to WorldCom's customers, employees and investors that this is a company they can trust. And at best, his plan for the new WorldCom will serve as a handy blueprint for other companies that get into trouble.