Around the world, whether the business is a major corporation, a private family firm, or a state enterprise, it soon learns the value of a board of directors. A board can deliver great ideas, objective advice, and connections that would cost far more if hired through business consultants.
Yet I’ve found that corporate boards are one of the business world’s most underused (and too often, misused) tools. Weak procedures, membership and skills dilute their value. A board of directors is treated not as a vital asset, but as a bothersome expense. The result is lost business opportunities, missed danger signals, and too often, ultimate business failure.
In speaking and consulting on corporate governance worldwide, I see remarkable similarities in boardroom failure across countries and cultures. But I’ve also discovered common steps that can be easily taken to build the quality of your boards and their work. Give these proven, basic moves a try — you’ll find improving your corporate governance simpler than you may have thought.
- Don’t fear boardroom independence. Independent, non-executive directors are the gold standard among worldwide securities regulators. However, in practice they remain uncommon in most boardrooms. Even board members who aren’t employees are often family members, business partners, cronies, government ministers, etc. Yet I’ve found that just one director who is fully independent from the company, its founders and promoters to be a great benefit. Seek someone with a strong record in the company’s field, with connections and knowledge the firm currently lacks, plus a desire to contribute (but not to run things). A retired, highly respected chief executive is often the best bet for adding your first dash of boardroom independence. Find someone whose credentials demand respect (even in a divided boardroom, everyone will still look up to this new member). Once your board has gained this outside perspective, you’ll wonder why you waited so long.
- Messy board procedures lead to messy governance. Good boardroom practices cost nothing, add much, and will amaze you with the professionalism you gain. A written-out, well-considered meeting agenda that uses time to its best. Meeting minutes that cover important points, votes, and show thoughtful, active board discussion. Pre-meeting board info packs that directors receive well in advance, which cover the data they need to see without swamping them (50 to 60 pages, plus exhibits, is a good average), and that is well-organized. Board presentations that aren’t allowed to drown directors in PowerPoint (a common boardroom complaint). These all may seem like basic housekeeping items, but discipline in using them creates discipline in your corporate governance.
- Sharpen board leadership. Chairing a board of directors is a highly responsible, demanding, sensitive task. Why, then, does no country on earth require any training or qualification to do it? Chairmen may hold the role because of stock ownership, government or family connections… but not because they are most effective as boardroom leaders. Commit to change that in your boardroom with some essential training on the basics of corporate governance, legal requirements, and parliamentary procedure. The company’s law firm is usually happy to provide some basic tutorials on this, and international groups like the OECD and the Institute of Directors (IOD) offer many low-cost, local training resources.
- Start building tomorrow’s board today. Privatisation… digital tech… security threats… succession. Your business faces a coming wave of change and challenges. Will your board makeup be up to the task? Succession planning for boards is rare, but crucial to shaping a board able to fulfill company strategy in the years ahead. Who is retiring soon (or should)? What new markets, structural changes, technologies or regulations will your company face… and will your board include talents at the table with expertise? Map out when current members plan to leave, what strengths they have, and who you’ll need to recruit to replace them. As important, look at the company’s strategic plan five and ten years ahead, and weigh the board talents you’ll need to fulfill it.