The Board Book: An Insider's Guide for Directors and Trustees
Plenary Session
Tuesday, October 21, 9:15 am
| William G. Bowen | Author, The Board Book and former Director, American Express, Merck, and TIAA-CREF |
Digested from William Bowen's Remarks:
Directors and trustees matter considerably in their organizations. At the same time, there is little limitation to how much damage directors and trustees can do.
Responsibilities
I've compiled a list of baseline responsibilities for directors and trustees, which I'd like to comment on:
1) CEO Succession. Boards do not understand how hard it is to find a good leader. At the end of the day they will be very lucky to have two-or even one-candidates.
2) Strategy. Boards need to discuss, review, and approve the strategic direction.
3) Monitor Performance. This isn't always easy, especially since many people have a tendency to overlook and minimize the negative.
4) Ensuring organizations operate responsibly, ethically, and efficiently.
5) Act on specific policy recommendations.
6) Provide a buffer for the CEO, and be willing to take some of the heat when times are difficult.
7) Make sure capital resources are available for the organization.
8) Nominate suitable candidates for election to the board, and carry out an effective system of governance at the board level.
Director Selection
Independence in choosing board colleagues must be respected. In determining which directors should be on the board, consider the following:
- You need the "curmudgeons" who aren't afraid to disagree.
- You need people who know what needs to be done-more importantly who are willing to do it.
- You need to have people who know the business so they can ask the substantive questions.
- You must be willing to remove people who have served long enough-or who are just not the best people to serve on the board today.
Board Dynamics
Board dynamics is critical to effective governance. Consider the following:
- There is no substitute for a skilled chairman who can prevent filibustering and keep the conversation on schedule and moving.
- Providing regularly for executive sessions is exceedingly important. The board can learn so much and be freed up to ask questions that are on their minds. Regular sessions let you get the "night-time nightmares" to the surface.
- If executive sessions are to work, feedback to the President/CEO is crucial The worst, worst outcome is if problems arise in executive sessions and the president is not informed. Feedback matters.
- One of the most difficult aspects of board dynamics is managing the tension of letting trustees speak out, without letting opinionated folks overrun the conversation.
- The board itself may have to prevent the occasional "board bully" from acting up.
Board-CEO Relationship
The success of any organization is based critically on the relationship between the board and the CEO. In corporate America , one of the continuing problems is the division of roles and responsibilities between the chair and CEO. John Whitehead, who was awarded NACD's Director of the Year Lifetime Achievement Award, is quoted as saying "One man leadership is just a bad idea. It is a bad idea to have one person chairing the board that oversees what that person does."
I think in time the nascent trend toward separation will become more pronounced. The lead director model is a good step-but it is a transitional step, and I believe the lead directors will morph into the non-executive chair.
"Solving" this problem by making the former CEO the chairman is a disaster. It is not the way to go. It makes it hard for the board to discuss objectively decisions made on the other person's watch. When the CEO leaves, the CEO should leave.
Leadership Style
There is a trend toward collegial leadership. The imperial CEO is no longer with us. More people in the business world are learning people are more likely to do as you ask if you treat them with dignity.
For More Information:
- For practical guidance on ensuring effective, efficient board and committee meetings, see NACD's handbook on Board Dynamics: How to Get Results from Your Board .
- FAQ: How Can I Get on a Board?
