Board Dynamics: How to Get Results from Your Board and Committees

As directors, both of us know the importance of board dynamics—how directors interact as a board. We know, based on our experience, that these dynamics can be the key to a board’s effectiveness. As one participant stated at a recent multi-stakeholder dialogue on boards hosted at the Columbia School of Business, “Poor boardroom dynamics cause most of our problems.

Authority is concentrated among too few, and there is too much deference to authority.” Another participant had this to say: “Boards need to empower individual directors. Too often, a director will raise a concern about a motion on the table, and the response is, ‘Thank you for sharing. Do we have a second for the motion? All in favor? Next.’” These statements are about concentration of power and groupthink—just two of the many problems facing boards as decision-making groups. Solving just these problems alone would go a long way to improving board effectiveness by changing boardroom dynamics.

Improving the quality of boardroom dynamics, however, requires that other aspects of board practices change as well. Specifically, the preparation before meetings and the follow-up after are equally critical for an effective board that can also enjoy its work.

The focus on the board’s compensation committee has never been sharper. The components of compensation plans and the link between compensation and company performance are under intense scrutiny from shareholders, employees, policymakers, the media, and other stakeholders. The Report of the NACD Blue Ribbon Commission on the Compensation Committee revisits NACD’s 2003 Report of the NACD Blue Ribbon Commission on Executive Compensation to highlight the new environment in which compensation committees—and, more broadly, boards—are now operating. It recommends that the compensation committee and board work together to establish an executive compensation philosophy that supports the company in creating long-term, sustainable value.

The report includes ten specific recommendations for compensation committees to consider when evaluating their compensation philosophies. It also provides practical tools, such as sample compensation committee charters, a compensation committee assessment, and guidance on executive employment contracts.