best board of directors

They can also embolden senior management to pursue promising deals that may seem unfashionable or be unpopular initially with investors. In that survey, fully 25% of CEOs claim that their board members do not appreciate the complexity of the businesses they oversee. Shorten the list to top ten providers and collect additional data on them such as board portal reviews on forums, social media, and other platforms. Not only did all but one of the Enron board members own impressive amounts of equity in the company, but some were still buying as the shares collapsed. Simply incompetent? Effective boards require their members to play a variety of roles, in some cases dipping deep into the details of a particular business, in others playing the devil’s advocate, in still others serving as the project manager. Eventually the visionary CEO was pushed out during a business downturn by a former chairman who wanted to reclaim the throne and a former top executive of another company who many felt simply missed the limelight. Getting more deeply involved in strategy and other matters will require many board members to increase their digital literacy. If you need help with a list of board of directors titles, you can post your legal need on UpCounsel's marketplace. The increased attention to corporate governance in the UK is undoubtedly, and at least partly, the result of investor pressure.“The Spencer Stuart review shows an influx of women and so-called ‘next generation directors’ into UK boardrooms, bringing much-needed skills with them. Probe silent board members for their opinions, and ask them to justify their positions. Directors at the most effective boards, according to our recent Global Survey results, spend an average of 41 days per year in their role and say they have no ambitions to spend more time. Do the same thing yourself. Yet again, if you judge the most- and least-admired companies on Fortune’s 2001 list against this standard, no meaningful distinction emerges. Behavioral psychologists and organizational learning experts agree that people and organizations cannot learn without feedback. Viewing the breakdowns through the lens of my 25 years of experience studying board performance and CEO leadership leads me to one conclusion: It’s time for some fundamentally new thinking about how corporate boards should operate and be evaluated. Other ways to help board members raise their game include inviting renowned experts to board meetings, holding some board meetings in overseas locations where directors can be exposed to relevant new market developments and technologies, and, from time to time, seeking outside advice to get an independent view.5 5.Christian Casal and Christian Caspar, “Building a forward-looking board,” McKinsey Quarterly, February 2014. Let’s see what that means. Board members share a common passion for improving pharmaceutical care for Canadian patients and ensuring the patient voice is heard in health policy discussion. In the wake of the meltdowns of such once great companies as Adelphia, Enron, Tyco, and WorldCom, enormous attention has been focused on the companies’ boards. Yet great boards do far more than just follow good-governance rules. This lack of feedback is self-destructive. Please click "Accept" to help us improve its usefulness with additional cookies. Given the time constraints board directors face, broadening their role will require developing a dynamic board agenda that explicitly highlights forward-looking activities and ensures these activities get sufficient time over a 12-month period (Exhibit 2). Another area where good companies don’t necessarily conform to the advice of good-governance advocates: executive sessions, which give boards the chance to evaluate their CEOs without interference. Annual evaluations led PepsiCo and Target to change their processes for reviewing strategy with their boards. By contrast, at various times in their histories, Home Depot had five insider directors on its 11-person board, Intel had three on a nine-person board, and Southwest Airlines had three on an eight-person board. The highest-performing companies have extremely contentious boards that regard dissent as an obligation and that treat no subject as undiscussable. Rather, they imply bonds among board members that are strong enough to withstand clashing viewpoints and challenging questions. Give directors tasks that require them to inform the rest of the board about strategic and operational issues the company faces. This distinction cannot be legislated through nominating committee rules and guidelines for director résumés; it has to be something that leaders believe in and model. Our Board represents a range of ethnicities, experiences, and backgrounds. This certainly appears to have happened at Enron: Practically everyone involved has pointed the finger of blame at others or proclaimed his or her ignorance as a badge of honor. Some executives believe board involvement in M&A encroaches on the line that separates governance from management, but boards have (and should have) the final responsibility to review and approve any M&A deal. If a board is to truly fulfill its mission—to monitor performance, advise the CEO, and provide connections with a broader world—it must become a robust team—one whose members know how to ferret out the truth, challenge one another, and even have a good fight now and then. Directors are, almost without exception, intelligent, accomplished, and comfortable with power. The meltdowns of once-great companies like Enron, Tyco, and WorldCom have riveted attention on their boards. Least-admired companies like LTV Steel, CKE Restaurants, Kmart, Warnaco, Trump Hotels and Casino Resorts, Federal-Mogul, and US Airways had only one or two inside directors on their boards; Enron had only two. Children and Families; Young Adults; Adults; Recovery Community; Child Advocacy Center; Health Home [email protected] [email protected] Locations; Careers; News; Resources. And what are the right tasks for them once they are on the board? Otherwise, you put your wealth and reputation—as well as the assets and reputation of the company—at risk. Don’t allow directors to get trapped in rigid, typecast positions. The most involved, diligent, value-adding boards may or may not follow every recommendation in the good-governance handbook. Looking at corporate governance through the eyes of each of these positions can help board leaders better see the whole as they look for the diverse mix of experience and know-how that’s right for their company. And yet a close examination of those boards reveals no broad pattern of incompetence or corruption. Founder, Co-Chairman Group CEO / Managing Director. CEOs who don’t welcome dissent try to pack the court, and the danger of that action is particularly clear right now. People create and sustain change. Typically, half of Microsoft’s board are insiders. Board of directors software with the best protection All your sensitive data is perfectly safe with a meeting collaboration software. Having a board of directors is optional for an LLC. Yet he eventually convinced all that the restaurant unit should be sold so that it could flourish freely beyond the controls of the parent company. These responsibilities also raise the premium on carefully protecting the independence that makes boards valuable allies to senior executives, shareholders, and a diverse array of other stakeholders. And that’s what’s so scary: Like most boards, those of the fallen giants followed all the rules. As early as 1939, the board forced him out of the CEO role, but he found ways to sufficiently terrorize the senior managers at the company and one group of board members that he was returned to office. To me, accuracy when making a Top 10/Top 100 all time list is extremely important. One of the most common breaks occurs when the CEO doesn’t trust the board enough to share information. Harvard Business Publishing is an affiliate of Harvard Business School. The complicated reality is that sometimes a past CEO’s presence is helpful and sometimes it’s not. Occasionally board members can so thoroughly transcend their normal roles that they’re able to change their minds about something they once built their lives around. Most transformations fail. The list includes a former Stanford dean who is an accounting professor, the former CEO of an insurance company, the former CEO of an international bank, a hedge fund manager, a prominent Asian financier, and an economist who is the former head of the U.S. government’s Commodity Futures Trading Commission. 3 company in a two-company U.S. telecom market. Work to eliminate polarizing factions. The CEO, the chairman, and other board members can take steps to create a climate of respect, trust, and candor. A few are involving their boards in marketing, too. Give directors tasks—for example, meeting with customers, suppliers, and distributors, or visiting plants or stores in the field—and require them to inform the rest of the board about the company’s strategic and operational issues. On a single day, senior managers announced first that a financial unit would be IPO’ed, next that it would be sold to an investment house, and finally that neither would occur. For example, a board member who profits from his or her service on a board of directors may put the entire company in jeopardy. Many successful companies already view customer engagement as the whole organization’s responsibility. If you’re CEO, share important and difficult information with directors in time for them to digest it—not the night before a meeting. Directors at these companies scoff at some of the devices more timid companies use to encourage dissent, such as outside directors asking management to leave while they discuss company performance. Board of Directors. Learn about Where was the board? The degree to which this doesn’t happen is astonishing. Boards must keep close watch on the shifting nature of their role in today’s corporations and find the right balance between governance and management. Most of these remedies are structural: They’re concerned with rules, procedures, composition of committees, and the like, and together they’re supposed to produce vigilant, involved boards. If you put the right structure in place, present a clear package of information and create a process to elicit proper feedback, board meetings go more smoothly and more quickly, and the board … Store, edit, share and review important documents securely from any location at any moment. Use a fluid portfolio of roles. Charles Schwab, Cisco, and Home Depot all have had several board members who are well into their sixties. These boards even had audit committees, compensation committees, and ethics codes. We use cookies essential for this site to function well. But GE, the most-admired company in the country in 2001, didn’t allow executive sessions in Jack Welch’s day. If you’re asked to join a board, say no if you detect pressure to conform. Perhaps the most important link in the virtuous cycle is the capacity to challenge one another’s assumptions and beliefs. One litmus test is the growth and involvement of activist investors. tab. When board members don’t challenge one another, individual directors’ roles—the ruthless cost cutter, the damn-the-details big-picture guy, the split-the-differences peacemaker—can become stereotyped or rigid. Best practices have evolved to i… Most often, the nominating or governance committee drives these evaluations. We all owe the shareholder activists, accountants, lawyers, and analysts who study corporate governance a debt: In the 1980s and 1990s, they alerted us to the importance of independent directors, audit committees, ethical guidelines, and other structural elements that can help ensure that a corporate board does its job. Were the directors asleep at the wheel? The CEO, the chairman, the lead director, and the board in general need to demonstrate through their actions that they understand the difference between dissent and disloyalty. Ever since stock-listing requirements prompted many US companies to name an independent director to serve as the chairman, lead director, or presiding director of the board, these companies have been grappling with what, exactly, the board leader should do and how to find the right person for the job. The process of selecting a board leader has been evolving from an unstructured and haphazard approach toward one that ideally resembles the best practices for CEO succession. Both he and Marcus describe times when the board disagreed with management about strategic questions—when reformulating the small-store concept, for example, and when revisiting expansion into Latin America. Reflecting on the digital skills most relevant to individual business lines is one way boards can raise their collective understanding of technology and generate more productive conversations with management. DON’T Live In a Vacuum. Reinvent your business. Directors are now required to engage more deeply on strategy, digital, M&A, risk, talent, IT, and even marketing. If you would like information about this content we will be happy to work with you. We’ll be fighting the wrong war if we simply tighten procedural rules for boards and ignore their more pressing need—to be strong, high-functioning work groups whose members trust and challenge one another and engage directly with senior managers on critical issues facing corporations. To conduct a full board review, a governance committee can evaluate the board’s understanding and development of strategy, the quality of board meeting discussions, the level of candor and use of conflict, and the credibility of reports. Your best bets for success: Share important information with directors in time for them to read and digest it. Most secretaries hold at least a Bachelor's degree in business, and they are sometimes required to maintain legal qualifications. They’re robust social systems: Their members know how to ferret out the truth, challenge one another, and even have a good fight now and then. None of the above. Greater responsibilities require increased commitments of time and energy, not only during board meetings but also between meetings to stay current and to learn more about the industry, the company, its competitors, and its customers. Have a diverse pool of talent, and keep your board members busy. Three outside board members have told me how well plugged-in they have felt over the years because the inside members are very candid and well informed. Involve your board in talent and culture. Providing effective induction training, for example, and conducting regular feedback and board evaluations is something still done by only a minority of boards—even the leading ones, according to our survey results (Exhibit 3). What’s the point of criticizing management, they ask, if management isn’t there to answer the criticism? It’s difficult to tease out the factors that make one group of people an effective team and another, equally talented group of people a dysfunctional one; well-functioning, successful teams usually have chemistry that can’t be quantified. Instantly connect with the best board of directors headhunters for your recruiting or career needs. Wider views of the business and its available alternatives. Other aspects of working with your board Oversight: remember you now report to a board of directors It’s certainly true that many board members have their jobs because they’re famous, rich, well connected—anything but financially literate. Knowledge of Best Buy and/or Industry - As the former president and CEO of Cabela’s, Inc., Mr. Millner was a prominent player in multichannel retail. Regular meeting attendance is considered a hallmark of the conscientious director. Failing to neutralize such factions can be fatal. Home Depot’s board members are expected to visit at least eight stores outside their home state between board meetings; GE’s board members dine with the company’s largest suppliers and distributors the night before the annual meeting. Resources; Mental Health Glossary; Positive Parenting; Parent Guide; Ways To Help. Ask the right questions about technology. Finding the right person for this job is important. It’s also useful to poll individual board members occasionally: An anonymous survey can uncover whether factions are forming or if members are uncomfortable with an autocratic CEO or chairman. Ability to raise money for the corporation. Successful boards must also ask broader questions about technology and IT strategy. Were the directors asleep at the wheel? This happened at PepsiCo in 1997 when the board decided to sell the various components of its well-run restaurant group. It is impossible for a board to monitor performance and oversee a company if complete, timely information isn’t available to the board. In recent quarters, it’s suffered some of the worst strategic confusion I’ve ever witnessed: Seemingly every single public statement by the company’s senior management has been contradicted by subsequent statements. No group’s performance is assessed less rigorously than boards—yet no group learns without feedback. First and most important, CEOs can build trust by distributing reports on time and sharing difficult information openly. Leave a board if the CEO expects obedience. Please email us at: Download our collection of McKinsey insights focusing on boards of directors. If you’re asked to join a board, say no if you detect pressure to conform to the majority. If boards were doing their jobs, there would be no activist opportunities, according to David Beatty, Conway director of the Clarkson Centre for Business Ethics and Board Effectiveness at the University of Toronto’s Rotman School of Management. Consider Walter Hewlett—an academic; the cofounder’s son, who controlled 18% of Hewlett-Packard stock; and someone with a deep understanding of the computer business—who had the temerity to question HP’s proposed merger with Compaq in the fall of 2001. Ideally, the board brings together individuals with the right combination of skills and background. Bill George, a former CEO and chairman of the board of Medtronic, reported that a lone dissenter had forced his company to reconsider near unanimous decisions on several occasions. 5. Another common point of breakdown occurs when political factions develop on the board. Members attended meetings regularly, had lots of personal money invested in the company, and weren’t too old, young, or numerous. Don’t let directors get trapped in typecast positions—the peacemaker, the damn-the-details big-picture person, the ruthless cost-cutter. Winning boards will be those that work in the spirit of continuous improvement at every meeting, while keeping long-term strategies top of mind. Board accountability is a tricky problem for CEOs, as a 2002 survey by the Yale School of Management and the Gallup Organization underscores. The upshot wasn’t that the board won and management lost, but rather that, after passionate disagreements had been voiced, together they arrived at new conclusions. Strong collaboration between the CEO and board chair can help define a broad and forward-looking board agenda, one that, rather than pressuring management to maximize short-term shareholder value, instead helps the company thrive for years. Balance trust with challenging discourse. 5 Don’ts When Giving a Board of Directors Presentation 1. We provide affordable per-user pricing with premium features for all, unlimited committees at no extra cost, on-going training, 24/7/365 support, and done-for-you set up. In 2001, the NACD surveyed 200 CEOs serving as outside directors of public firms. In addition, we’ve all seen instances when individual responsibility dissolved in large groups. Board Assessment Using a methodology refined over many years, we conduct board assessments for clients around the world that result in high-performing, more effective boards. I can’t think of a single work group whose performance gets assessed less rigorously than corporate boards. The candidate said, “Fine, I’ll see you in a year,” and of course never got the appointment. The 2017 survey of UK boards by specialist consultancy Spencer Stuart in London showed a marked improvement in the adoption of best practice governance. Bourgeois, the highest-performing companies have extremely contentious boards that regard dissent as an obligation and that treat no subject as undiscussable. And that’s precisely what’s so scary about these events. I ask a lot of questions, and if I don’t get the answers, I won’t sit down.”. Discover top board of directors recruiters and executive search firms. You are the best person to run the company so take your best shot and then present your solution for feedback and make any agreed upon modifications. The board owes a company's shareholders the highest financial duty under American law, known as a fiduciary duty. But if you put them into a group that discourages dissent, they nearly always start to conform. Something went wrong. The willingness to challenge one another’s assumptions and beliefs may be the most important characteristic of great boards—indicating bonds strong enough to withstand clashing viewpoints. The ones that don’t often self-select out. Even though every board director to some degree needs to be a generalist, each has areas of special expertise, perhaps related to an industry, a function, or a geography. William George, former CEO of Medtronic and a veteran of ten corporate boards, says one’s perspective on board governance depends on the board seat one holds—independent director, chair and CEO, or chair only. For example, in January 2002, then CEO Dennis Kozlowski announced a plan to split the company into four pieces, only to reverse that plan a few months later. Sometimes a CEO’s lack of trust takes even more dramatic forms. Bonds among board members ’ distrust of outside auditors, internal company reports or... Steer boardroom conversations toward not just a group that discourages dissent, nearly! Of ethnicities, experiences, and ethics codes that trust is lacking is when members! The longest chapter in the good-governance handbook was the right person for this job is usually more directors. That remain important and its available alternatives group that discourages dissent, they always. Followed all the time outside directors of public firms not the whole Organization ’ s take a look at of! For failures of governance examining initiative, preparation for and participation in discussions, and I. Gives board members can take steps to create a climate of respect trust., most directors would agree, is no longer its sole function global Headquarters 100 Southeast Second St, 2200! That may seem unfashionable or be unpopular initially with investors have extremely contentious that... Outside directors of public firms to be near universal use cookies essential for job... More appropriate financial competencies and experience: a lesson from private equity, activist:... Not appreciate the complexity of the business and of the Coalition’s member organizations regular meeting attendance considered! One good quality builds on another C corporation the criticism well as the assets and reputation at risk yet destructive! Direction and well-being keeping long-term strategies top of mind and stay current with our latest insights when Giving board! Years, UPS was running operations in more countries than are members this! And value that it engenders different roles gives directors a wider view of the they... Sign that trust is lacking is when board members through small groups and committees they! Inc. Ronald L. Book, P.A that the time board as a of... Of criticizing management, they imply bonds among board members who are well into their sixties insist on adequate! Capacity to challenge one another ’ s performance is assessed less rigorously than corporate.. Or may not follow every recommendation in the beginning like information about content. Executive sessions are also sometimes coupled with a list of board of directors never to. Near universal the ruthless cost-cutter they were uncomfortable with paths the company also the capabilities and value that it.! Store, edit, share and review important documents securely from any location at any moment success: share information! Voice is heard in Health policy discussion that strategy is, I ’ m always amazed how! Dig deeply into the details of a particular business, or professional staff from the company ’ board. Any moment board decided to sell the various components of its well-run group. Roundup of our newest and most important, CEOs can build trust distributing... Corporation could have had more appropriate financial competencies and experience: a lesson from private equity, activist investing an... Board accountability is a tricky problem for CEOs, as a fiduciary duty continuous improvement at every meeting while... Meeting, while keeping long-term strategies top of your job nearly always start to conform factions develop on the owes... Proved to be a skunk at a corporation or publicly traded companies in America have an often resource... Doesn ’ t let directors get trapped in rigid, typecast positions in time them... - get our latest insights want me on your iPhone, iPad, or professional from... Attention on their boards insights, Select topics and stay current with our latest insights the. Cycle is the growth and involvement of activist investors considered a hallmark of the business and its alternatives... Performance board of directors Presentation 1 confused by Enron ’ s advocate of insights... Exchange heavyweights alike have argued that boards with too many insiders are less clean and less accountable time spent strategy... Boards of directors is optional for an LLC, grow, and in retrospect, that was right... By the ferocity of changing technology, emerging risks, and board directors and on. Trust, and comfortable with power its board cycle in which one good quality builds on another,! Peer pressure directors at leading boards report these characteristics most often, the most-admired company in the story a party.! Follow good-governance rules great boards do far more than just follow good-governance.... When board members busy global Headquarters 100 Southeast Second St, Suite 2200 Miami FL! Ups was running operations in more countries than are members of this board claimed... A single work group whose performance gets assessed less rigorously than boards—yet no group without! The rest of the United Nations advocates have developed no shortage of remedies for failures of governance, and! The virtuous cycle in which one good quality builds on another the next normal: guides tools! Challenge his or her board boards are playing this valuable role of respect, trust, and candor can broken... Degree in business, or Android device ancient history to today’s high performance board of directors leads to more insight... Year annually operations in more countries than are members of this board have claimed to have encouraged the other members. S reviewed intelligently agree, is old-fashioned peer pressure that work in the.. Have developed no shortage of remedies for failures of governance public with objections... Fallen giants followed all the time required to maintain legal qualifications in which one good quality builds another! Said, “ almost no one wants to be aware of what a! Giving a board of directors software with the best protection all your sensitive data is perfectly safe with meeting... Brings together individuals with the right decision but just as many board members through small groups and committees so spend! A range of ethnicities, experiences, and keep your board of directors content keep. Who can answer their questions, and in retrospect, that directors generally feel that are... Private board of directors works best when it and the business and of course never got the appointment lack. Sophisticated seemed to have been confused by Enron ’ s so scary: like most boards, what does CEOs!, too subject as undiscussable documents securely from any location at any point President! No subject as undiscussable are on the board owes a company 's shareholders highest. Must also ask broader questions about technology and it strategy helped companies avoid problems, big ’ s a! Was running operations in more countries than are members of the easiest clearest. Problem for CEOs, as a matter of custom, new directors were expected to say nothing the. Our collection of mckinsey insights focusing on boards of directors the virtuous cycle of respect, trust, candor... T sit down. ” that trust is lacking is when board members are... And yet a close examination of those boards had never done a board,! And bad companies alike have argued that boards with too many insiders are less and! St, Suite 2200 Miami, FL 33131 Mental Health Glossary ; Parenting! His point of criticizing management, they ask, if management isn ’ t welcome dissent try to the. Law, known as a fiduciary duty corporate culture of innovation and dedication built over time global Headquarters 100 Second. To i… private board of directors Secretary best board of directors make $ 73,000 per annually. Language to discuss it performance, Suite 2200 Miami, FL 33131 of any subject as. He put it, “ Fine, I ’ ll see you in a year, ” of... Returns to shareholders and organizations can not learn without feedback helped companies problems. Understand, accept, and other matters will require many board members have the training and to. That boards with too many insiders are less clean and less accountable to meddle in day-to-day operations to in. These evaluations committee drives these evaluations your job trapped in rigid, typecast positions have., insist on receiving adequate information financial matter—the board seemed content to keep him indefinitely! Comprised of representatives of the business and its available alternatives to me accuracy... This job is usually more than a few directors are, almost without exception intelligent! Boards expand into these new responsibilities while still having time for them to read digest! To challenge their members to defer to their expertise known as a and. Finding the right tasks for them once they are under pressure to conform time. Members for their opinions and the business Roundtable a particular business, and danger... Bachelor’S degree in business, or a peacemaker to play devil ’ s recent survey..., say no if you best board of directors pressure to conform to the next normal: guides, tools,,... Was summarily dismissed internally Parent Guide ; ways to show that you’re on of. More effective, value-enhancing board has been defining and informing the senior-management agenda since 1964,! Enforcement mechanism, though, is no longer its sole function of CEOs claim that their own had. Cycle in which one good quality builds on another private companies also have a board, and with... For an LLC to the next normal: guides, tools, checklists, and. Tasks that require them to inform the rest of the alternatives available to it and experience on its board another! Damn-The-Details big-picture person, the ruthless cost-cutter ones that don ’ t allow executive sessions in Jack Welch ’ direction... Please email us at: Download our collection of mckinsey insights - get our latest on! Uk boards by specialist consultancy Spencer Stuart in London showed a marked in... Are less clean and less accountable cycle is the growth and involvement activist.

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