Importance of Board Culture

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In Wednesday’s NACD Directors Daily, Stuart Levine, writing in the Long Island Business News highlighted the need for collegiality among directors and its positive effects on board performance. Over the years, however, directors have placed less and less importance on this critical component of boardroom culture. According to research from NACD’s annual governance survey, board culture ranked very high in importance in 2007 and 2008 but has fallen  significantly in recent years. In 2007, board culture ranked number three in importance, just after board/CEO relations. In 2008, board culture moved to the number two spot.  

Things changed in 2009, likely as a result of the financial collapse. Boards began to rank strategic planning and oversight as the most important issue to board governance, followed by strategic planning and valuation. Board culture fell to tenth place that year. Likewise in 2010, board culture fell again to fourteenth place. This year, directors ranked it at eleventh place.

Strategy and financial performance are important, but so is culture. If a board cannot work together, work cannot get done. Relationships have a powerful influence on board performance and boards should be mindful that personal characteristics are every bit as important as skill sets when recruiting new directors or considering board composition.

The 2011 NACD Public Company Governance Survey will be available for purchase later this month.

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