Survey: Boards Favor Lead Director Structure

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Earlier this week, NACD finished collecting responses to the 2012 NACD Governance Survey. In a preliminary review of the results, we found some interesting data. For instance, of those companies with a combined CEO/chairman leadership structure, 82.8 percent also had a designated lead director. Nearly all of those with a lead director found that the position enhances the board’s effectiveness; just over 50 percent found that it helped to a “great extent.”

Perhaps the most interesting finding came from a new question that asked, “Do you believe the lead director structure is more effective than that of a non-executive chairman?” Nearly 43 percent of the respondents answered in the affirmative while only 16.3 percent said, “No.” However, a significant portion (27.9 percent) believed that the structures had the same effectiveness (13 percent said, “I don’t know”).

The strong support for the lead director structure may stem from a variety of sources. For one, many boards favor a combined CEO/chairman for “ensuring clear strategic alignment throughout the company,” as stated in Home Depot’s 2012 proxy statement. Other companies, such as Pfizer, see benefit in the lead director’s “strong leadership skills.”

Regardless of the rationale, structure is not the heart of the issue, as a variety of structures can provide the leadership crucial to an effective board. Rather, the effectiveness of the individual serving in the role can make the critical difference. For example, the lead director can enhance board effectiveness by following six practices outlined in last year’s Blue Ribbon Commission Report:

  • Consider the bigger picture.
  • Organize information for action.
  • Give a voice to every director.
  • Conduct effective executive sessions.
  • Plan for director succession.
  • Provide leadership in a crisis

To learn more about these six practices, review the BRC Report on the Effective Lead Director. Complimentary copies of the BRC report are available only to full board members.

 

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