Topics:   Corporate Governance,Strategy

Topics:   Corporate Governance,Strategy

July 20, 2018

The Board As a Tool for Faster Growth

July 20, 2018

During a recent NACD Director Professionalism® event in Seattle, I had a chance to discuss the current business climate with CEOs who run private-equity-owned companies. During our discussions, one word predominated: growth. I couldn’t help but ask the collection of CEOs in the room about that other G-word: governance.

As a lifelong business builder who is now focused on supporting the development of directors, I asked these CEOs how they leverage their corporate boards to help accelerate strategic revenue growth. Not surprisingly, their answers varied.

One CEO replied, “No way, I just want them out of my hair.” Another answered, “I’d like to, but I don’t have time.” Providing a counter perspective, Tom McAndrew, CEO of Coalfire, replied, “My board is a critical asset to help me and my team deliver better business results.”

The first two CEOs turned toward McAndrew to learn how he capitalizes on this valuable asset. “Why not use your directors to your advantage?” McAndrew asked. “They are smart, their compensation is well aligned with your success, and they collectively know more than you do. So I challenge my board to help me with my three highest-priority issues. First, I ask them to help me develop and refine our strategies to accelerate growth. Second, I ask them to help my team and me to discover, understand, and navigate key risks. Third, I seek their expertise to help me facilitate capital formation. We clearly would not have been able to grow our business over the last 15 years without my board’s help.”

This gave me a moment of special pride in the work that has been done at NACD for 40 years, work which is focused on elevating board performance and helping directors to lead with confidence in the boardroom. When directors make a difference in a company, they make a difference in the economy.

In fact, a good board of directors can help company managers to see the broader meaning of economic events and their implications for strategy, risk, and capital—all to foster more rapid growth.

Consider the rise in the Federal Reserve’s benchmark rate to 2 percent, the drop of the unemployment rate to 3.8 percent, and the ongoing trade wars between the United States and China. How might a board help management to make sense of such events? The board might engage with management to recalibrate strategy based on risks of a higher cost of capital, a greater scarcity of labor, and higher costs for imported goods. Directors with experience in such scenarios can help managers thread their way through the labyrinth of change. If needed, directors can also expand financial horizons for the company. Boards that include not only private-equity investors as directors but also other, independent directors may be able to widen their company’s access to capital.

Where is the good news? While the economic environment is changing, companies can cope with the help of their boards—and NACD is focused on elevating board performance and helping directors to lead with confidence in the boardroom.

As we concluded the discussion, I was asked if and how NACD can help CEOs to better leverage their boards and directors. Yes, NACD has a plethora of resources such as a private company governance resource center; the annual Global Board Leaders’ Summit in Washington, DC; and a series of Blue Ribbon Commission reports, among other assets. Our NACD Directorship magazine, with its regular small-cap column by Adam Epstein, “Entrepreneurial Governance,” contains great guidance for pre-public and small-cap companies—and a wealth of other insights about all facets of governance.

Net: for all CEOs out there who are seeking to accelerate strategic revenue growth, mitigate risk exposure, and facilitate capital formation, leverage your board—and let NACD help.