Tag Archive: independence

Self-Reflection: Three Questions Boards Must Answer

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The stakes are higher than ever before. Public expectations are greater than ever before. It is an immensely challenging business environment in which boards must now play a decisively stronger role to ensure the highest standards of corporate governance.

To that end, boards need to embark on a continuous process of self-assessment. We cannot do better tomorrow until we ask ourselves an important question: How are we doing today? Only where self-reflection is part of the board’s DNA can it provide the strategic guidance that defines its mission.

While many large and small questions drive self-reflection, three essential questions begin the process.

  • Are we independent?

There are often fundamental warning signs that a board is no longer thinking independently and that self-interest may be clouding its judgment. One is tenure. How long has each member served? Is it possible that, as a result of many years of service, some members have become too narrow in their perspective or that their own personal investment in the company might create a conflict when big decisions need to be made?

“It is generally agreed that director perspectives on a particular company can become stale and even compromised after many years of continued service,” according to the Bridging Board Gaps report by the Columbia Business School and the University of Delaware. “It may be difficult to remain objective about a company one has served for a long time.”

In other instances, circumstance simply makes independent judgment impossible. If a family business goes public, for example, family members cannot function as independent-thinking board members.

The self-reflection that a board needs to assess its own independence has to be a tough-minded, conscientious process. Hard questions need to be asked. But the board that has the courage to ask itself the hard questions is all the more likely to have the courage to act decisively to address critical problems in the future.

  • Do we have chemistry?

There has to be some real chemistry in the boardroom if discussions are to be open and free-wheeling. Board members have to trust each other. They have to feel free to float new ideas and challenge others. They don’t have to be best friends, but board members need a sense of camaraderie to assure a creative group dynamic.

An attentive, enthusiastic and engaged board means more efficient decision-making. Are your board members attentive, engaged and active? Are there certain directors who are not? Is there some adjustment, some way to change the chemistry to ignite a higher level of enthusiasm?

  • Do we have the right team?

Having the right team means building a well-constructed board, with members from a variety of backgrounds who are ready to meet the challenges ahead. Having the right team means a broad range of skills, talents and perspectives that can feed the company’s strategy in multiple contexts. It is a competitive necessity, reflecting varied work experiences, personal backgrounds and educational training.

Really think about your board composition. Do the directors around the table offer a diverse mix of industry experience? Do you have expertise across various disciplines such as operations, marketing and finance? Watch out for too much expertise in any one industry. Whatever the company’s business, independent input is essential if the board is to advise on the multiple opportunities and problems that confront management.

In fact, board members are often all the more valuable when they can see the company as other stakeholders see it.

Self-reflection is a never-ending process. Questions about your independence, chemistry and  diversity must be constantly revisited and broadened to ensure optimal service.

Self-reflection is also a challenging initiative.  Performing an objective, holistic evaluation of your board may require the engagement of independent professionals who stand ready to provide the benefits of their significant experience and intellectual capital.

Sometimes others need to see you before you can really see yourself.

Learning High above Sea Level: Deer Valley, UT – NACD Director Professionalism®

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Fay Feeney is CEO of Risk for Good, an advisory firm providing board chairs and corporate counsel guidance to monitor, govern and leverage the fast-moving landscape of social media, technology and the Internet. 

One of my table mates at the NACD Director Professionalism course I recently attended in Deer Valley, UT was Allan C. Golston, president, United States Program of the Bill & Melinda Gates Foundation. It’s amazing who you sit next to at NACD events. Allan swore his learning wasn’t disrupted by my tweeting during class, and shared with me his takeaways from two days with NACD.

“The course was more than ‘rules of the road’; it was also a dialogue around how to think about the fundamentals of being an effective director in the 21st century in a strategic way. Whether it was rethinking what it really means to have an independent mindset, or rethinking what it means to have courage in the boardroom, or rethinking what it means to represent shareholders—I found these types of fundamentals the most useful.”

Allan Golston with Rob Galford, Compensation Chair, Forrester Research and NACD facilitator

I agree. I invested my time and money to have a refresher on fiduciary responsibilities and to pick up some useful tips on how to contribute most effectively in the boardroom and on key committees, but I came away with so much more: insights that have reshaped my thinking about how to lead in governance and examples of great board behaviors that will galvanize my own priorities and performance.

Mike Lorelli, CEO of Water-Jel Technologies, and another high-flying classmate, agreed. “As much learning in two days, as in two years of an MBA program,” he said.

Mike Lorelli at the NACD resource center

The sessions at Director Professionalism are led by active public company directors. I loved hearing Michele Hooper, who sits on the boards of Astra Zeneca, UnitedHealth Group, PPG Industries and Warner Music Group, encourage newbies by saying:  “Everyone has a “first” board seat. Today’s most experienced directors had a first board seat.”  

She encourages boards to consider qualified candidates without prior director experience, maintaining that, if your board is looking to expand their recruiting to engage more diverse thinking, they will need to refresh their thinking about board composition. 

Although the NACD facilitators were great, the really valuable learning often came from other members of the class. “There really weren’t 10 instructors—more like 70 when you count the learning from the 60 peer-level CEO’s and directors,” said Mike Lorelli. Allan Golston agreed.

“The ‘official’ instructors were really strong, but the interplay and dialogue among the group enriched the content and learning well beyond what the official instructors provided.”

Pamela Packard is a private company director who is active in NACD’s New York chapter. She felt that the snowy setting of the Montage Deer Valley Resort provided lots of opportunities for “off the record” candid conversations among directors from diverse backgrounds and experiences. “These discussions complemented the formal sessions.” She also told me “newcomers to corporate governance had the chance to glean the subtleties of different board cultures and communication styles, learning from those of us with more experience.”

Pamela Packard

Pam really valued the plethora of publications and extra learning resources provided by NACD. “Great reference materials for future use!” she said.

Director Professionalism has a comprehensive list of learning objectives but really these were just the starting point for our class. In the fast moving world of governance, it’s not only what you know, but who in your network can help you keep your knowledge current. Thanks for a great class. I’ll keep on learning with NACD and look forward to becoming a 2011 NACD Governance Fellow.

To sign up for Director Professionalism in Houston TX, San Francisco CA, or Palm Beach FL, please click here