Tag Archive: Society of Corporate Secretaries

Balancing Act – Building a Better Board

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Boards today face an increasing number of demands. In addition to an increasing number of regulatory requirements, they are also meant to be the problem solvers and strategic leaders for companies. With the fast pace and growing complexity of business today, that is no small task. To guide an organization through today’s challenging business environment, the board must be comprised of directors with a wide range of skills and experiences

Diversity of a board is not simply guided by race or gender. There must be diversity on an intellectual level. A board that truly serves as a strategic asset to investors is one that brings together a team whose skill sets are aligned with the goals of the company. For example, a U.S. company interested in expanding overseas operations should have a director on its board that has experience taking a company global.

Even companies that have a targeted demographic, such as Avon “the company for women,” have diverse boards. Although Avon’s tagline is generally a women-centric company, the company’s board is represented by a mix of men and women, as well as directors with varying ethnic backgrounds. Boards today need to have a range of skills and experiences in their portfolio to help companies succeed in an increasingly competitive environment.

NACD and the Society of Corporate Secretaries and Governance Professionals held joint roundtables nationwide to bring directors and legal professionals together to discuss the board building process. This distinguished group identified three fundamental concepts for creating the optimal board composition:

1. Analyze the needs of the board, its strengths and weaknesses, and determine what skills are needed for aligning the board with the strategy of the company.

2. Recruit to the board’s needs by casting a wider net to find candidates who have the skills, experience, desire, and time necessary to drive performance at the board level.

3. Evaluate the board regularly to identify areas to improve its own performance and develop a plan to address them.

Boards of directors are working to build better balanced boards through the assessment of skill sets and experience. NACD offers several board composition planning tools to help directors determine the best possible construction for their boards.

The Cake

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Mellody Hobson I had the pleasure to speak with Mellody Hobson, the president of Ariel Investments, after her opening remarks today at the Society of Corporate Secretaries and Governance Professionals annual conference in Chicago.

Mellody is a very passionate, smart and disciplined leader, and many of her suggestions can add distinct value to all directors, boards and senior executives. Her knowledge nuggets are gleaned from her current board leadership experience at Estee Lauder, Starbucks and DreamWorks Animation—among others.

Here’s a quick summary of Mellody’s key points:

  1. Keep slides to maximum of three pages – not three inches thick!
  2. If an executive or presenter wants to provide more information in the board book, fine—but don’t “re-read” to the board what’s in the board book. That’s insulting and a massive time suck!
  3. Whenever presenting material to the board, start with “the headline is…”  Net: Stick to the key takeaways and implications, and allow for an interactive knowledge exchange between the board members and participants.
  4. There are no categorically right or wrong approaches to corporate governance.  Mellody is a fan of the NACD Key Agreed Principles, and she suggests that boards take a principles-based approach to providing board leadership oversight of their company. For example, many ask her if co-CEO/Chairman roles do, or do not, make an impact on an investment decision. Short answer:  No. There is no right or wrong way, as a categorical decision, to run a company or board.  Whatever is best for the company, in the long run, do it and move on.
  5. Lastly, “The Cake.” The executive session is the best part of board meetings. This is where and when the real meaningful dialogue occurs. When asked if the executive session should occur before or after the board meeting: after. Listen and discuss during the formal board sessions, and then opine based on information and insights.

It should be noted that Ariel Investments takes a long-term view when making investment decisions— typically three-five years minimum, and Ariel Investments has held positions for over a decade. If all boards, directors and shareowners (i.e., not traders and share flippers) take a similar approach to evaluating and running their businesses, perhaps capitalism can prove merit once again.