This Part explains the first 5 practices. Part 2 describes the last 5 practices.
Recent and very public “white collar,” stock-fraud crimes have brought much public attention to how governance is supposed to work, but too often doesn’t. The Sarbanes Oxley Act is one example of new regulations intended to strengthen the transparency and accountability of Boards of public corporations. Consensus seems to be that more independent Board members and less involvement of CEOs on Boards is one solution for for-profit and nonprofit Boards.
Some Board members have over-reacted and dramatically distanced themselves from working with their CEOs. Still, the quality of the working relationship and mutual support between Board members and their CEO is critical to the success of a corporation, whether for-profit or nonprofit. We should not expect CEOs to have to work apart from their Boards members — frequently, it’s the CEOs who support members to do their jobs! Here are some practices that CEOs can do for their Boards without losing the diligence and accountability of Board members.
1. Ensure clear descriptions of roles of Board and CEO
Years ago, a person had to hire a consultant to find suggestions or tools to clarify the roles of a Board and its CEO. Now, there is a wealth of resources available on the Internet and bookshelves. An organization should end up with a document that clearly specifies the types of functions and decisions that are driven by, and even those done by, the Board versus executives and other managers. The document should be reviewed once a year during a brief Board training.
2. Recruit Board members based on their strategic expertise
As much as possible, these people should be independent Board members – members who are not or have recently been employees of the organization, are not relatives of the CEO, are not in organizations which have the CEO on their Boards, and are not major customers or vendors. Instead, bring in members who have expertise to address current strategic priorities and, ideally, have been on a Board of a well-respected organization. (Some Boards might be required by investors or other stakeholders to have representatives on the Board. Strive to have some based on their expertise.)
3. Orient Board members to the organization
Frequently, members can serve on a Board for years and still not really know what products and services are offered by the organization. CEOs can significantly increase the effectiveness of Board members by orienting members to the organization, including its history, products and services, customers, collaborators and successes. Note that this is a Board orientation, not a Board training. An orientation is about the unique aspects of the organization. A training is about the role of any governing Board.
4. Annually train members on the role of a governing Board
Because the CEO remains in the organization working with the Board, while Board members come and go according to their term limits, the CEO often understands the role of a Board more than its members do. The CEO can be very useful, for example, in working with the members of a Board Governance Committee as its members conduct a Board training each year, but should not be taking the lead responsibility in this training.
5. CEO should have strong role in strategic planning
Boards that view its members as attending primarily to top-level policy — especially Boards that have over-reacted to recent regulations about governance — will sometimes make the mistake of determining mission, vision, values and top-level goals without the input from the CEO and other employees. That’s a mistake. The most useful strategic planning sessions often involve information, discussions and suggestions from the CEO and employees.
Part 2 will describe the next 5 practices to cultivate a successful strategic partnership between Board members and the CEO.
What do you think?
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Carter McNamara, MBA, PhD – Authenticity Consulting, LLC – 800-971-2250
Read my weekly blogs: Boards, Consulting and OD, Nonprofits and Strategic Planning.
Carter McNamara of Authenticity Consulting, LLC, provides organization development and consultant training services, and is developer of the Free Management Library.
Julie Garland-McLellan uses her experience and depth of knowledge in corporate governance to show boards with limited resources how to be more effective through practical governance innovation and know-how.
Nick Lindsay of Elemental CoSec, provides corporate governance, legal and company secretarial advice to a wide range of companies in the UK.