Are your board directors dinosaurs?
“A decade ago, when one non-executive director joined the board of a paragon of American industry, a long-serving colleague told him, in private, “New directors shouldn’t speak up during board meetings for the first year.” That attitude is untenable today and, in fact, that board is much different now. But such comments are indicative of the culture of passivity that permeated the Dark Ages of corporate governance.
Some readers may remember when such ‘ceremonial’ boards were commonplace. Management had all its ducks in a row by the time a board meeting began. There was a scripted morning presentation that was rehearsed to the second in a tight agenda. The CEO communicated very little with the board between meetings, other than with the one or two confidants the CEO trusted and worked with if the need arose.”
Ram Charan, Boards That Deliver (2005)
Ram Charan is arguably the world’s most successful management consultant, charging his clients upwards of $20,000 per day. He works with the likes of GE, Intel, DuPont and Citi – and has advised them for decades.
Mr. Charan spends all his time thinking about strategy and governance, and his book Boards That Deliver was a landmark in the corporate governance field. In it, he observes that there are phases of evolution for boards. The board he describes in the excerpt above is what he terms a ‘ceremonial’ board: a body that exists to conduct statutory duties – and very little else.
Sound familiar? In this part of the world we have all come across precisely this kind of board animal: dull, scripted meetings; information tightly controlled by management; no time allocated for interactive dialogue at board meetings. And, therefore, very little need for directors to actually understand the business.
In the not-so-distant past, a job on this type of board was the ultimate sinecure. Firstly, one was generally invited to the board by one’s buddies in the corporate world. Secondly, directors often actively sought conflicts of interest: professionals tried to sell services to the company; politicians marshalled the company’s resources for personal use, particularly at election time. Thirdly, a non-executive director really expected to have very little to do as a board member: a few tedious meetings every year followed by a sumptuous lunch; a board retreat or two at a 5-star beach hotel; a generally uneventful AGM where an occasionally troublesome shareholder livened up proceedings.
Thankfully, things are changing. Mr. Charan defines ‘progressive’ boards as the ones that will soon be the norm everywhere: boards that add real value to the company; that work as a team rather than a collection of nobles; that teach directors the nuances of the business and demand active participation by all; and that regularly evaluate their own performance.
In East Africa we are witnessing the arrival of the progressive board. Directors are younger and more unconventional: you no longer have to be male, retired or tired to join a board; young executives are increasingly a feature. Board meetings are spirited and allow plenty of time for meaningful debate. Board members get involved in thinking deeply about strategy. And the CEO actually values the role of directors as guides and counsellors.
So look out for the progressive board: coming soon to a corporation near you…
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