Respect is the key to successful board relations in public and private companies, government boards, and non-profits. And respect requires active communication, careful listening, effective committees, and detailed preparation for all meetings. But with all the focus on process in Sarbanes-Oxley, Dodd-Frank, public sunshine laws, most reform efforts miss these key mechanics of successful boards.
This is not a legal commentary. Any competent law firm with an active corporate, government, or NGO (non-governmental organization) practice can advise on fiduciary duties of boards. This is a commentary on the human elements of successful boards.
Expectations of a Rubber Stamp
Regardless of whether a board is corporate, governmental, or an NGO, if you want an effective board the organization will recruit strong, intelligent, vocal women and men. Experience in the organization’s field is often mentioned as important, but this is often a trap. A board composed solely of industry, agency, or charitable experts is often imprisoned in conventional wisdom.
A board of strong, intelligent, and vocal members will not tolerate being a rubber stamp. They are on the board to advise the CEO or Executive Director and to push them and their staffs to overperform on operations, finance, and strategy. Management has to expect that the board will reject or modify ideas.
And management cannot be defensive about rejection or modification. More often than not a board is saving management from tunnel vision and conventional thinking. Sometimes the board is raising profound ethical and strategic questions. This is its greatest virtue.
Committees too Big for Their Britches
Committees of the board are an effective tool for preparing issues for the entire board to consider in a board meeting. They are not substitutes for the entire board. Committees report to the board. Ideally, they present a range of possible actions based on facts and analysis with a recommendation about the best course of action. They never, ever, present a fait accompli.
The most common mistake I witness in board preparation is management or the chairperson circulating an agenda and supporting documents last minute without board input. Then the board arrives at the meeting expected to vote for a particular outcome. Typically, board members have big egos. It is part of their success.
At a minimum this is a recipe for hard feelings and board members believing they are disrespected or taken for granted. A worse outcome is a non-unanimous vote or an outright defeat.
In the best run public company board I served as general counsel and several boards where I was a board member we followed a simple process. A draft agenda and important committee reports were circulated two weeks in advance. The CEO called personally each and every board member for advice and input. The General Counsel, Secretary, or Chief of Staff called a few days later to follow-up in case there was an uncomfortable topic where an alternative listener was an advantage. Issues were resolved and although no decisions were made outside the meeting, we knew the vote count before the meeting.
This is very simple. There should never, ever be a surprise in a board meeting. At every level from travel arrangements to CEO hirings make the board feel special. Surprises are not special.
If you use the board just to fundraise, then make sure that you pick distracted, disinterested, rich people to serve on your board. At least be honest when you take people’s money and explain they are wallpaper in board meetings.
Picking the CEO
The most important issue boards face is the selection of the CEO. Often a committee working with a recruiter is charged with producing a slate of candidates. Again, the committee’s job is to do the grinding day to day work of producing a qualified slate.
It is never to present a single candidate. Imagine a board member arriving at a meeting expecting a slate or a committee report faced with a vote on a single candidate. They may vote “no” costing you a candidate who worries about lack of board support. Worse, you may create a perpetually disgruntled director.
The best run boards in my experience conduct annual reviews of board members performance. Are they attending a minimum number of meetings? Are they prepared? Are they providing ideas or offering network opportunites? Are committees providing effective work? Are board members passive or active in pushing management and strategy?
It is an uncomfortable process that requires great listening and tact. But it removes deadwood and opens up opportunity.
Respect at every interaction is the key.