Is Your Board Focussed On Improving Performance?

Company boards have evolved over the years to be responsible for well defined governance tasks, ensuring that the organisation is managed in shareholders interests, strategy formulation, compliance with legal requirements, risk management and recruiting, presiding over, and supporting the Chief Executive.

Well publicised corporate failures (Enron, WorldCom, HIH) have rightly focussed attention over recent years on the monitoring role of boards, and resulted in responses to improve corporate accountability (Sarbanes-Oxley, NYSE corporate governance requirements, ASX Corporate Governance Guidelines 2010 Amendments, etc). While we are interested in the impact of board and committee structures, the key question now is how to improve board performance as a source of competitive advantage through greater scrutiny of board processes, and strengthening the interface between the board, Chief Executive, and senior executives.

Board Processes

The environment that boards operate within are increasingly difficult, Directors are time poor, the regulatory environment is complex, and shareholder and analyst expectations for results are high. In the past little attention has been spent on the processes boards use and their impact upon company performance, time spent focussing on improving processes will be well spent. Dimensions to examine include:

  • Administrative processes - Do administrative processes provide appropriate support to the board.
  • Strategic relationship with the business - Is the level of interaction appropriate?
  • Teamwork - Does the board work well together as a team?
  • Decision making - How are decisions made?
  • Constructive debate - Are discussions managed constructively?
  • Director development - Are opportunities available to develop Directors?
  • Gender diversity - Does the company have a diversity policy, with measurable objectives to assess progress?
  • Board Chair's performance - Is there feedback on how the chair's performance could be improved?

Board, Chief Executive Officer, and Senior Executive Interface

In a world where the competition for executive talent is frantic, market place perceptions of the board and how it interacts with the Chief Executive and senior executives is an increasingly important factor in attracting the best candidates. Building strong board Chief Executive and senior executive relationships that are appropriate to the environment the company operates within and the capabilities of senior executives, leverages Directors experience and expertise down through the firm. Dimensions to examine include:

  • Support to the Chief Executive - Is the level of board support to the Chief Executive appropriate?
  • Support to senior executives - Is the level of board support to senior executives appropriate?
  • Director capabilities and performance - Do Directors have the capabilities to monitor the company, and support the CEO and senior executives?
  • Chief Executive and senior executive development - How is the board developing the Chief Executive and senior executives?

Increasing attention to board processes and the relationships between board, Chief Executive, and senior executives, positions the board as a source of competitive advantage, increases the impact of the board on the company, attracts senior executive talent and investors, and sends a clear message that the board is serious about driving performance in all areas of the company's operations.

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