Key Elements of a High-performing Board

Today, my good friend Doug Park shared a link to a report (PDF) by the Lead Director Network. This is a group of directors who gathered to discuss, in this instance, what is meant by a high-performing board, the critical components for enhancing board performance, and how boards may evaluate their own performance.

As you will see from the report, the lead directors from a number of high profile companies participated. However, I am not sure I agree with their results.

On the question of what are the key components of a high-performing board, the group decided there were four:

  • The right group of directors in the boardroom
  • Robust, constructive interactions between the board, CEO, and senior management team
  • A fundamental understanding of the company and the external environment
  • Ongoing, substantive involvement in corporate strategy

You can certainly read a lot into each one of these, so it necessary to read the explanatory text. Even then, the group may have intended the following to be covered, which are not discussed as best I can see:

  • A diverse board, with insights and experience in all major aspects of the organization’s industry, economic environment, etc. I would have expected this to be discussed as part of the “right group of directors” point, but it is not.
  • An attitude of “noses in” and “fingers out”. The directors need more than a good working relationship with the executives, and the ability to challenge them. They need to demonstrate a level of skepticism at all times
  • The ability to assess the performance of the management team, make changes where needed, and set compensation appropriately
  • A board cannot function effectively without reliable, timely, and relevant information. Internal audit can provide assurance on the controls around providing the directors with the information they need, when they need it, in a form they can use
  • Risk should be part of every strategy discussion, but I don’t see oversight of risk management in the piece
  • A sufficient number and length of meetings to get the job done

What do you think? Do you agree with the four the group defined, or would you change the list?

Posted on Dec 14, 2010 by Norman Marks

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  1.  Dear Norman

    I agree that whilst there are some good things in the paper there are gaps also. Your builds are good, and I would add the following:

    Beyond risk in strategy and an oversight of risk management I would go further and say that a risk mindset should permeate the whole board approach. For example - are the key risks of the organisation actually discussed in board agendas (you can map risk profile to board time) and vice versa are all board discussions on key risks? This would then inform whether the board is spending enough time 

    In terms of information I agree this is key and would add - wearing an IIA hat - that board members should be more regularly asking for independent assurance on key aspects of the board papers they are receiving (e.g. testing assumptions / risk assessments presented) - in my experience many CAEs are not providing assurance on these papers and I would encourage CAEs to ensure this is clear in their audit planning up-dates

    In terms of board evaluations, independent assurance/QA is key - and this is now required every 3 years in the UK Corporate Governance Code. As well as looking more closely at individual director performance - and their development of course! - it should also look at the behavioural aspects of the board at work, since this dynamic arises "in the (board)room" and is crucial to the effectiveness of the board. For example - can the board tell the difference between having a good team spirit and developing group think?! (Most boards with group think dont think they have it!) or the difference between having "an outstanding and trustworthy CEO" and developing a blind spot and dependence on them?!

    In my experience in this area, we can intellectually have an idea what good looks like, but often actually seeing this in practice - and doing something constructive about it - is another thing!!

  1. Always refreshing to hear a rational asenwr.

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