Boris Groysberg Harvard University Professor perspectives on Corporate Governance

Boris Groysberg is a professor of business administration in the Organizational Behavior unit at the Harvard Business School. Currently, he teaches courses on talent management and leadership in the school’s MBA and Executive Education programs. He has won numerous awards for his research, which focuses on the challenge of managing human capital at small and large organizations across the world.

Boris talks to Henri on his perspectives on corporate governance and leadership in the boardroom.

Why corporate governance?

The importance of corporate governance is now top of mind for many boards.  Traditionally the focus has been centered on the performance of the company not the directors. They need to be held more accountable for their performance.

Is the board doing its job properly?

In appointing directors, boards are now starting to apply a rigorous selection process.  They are focusing more on talent management.  Traditionally a” tap on the shoulder” process of similar individuals was the norm.  Many boards approached the appointment process as “a club where directors got off the board when they died of natural causes”.  This is slowly changing today as some companies are applying a more rigorous process that is aligned to the overall strategy in selecting new board members.

What is the right process to increase gender diversity on boards?

We have not seen enough research in this space.   The governments free market approach is not working.  In the past, it was about fairness, now it’s about access to opportunities.  I think as a business community, we are ready to change.

How do we make boards more effective?

Boards do not seem to effectively manage under-performing board members.  Boards require the right mix of skill sets covering everything from operations to social media.  A more rigorous approach in appointing board members is critical.

There ‘s also a lack of research on measuring a board’s performance.  We have this analysis for CEO’s but more research needs to be completed on what makes a board more effective.

Boards are a ‘black box’ or ‘closed shop’ as some of the key reasons that we have under-performing boards.  As a result, shareholders suffer.  Boards need to be held more accountable.  Should the review process and findings be more public?

 

How do we fix the interview board selection process?

An inherent bias exists in the interview process.  In 85% of board appointments, we identify candidates within our own networks.  We need to look further afield and identify potential candidates that are not a “mirror image of ourselves’.  We need to take a closer look at our candidate selection process/criteria. The hiring process is interesting because when we hire someone we admire, we make sure that they are happy.  On the other hand, if the candidate is unknown to us, we follow the “interrogation versus interview approach”.   The biggest surprises in appointing new directors are those following such a rigorous selection process.  In order to fix this interview bias, we need to look outside our existing networks for the right skill sets that meet our long term strategic goals.

It’s time for boards to adjust their approach using the same rigorous processes in hiring executives.  50 years of research in hiring, boards need to use these tools to improve their own performance in hiring the right director that fits their requirements.

How long should a director serve on a board?

There’s no research in this space.  Typically 4-5 years for a CEO.  I would suspect the range being from 6-9 years as the maximum tenure for any board member.

Do we focus enough time on succession planning? 

To few boards are properly engaged on this topic.  The board is responsible for succession planning within the boardroom. In fact, we discovered that many boards are struggling with succession practices.  In 2012, Deborah Bell and I surveyed in partnership with WomenCorporateDirectors and Heidrick & Struggles, over 1,000 board members around the world about succession planning—specifically, how often CEO succession was discussed at the board level. For example, if we look at P&G’s industry, Consumer Staples, we see that 44% of boards said they had not vetted at least one viable candidate for the CEO job and more than 1/3 (36%) said CEO succession was not discussed regularly at the board level (meaning not even once per year).

What do you read? 

I read various history books.  I’m a regular reader of The Economist and Time.  Time permitting, I also read the Financial Times, NY Times and USA Today.