Henri Eliot: Board member, we’re watching you!
10:00 AM Monday Jul 20, 2015
Boards need to change, and serving on a board needs to be considered a job. Photo / Thinkstock
Gone are the days of the rubber-stamp board meeting. Companies suffer greatly when independent board members don’t ask the tough questions, and don’t hold executives accountable for not just the profit margins but also the ethics of the company. An important lesson: a complacent board jeopardises a company’s future.
Boards need to change, and serving on a board needs to be considered a job.
Read also:
• Henri Eliot: What makes an outstanding chairperson?
• Henri Eliot: Are NZ boards spending enough time on strategy?
The best boards have chairs and members who are truly independent and engaged, who work hard to get a complete understanding of the business their organisation is in-and the one it wants to be in. As board members, we should be assessed on how well we fulfil what I call our “grounding and stargazing” responsibilities: making sure the company manages its risks prudently and operates at all times in a responsible, legal, and ethical manner, while at the same time making sure it is ready and able to respond shrewdly to future challenges.
It is also clear from reading the stories accompanying headlines about boards behaving badly that they need to be more diverse in every way-gender, professional expertise, ethnicity, age, international perspective, and more. A truly diverse board will present more opinions from more perspectives, have fewer common assumptions (and misconceptions), and is more likely to understand the various needs of all of the company’s customers, employees, and investors.
It is critical to have the right group of people sitting around the boardroom table, but those directors will only be useful if they are allowed to operate with complete candour. Independent board members have to be comfortable asking hard questions; in fact, it needs to be clear that asking tough questions is a basic requirement. In such an environment board members can discuss a wide range of topics essential for their organisation’s short- and long-term success, including sustainability, the changing workforce, innovation, infrastructure, technology, internationalisation, communication, and the balance of continuity and change.
Better boards require better leaders around the table, and being a leader in the boardroom isn’t just the job of the chair or lead director-it is the responsibility of every board member. Leadership means not bowing to peer pressure or groupthink. It means not acquiescing when you are the only “obstacle” that stands between clarifying a point and breaking for lunch. It is about being the voice of caution when the rest of the board is in a state of euphoria.
Showing great leadership in the boardroom also means knowing when it is time to leave. Keeping a board fresh is important, but it is a topic too often discussed in hushed tones.
Being a good leader also requires active engagement inside and outside the boardroom. When you first join a board, get to know the people you will be working with, and the business your organisation is in-its competitive landscape, its stakeholders, employees and customers, and even the communities in which it operates. Independent knowledge is power.
Showing great leadership in the boardroom also means knowing when it is time to leave. Keeping a board fresh is important, but it is a topic too often discussed in hushed tones. There is a real danger of board seats being treated like jobs for life. As companies grow, boards need new faces, new ideas, new perspectives, and new expertise. As board members, it is our individual responsibility to know when to go, rather than waiting to be pushed by shareholders or the board chair.
There are several reasons to leave a board, including: you’ve served too long, your expertise is no longer required, you’re not pulling your weight, you’re obstructively disruptive, or your actions, inside or outside the boardroom, bring distraction or disrepute. No one wants to be the person everyone around the table feels is not contributing, and you never want the board to have to take formal action because you have outstayed your welcome. Although humbling to admit, no one is irreplaceable, and sometimes the best service you can give is to walk away.
In New Zealand, we are only starting to have the long overdue public conversation about the role of boards and board members. A good board-one that is engaged, transparent, and accountable-is a tremendous asset to any organisation. The evolving boardroom requires every board member be a great leader, from the moment we are appointed to the day we step down.
It will be interesting to see if anything changes at AGM’s this year and we have our own version of “The Shareholder Spring” as the recent period of shareholder activism in the US has been dubbed. This uprising shows that investors, stakeholders, regulatory bodies, governments, and the general public are taking a greater interest in what goes on behind closed corporate doors.
