Board membership is not for the faint hearted
It is challenging times for members of board of directors of companies. Boards have never had it so hard. They are pressured by the market to have their companies giving short-term results when they understand that the business is there for the long-term. They are asked to comply with stiffer regulations, when they should be focusing on business strategy and performance. Meanwhile, they are being hounded by small shareholders and the public on the social media as their professionalism, experience and performance is being challenged by attacks that they are not doing enough, that they are being highly (or excessively) paid and that they have conflicts of interest.
How can trust in board directors be raised again? Good to ponder about this.
First and foremost, let us concentrate on the mandate that is given to board directors. They are there working on behalf of all owners for the good of the company, looking at its sustainability and growth with a long-term perspective. Each board member should continuously be reminded – why am I here? What am I standing for? And they need to consider their role even beyond the micro state of the company – they should have a macro view. What am I doing for the community, for society at large?
Secondly, board members should sit on fewer boards. They need the devote enough time to prepare and participate not only in board meetings but also on board committees. This might mean that their remuneration needs to be adjusted to make it worthwhile for them to sit on boards at all as they are finding that the time they are spending on board work by far exceeds the hours they had allocated when engaged in their responsibility.
Third, board membership is not only about technical or professional competence and experience, it is fundamentally about judgement. The ability to scan information, ideas and opinions in presentations, papers and reports prepared by management or consultants and then offer a view, a recommendation or a decision. Decisiveness (logical, rational and calm) is a major attribute of effective board membership.
Fourth, boards should offer greater opportunity for collegiality, team work, involvement and participation. Deviants, i.e. those who are always ready to question and challenge, are more than welcome on board. This gives a greater chance for depth in the discussion, and better preparation to support views that are being brought forward for decisions at board level. Collegiality, strengthened by off- board room meetings and retreats on strategic and long-term issues encourages team work and better decision making.
Finally, the days of passive directors on boards are over. We are in for activist boards prepared to challenge management and bullying executive chairmen and chief executive officers. This keeps management from falling asleep or be careless or even (God forbid!) uncompliant and devious attitudes and behaviour.
Not an easy time for board members.
About the author
Joseph F.X. Zahra is a Malta based economist with over thirty five years of corporate leadership and business consultancy experience.