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?