MakovskyMonday, May 18, 2015
In years gone by, serving as a member of a corporate board of directors was a relatively easy task. You attended quarterly meetings, discussed business and voted on various matters. Board meetings were followed by a nice dinner or a trip to CEO’s country club for a round of golf.
Board members were typically friends or business acquaintances of the CEO. In essence, “the old boys club,” as directors could have been described as “pale, male and stale.”
A trend emerged a number of decades ago when calls came for greater diversity on corporate boards. Companies soon began to add women and minority members to their boards as a way of assuaging the concerns of shareholders and social activists.
Now that American business has become a “blood sport,” companies are advised to take a hard look at their boards to ensure that they possesses the skills necessary for dealing with the challenges confronting corporations today.
Let’s explore some of the qualifications for a successful board:
“Street Smarts.” Given the upswing in attacks by activist shareholders, boards should have at least one member with knowledge of the ways of Wall Street and how investors think. Such an executive can provide critical insights into how to deal with activists should a threat emerge.
Cyber Security Expertise. Major companies such as retailer Target have been hacked, jeopardizing valuable customer information. New cyber-attacks are emerging daily, making this a critical issue for boards. Given the ubiquity of such attacks, an executive with expertise in cyber security has become increasingly important.
Reputation Management Skills. Corporate reputations are constantly threatened. Crisis situations take many forms – financial, operational, strategic, personal, and so on. One of your board members should have considerable experience in navigating a crisis.
Youthful Voices. According to various studies, the average age of a board member is in the 60s. Given the rapid developments in technology, corporations would benefit from having a member of the Millennial Generation serving as a director. This is particularly important for a company whose products or services are marketed to consumers, particularly youthful consumers.
Focus. Some executives have built careers as “professional board members” through service on a number of corporate boards. “Overboarding” is a concern for many corporate governance experts. Limits should be placed on the number of boards your directors can serve on.
Diversity. Studies such as those conducted by Catalyst have indicated that those companies with more women directors outperform others. While women have made great progress in the board room, more efforts are needed in this area.
Been There, Done That. Former CEOs make great candidates for board memberships. These executives have confronted a myriad of corporate governance matters, most notably succession planning, an issue which has gained considerable attention from the investment community.
The challenges confronting corporations are growing more complex by the day. The days of tokenism and window-dressing are over. Strategic thought needs to be applied to the selection of directors if the enterprise is to grow for the benefit of all stakeholders.