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Column
What’s next as the ‘sitting CEO’ model of board composition ceases to be the dominant form? By Sharon L. Allen Because of the turbulence we’ve gone through in the last few years, we are now learning that checklists and boardroom protocols, while useful, don’t ensure effective governance. What does work is the presence of a highly engaged group of people who trust one another. A group that is unafraid to raise important challenges and is even willing to have a good fight now and then. The challenge is to create such a group. Traditionally, the ideal candidates for a board position were sitting CEOs. They were considered ideal because of their experience, their insight, their presumed like mindedness with other board members, and, let’s face it, their status. I don’t entirely discount star power. In the marketplace, prestige counts for something -- but maybe not as much as it used to. Furthermore, sitting CEOs are more often declining the request to serve on other corporate boards. The time requirements as well as the additional risk just don’t make it practical. If they do serve on an outside board, it’s likely to be on only one, rather than several like before. So what would replace that model? Many people have championed diversity as the new boardroom standard. As we open up the American workplace to different kinds of people, the argument goes, we need our corporate leaders to reflect that diversity. American society has changed, and so should the boards that govern our companies. I happen to agree that diversifying the boardroom is a good objective. By diversity, I mean in the traditional sense: gender, ethnicity, religion, and cultural background. But I also mean in the experiential sense. I believe it will be imperative to throw a broader net to find talented, effective board members in the future. However, we must consider the role of diversity in the boardroom with some perspective. It really is a complex subject. Do companies that perform better have a higher percentage of women and minorities on their boards? There are some studies that support this conclusion, but we don’t yet know whether there’s a clear causal link. What we can say is that there is a link between leadership that appreciates the benefits of diversity, and success on the bottom line. But simply creating a diverse group does not by itself create an advantage. That’s tokenism. All the checklists and official protocols might get you a board that looks perfect on paper, but won’t guarantee effective governance. One of the potential problems is that people can no longer rely upon shared backgrounds and understanding to bind them together. There could be such a diverse set of views and beliefs that you’ve lost ability to communicate effectively. That’s not good. Today, the search for directors is a lot like the traditional executive search: A search firm is engaged; there are multiple candidates; and the candidates are assessed not just in terms of their talent, skills, and accomplishments, but also on their chemistry with other board members. A successful board will include a cross-section of ideas and areas of expertise. We will need to take more of a “tapestry” approach, as my friend Caroline Nahas, a managing director for Korn Ferry, says -- integrating sitting CEOs with presidents of large divisions, executives from midsized companies, and professionals with expertise in finance, technology, regulation, M&A, and branding. A good board candidate could be someone with an expertise that matches your company’s strategies. Say a key imperative for your company is to enter the Chinese market. It would be ideal to have someone on your board who has successfully led a market entry into China, or Asia. That might even be reason enough to specifically invite someone to join the board. Companies should continually be looking at the relevance of their boards, and changing the composition as the imperatives change. Remember that the composition of the board is not fixed. It changes over time -- perhaps not as quickly as it should. Directors should be reviewed each time they are nominated for re-election. But just as important as professional expertise are the personal qualities that a person brings to the table -- the ability to probe, analyze, listen, and ask questions. I mean all the questions: the seemingly ignorant questions, the broad questions, the probing questions. I can’t overestimate the importance of this. The challenge, then, is not just finding the right people. It’s finding the right combination of people who will interact in the right way. The boardroom is not a classroom or a lecture hall. It’s meant for conversation, for exchange of ideas and information, for dialogue and discussion. There’s a reason everyone sits around a table. They’re intended to be talking to one another! |
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L. Allen is chairman of the board of Deloitte & Touche USA LLP. Copyright © 2004 Directors & Boards, P.O. Box 41966 Philadelphia, PA 19101-1966. All rights reserved. Contact the webmaster. < Privacy Notice > |
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