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Aug 7Chris James

Building Better Corporate Boards

Aug 7Chris James

Corporate Board meetings, both private and public, involve a lot more time and effort than they did 10 or 15 years ago, according to a posting on the Harvard Business School Working Knowledge website, which publicizes faculty research at HBS. While quarterly board meetings used to last half a day, meetings now last a day-and-a-half and happen up to six times per year. Reviewing materials for the meeting used to mean flipping through the annual report on the plane ride to the board meeting. Now it involves several hours poring over hundreds of pages of company documents looking for problems, unreasonable risks, and potential fraud.

“While corporate board members take their jobs more seriously than ever, they are not necessarily as helpful or effective as they could be,” says HBS senior lecturer Stephen Kaufman. He recently sat down with HBS Working Knowledge to discuss what he considers to be the biggest practical issues facing boards today. Key concepts he identified include:

  • Board directors may not give an honest assessment of the company because they fear reprisal from the CEO or the other board members.
  • In accurately evaluating a CEO’s performance, board members must get feedback from other employees at the company, who possess insight into day-to-day operations that the directors do not.

On this second point, in the old days a board member judged the CEO based on whether the financial targets were met and the stock price was rising. Those are still important metrics, but responsible boards should look at other metrics such as employee engagement and turnover, customer satisfaction, and the CEO’s leadership style and character.

If the board directors only see the CEO at well-rehearsed meetings, it doesn’t tell the board if the CEO is autocratic or collegial, whether they listen to advice of respected subordinates, or how in touch they are with customers and employees.

According to Stephen Kaufman, “the goal of the performance discussion is not just to fill out a report card to justify the CEO’s compensation, but also to help a good CEO become a great CEO.”

 

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