Bored Directors…Improving the Performance of Boards

In today’s National Post, two lawyers, Jonathan Drance and Edward Waitzer, make a solid case for changing the role of the independent director. They recommend corporations follow the private equity governance model whereby the number of “non-management” directors shrinks to 6-8, their workload increases to 80-100 days per year and they accept performance targets.    For perspective, the typical public company director works just 18-25 days per year on typical Board duties.  Given the plethora of corporate governance fiascos, it’s hard to criticize the need for change.  However, any changes must take into account the realities of business complexity and corporate culture.

For one thing, large public corporations are extremely complicated organisms that are difficult for most insiders, let alone a director to truly understand, especially if they are in a part-time role decoupled from customers, operations and employees. Merely spending more time in the job with no line responsibility will not ensure better performance.  Secondly, a director is only as good as their commitment and experience allows.  To be frank, most directors are older men and women who often lack the expertise, incentives and passion to fulfill their current role, let alone a new mandate with performance targets.   Finally, to be truly effective, directors need comprehensive and objective information equivalent to what is available to the executive team.  Often, this is not provided in the format needed for quick assimilation and effective decision making.

Clearly, good governance necessitates directors engage more comprehensively on a more regular basis. Other changes could help, including:

  • Establishing a new Chief of Staff role, reporting directly to the Board, who ensures a steady flow of objective and synthesized information, delivered in a timely fashion;
  • Enabling directors to engage at any level of the organization for information or perspective, just as President Kennedy  used to do when faced with an obstinate bureaucracy;
  • Adjusting governance rules to require a Board-driven “Team B analysis” for major investments or risky decisions.

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