What is the right composition for a board of directors?

The relationship between the CEO and the board of directors is unique in the business world. The idea of reporting to a committee of people instead of to a single individual makes managing this relationship much more challenging, particularly for new CEOs with little experience working with boards. The composition of the board will have a big impact on the relationship as well. 

The trend over the last twenty years has been to diversify the composition of boards and to include more functional expertise. I have always thought that the job of the board should be to select and monitor the CEO in his or her efforts to represent shareholders’ interests, not to become involved in running various areas of the company. It is impossible for a group that meets once a quarter to have the same understanding of the business as the people who are working in it every day. For this reason, I like to see boards that are primarily composed of people with CEO experience. As this blog is all about, the CEO job has many unique aspects that people without that experience will not appreciate.

If you have a board with mostly subject matter experts – for example CFOs or CIOs or CSOs – the board can quickly morph into a “super executive” team. People will naturally gravitate to their area of expertise and the board can become an operating entity. This is dangerous and undermines the credibility of the CEO.

The problem can be exacerbated if you have weak executives in any key positions. If you need a board member to help cover for one of your executives, it is a clear sign that you have the wrong executive in place. 

If you are running a private company, spending time to get the right board members in place is a valuable use of your time. Even in public companies, the CEO will likely have some influence. Aim high. Most people are flattered that you would consider them for a board position, and while they may not always accept the position, they will often have recommendations for others who would be a good fit

In addition, I think it is a good idea to have board terms expire every year or two and require unanimous approval to renew then. Sometimes, board members remain long past their useful time just because there is no easy mechanism to replace them.

The right board can be a powerful multiplier of your efforts as CEO. Take the time to select people who have the knowledge, connections and experience that will make you a much better CEO.

Photo Credit: Incase. via Compfight cc

3 thoughts on “What is the right composition for a board of directors?

  1. Thanks for sharing. One way to think of board composition is as a continuum balancing on a fulcrum. On one end are micromanagers, and on the other end are cheerleaders. Neither of these types is particularly helpful.

    At the center over the fulcrum is the type of board you’re describing, i.e. one that’s capable of offering viewpoints on strategic issues related to increasing shareholder value. In my experience, a productive CEO keeps the focus on his/her vision for growth and draws from the board members’ collective experience in achieving it.

  2. Pingback: What is the right composition for a board of directors? | HENRY KOTULA

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