Playing board games to win

November 16, 2011

The board room is going through an extraordinary time of transition. More is being demanded of boards than ever before, and the activities of boards are under greater scrutiny.

Corporate boards no longer operate in a secretive world behind closed doors, beyond the watchful eyes of the public and media. Investors, stakeholders, regulatory bodies, and governments are demanding more transparency and accountability. The past six months have catapulted the boards of HP, Yahoo, NewsCorp, Goldman Sachs, MF Global, and Olympus, straight into the news headlines.

The reason for this increased scrutiny is a greater public understanding of the role boards can and should play. There is growing awareness by investors, employees, and customers of the consequences of boards and board members not asking hard questions, not adding real value to the organization, and not protecting its future health and wealth.

Many question what boards do and if they have the skill, vision, and determination, and indeed any power, to affect the real change necessary in steering organizations and improving their business practices. The answer is that the best boards do. Most organizations have boards, be they in the public or private sector, a FTSE 100 company or an NGO, a university or a utility, and these boards have the power to influence the direction of business, to ensure that organizations are doing what is necessary to operate at its best, and to take real action if the organization is not performing well.

Boards will be judged in the future on their ability to “future proof” their organization, ensuring that their organization has longevity and fortitude and the ability to withstand the vagaries of the marketplace, serving not only those invested in the company today, but the investors and all of the stakeholders of tomorrow. They’ll also be viewed for how well they fulfill and balance their grounding and stargazing responsibilities, making sure the company meets all of its legal requirements, manages risks properly and does business in a responsible way, while at the same time making sure the organization is ready and able to become the robust and resilient business that is capable of responding effectively to the yet unknown challenges in its future. Boards will be assessed on whether they simply chase short term gain or build strong organizations for the long term, and whether the people around the table of the board room complement each other well for the tasks at hand.

The best organizations of all sizes, in the for-profit and not-for profit sectors alike, have boards with independent chairs who can help mitigate conflicts of interest and ensure that the board acts as an effective oversight body. These boards are composed of truly active, engaged, independent, and interested directors who strive to have the best possible understanding of the business the organization is in, and the one it wants to be in. These boards are diverse in the true sense of the word, not only when it comes to gender but also in terms of professional expertise, sector background, color, age, international perspective, and more, representing the stakeholders of the business and the environment in which it operates.

Beyond that, the best organizations encourage a climate in which actually having the best people on board can bear fruit. These board rooms are environments in which independent board members are comfortable, and indeed required, to ask hard questions, challenge the status quo, and step up to assist in areas where they can. In such an environment boards are able to discuss a whole range of agenda items that are essential for their organization’s short- and long-term success, including sustainability, the changing work force, innovation, infrastructure, technology, internationalization, communication, and the balance of continuity and change. The role of the board here is to help the organization put the relevant items on its agenda and prioritize without losing sight of the bigger picture of the local and global ecosystem in which they operate.

In times of crises like the one we are currently experiencing, effective boards help their organization to emerge strengthened and to recognize and seize opportunities for critical innovation and investment into a future of sustainable growth that benefits all stakeholders of the organization.

Greater public and shareholder scrutiny will demand more engagement on the part of board members who, in turn, should actively promote transparency and accountability as a means to ensure that organizations can truly serve their stakeholders’ and the public interest.

We’ll be seeing more news stories about boards, and this column will be here to help navigate them.


One comment

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[…] with them, challenging and encouraging them to ensure that they are doing what is necessary to future proof the institution, and to ensure that they doing both the tactical “grounding” work, but also the […]

Posted by College trustees are board member and then some | Lucy P. Marcus | Report as abusive

There still appear to be too many boards that appear to concern themselves primarily with ripping off their shareholders and lining their own pockets. I didn’t realise how bad it was until I invested in Cosalt several years ago. Unfortunately the board of Cosalt appear to have been among the most corrupt in the UK, but I didn’t realise it at the time. Whether it’s possible to eliminate such behaviour I guess is unlikely. I hope that some of these directors can be prosecuted for their crimes.

Posted by ActionDan | Report as abusive