Summary
It takes a combination of three things to make a board of directors work well: 1. expertise, 2. experience and 3. good dynamics. A combination of any two, without the third, increases the risk that the board will fail. Russell Reynolds Associates has developed methodologies that add expertise to the board and still leave the CEO and management with enough time to run the company without playing "running dog" to the needs of the board. The first line of defence is a selection process that applies business experience as an overlay on the expertise matrices. Its clients call it "business savvy" or "street smarts. The second line of defence is having a competent chair. Aside from having industry expertise and business savvy, a board must take steps to ensure that the environment in which it operates can replicate and sustain best practices in corporate governance. This is called Board Climate Review.
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Extract
Board Performance: A Three-Legged Stool
It takes a combination of three things to make a board of directors work well: expertise, experience and good dynamics. A combination of any two, without the third, increases the risk that the board will fail.
In Canada, commentators flag enterprises like Nortel Networks, Atlas Cold Storage or Ontario Power Generation and ask, "Where was the board of directors?" In all of those cases, insiders can explain why the board did not intervene to stop what now appears to be irrational exuberance, unsound implementation or questionable practices. These boards may be excused from liability on the basis that they exercised their duties as directors in good faith and with reasonable diligence, based on their knowledge and experience. Where the facts point to fraud-and perhaps in all of these cases-there may in fact be nothing else that the boards could have done. But before we...See the full content of this document
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