The Big Idea: The Case for Professional Boards - Harvard Business Review

This question was posted at Linked In, at the following location:

http://tinyurl.com/2fbpeeu

The orignial HBR article is linked through this address as well. I have also posted my comments directly to the Linked In discussion thread.

From what I saw in the preview, and based on my personal experience, I would agree with the three main recommendations made by the author, specifically:

1) Smaller size: the author recommends six to seven members, with the CEO and the rest as outsiders.

I have been on boards of this size, as well as both much smaller and much larger boards. Where I felt the board was most effective was in just the size and composition that the author recommends. In the case of too small a board, I did not find enough difference of opinion on any subject to make a worthwhile dialogue. Additionally, with a very small board, there are risks that one or two will dominate the conversation, especially the CEO. On the boards that are too large, as the author indicates, no one feels terribly responsible. Because of this, the board meeting becomes an echo chamber for the CEO.

2) Most of the independent directors would be required to have extensive expertise in the company’s lines of business.

I would agree, given the qualifier “most.” I offer the following cautions:

a) Experience in the industry by the board members must be tempered with the realization that management has the charge to run the company, and it is management that best understands the customers, suppliers, and other competitive dynamics faced in the present time and in the company’s particular situation, and

b) Outside perspective is always needed. Candidates could include someone with:

i) Complementary background, perhaps from a supplier or customer of the subject company,

ii) Someone from an industry with similar labor or cultural dynamics, or

iii) Someone who has experience dealing with a particular management situation (perhaps a turnaround, etc.).

3) They would spend at least two days a month on company business beyond the regular board meetings.

Of the three recommendations, I find this the most critical. I find it inappropriate to believe that one person can sit on several boards and somehow provide real value to the management and shareholders of each of the companies. However, this expectation is reinforced by the typical compensation practice for a board member. Board members are paid as if they are expected to not be involved more than four board meetings per year, so that is what happens.

It is not possible to properly serve as a board member in more than a small handful of situations at a time. Time must be spent with management; interaction should be encouraged beyond that with the CEO. This relationship must be clearly understood and defined to ensure that lines are not crossed between oversight and execution, but certainly this can and should be done.