If you listen carefully, you can hear it. A drumbeat, almost inaudible at first but getting louder now, has been beating a new tune in corporate boardrooms: that directors need to get serious about strategy. If the recently published NACD Blue Ribbon Commission's report is any indication, the era of boards meeting to review past performance and satisfy their compliance obligations (as their sole responsibility) may be drawing to a close.
While I was initially non-commital, the BRC should be applauded for its report, and the NACD congratulated for having the courage to commission it. That the BRC has produced a set of strong recommendations is great news for shareholders, the markets and other parties interested in effective corporate governance and the achievement of great company performance outcomes. However, the recommendations are not without consequences:
These consequences will place downward pressure on the number of boards that any given director can sit on at any one time, without doubt. Three concurrent board appointments is probably a reasonable maximum for any one director, and possibly two if one appointment was a chairmanship. However, that may introduce a whole new set of concerns, not the least of which might be requests—from directors more interested in earning than serving—to shareholders to increase the size of the directors' fees pool! Notwithstanding this, I hope directors and boards take heed of the calls to action—for they are beating loudly now.
Finally, my current research work, and experience in practice, suggests that the calls to action make very good sense. They are likely to lead to better company performance outcomes—but if they are followed.
Peter is right to raise the flag on this issue. Year after year Durectors say inovelment in strategy is a top priority Somehow they don't get there A few years ago I led NACD's Masters Class on the role of Directors in the Stategy Dialogue. Of 60 Directos only four, one being one I served, said they were adequatelt involved Directors have the tools. Get involved. Peter sets up one big issue, namely, the time it takes to know enough to contribute. Commitment is a critical criterion for success. It takes time and effort to be a good Director.
Thanks Tom, great to hear from you. I harbour fond memories of our time together in Boston earlier this year.
Great summary Peter, thanks. Proactive, and continuous, engagement is how I summarize the recommendations for NACD's Blue Ribbon Commission report.
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Thoughts on corporate governance, strategy and the craft of board work; our place in the world; and, other things that catch my attention.