The contribution of boards to company performance

A blog article, with the catchy title How to double your company's profit: begin by refreshing your board of directors, appeared in Huffington Post today. The article is helpful because it highlights the importance of having a diverse board. Here's a snippet: 

Imagine instead a board comprised of 10.7 people (the average board size) where directors of a variety of ages bring the relevant expertise and leadership experience that is needed, and have grown up in various regions of the world, in a variety of socio-economic conditions. Such a group, some with academic credentials or particular subject mastery, others having built and led innovative ventures, climbed the ranks of multinational corporations throughout the world, having life experiences in emerging markets, and playing and working with the latest technologies from the time they could crawl, can truly envision what's possible and also know what questions to ask management.

With such boards of directors, multinational corporations will finally unleash their greatest potential, attaining exponential profits while achieving peace and prosperity.

Korngold makes some great points—she is amongst an increasing number of people to suggest that better governance leads to better performance. Diversity in the boardroom is a good thing. However, a couple of her assumptions deserve comment:

• Korngold suggests that diversity in the boardroom is causal to increased company performance. Sorry, but we don't know that. Diversity of thought and experience within a group has been associated with the making of better decisions (because a wider range of options and ideas are explored). However, placing a diverse group of experienced and effective directors together to govern a company does not necessarily lead to high performance. There are many other internal and external factors, some of which are well outside the control of the company, let alone the board.
• Korngold asserts that increased performance occurs when board members "truly envision what's possible and also know what questions to ask management". These are important attributes of effective boards, however there is much more to it. In addition to being fully engaged in the process of governance (implied in Korngold's comments), boards need to be forward facing and actively involved in the development of strategy. Even then, increased performance may not follow.

Governance is complex, socially-dynamic and every board is unique in some way. Things that work in one instance may or may not have the same effect elsewhere. Notwithstanding these comments, I enjoy reading Korngold's articles. They add much richness to the discourse.