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NACD Commission on strategy: An increased role for the board?
The National Association of Corporate Directors (NACD) has announced the establishment of a commission to make recommendations about the "board's role in recalibrating the enterprise's corporate strategy in response to market forces". The decision, to consider the topic and present guidance, is a positive step towards more effective governance in the USA.
For some time now, researchers have suggested that strategy needs to be part of the board's remit, although a consistent interpretation of what that means remains unclear. Some directors and consultants think boards should be actively involved in the process. Others disagree. Clearly, there are several options to be considered, along a spectrum:
Irrespective of the recommendations that Commission presents later in the year, boards are responsible and accountable for business performance, and board contributions need to be recalibrated accordingly. I await the outcome of the NACD process with interest.
For some time now, researchers have suggested that strategy needs to be part of the board's remit, although a consistent interpretation of what that means remains unclear. Some directors and consultants think boards should be actively involved in the process. Others disagree. Clearly, there are several options to be considered, along a spectrum:
- Management drives the entire strategy development process, and the board, at best, rubber-stamps the result.
- The board simply approves strategy developed by management. This is the default option for many companies today.
- The board speaks into the strategy development process, but it remains largely controlled by management.
- The board is an active participant in the development of strategy, together with management.
- The board drives the strategy development process, albeit with considerable input from management.
- The board imposes strategy on management.
Irrespective of the recommendations that Commission presents later in the year, boards are responsible and accountable for business performance, and board contributions need to be recalibrated accordingly. I await the outcome of the NACD process with interest.
Your comment about 'partnership' is important, although many Americans and American-inspired directors may challenge this, because they see 'independence' and 'control' as being more important. Many American boards interpret acting in the best interest of the shareholder (the US statute is different from that in many Commonwealth countries) as simply controlling the CEO. The selection and implementation of strategy is seen to be the CEO's job.
I'm of the view that the 'best' configuration is somewhere around point 4 or point 5. My doctoral research is pointing to this, although the analysis is not complete yet, and I am yet to test the ideas fully back against the data.
In the meantime, if you have some additional evidence to back up your 'I believe' statement, I'd be most interested to see it.
http://www.fic.gov.bc.ca/pdf/creditUnionsTrusts/GovernanceGuidelineCUs.pdf. You may also to check the OSFI website for Canadian Banks.
I look forward to the publication of your doctoral research. thanks
I have been invited on a panel to discuss the "Customer Culture Imperative" for organizations. As a partner at Heidrick and Struggles leading the board practice, I have been asked to contribute a perspective from the top (Boards). My initial thoughts are that as building a customer centric culture is central to strategy, the imperative lies on the strategy continuum you describe above - therefore (and supported by my observations) some boards will have little representation of their consumers or capability to bring consumer insight to the boards, through to those who have marketing committees with the explicit responsibility to bring consumer insights to the board to constructively contribute to/drive a customer centric strategy. Some chairs ask me to specifically recruit consumer experts to the board, e.g. those with direct FMCG marketing/leadership roles - even for B2B and commodity businesses. I also have B2C businesses who say that marketing/consumer experience should sit with management and therefore that experience is not needed on the board. I find the latter an "interesting" position that reinforces a board that may suddently find themselves still selling buggy whips, completely out of touch with their changing market if they don't have some in their ranks who walk the supermarket ailes or are e.g. excited users of the new technology. All this speaks to the heart of the value of diversity (broadly defined) on the board - some gender, some geographic, some consumer, some industry, some legal, lots of financial, some IT experience, etc - not to provide specific expertise, but to provide meaningful challenge to management. I would be very interested in your thoughts. warm wishes Judi
I have been invited on a panel to discuss the "Customer Culture Imperative" for organizations. As a partner at Heidrick and Struggles leading the board practice, I have been asked to contribute a perspective from the top (Boards). My initial thoughts are that as building a customer centric culture is central to strategy, the imperative lies on the strategy continuum you describe above - therefore (and supported by my observations) some boards will have little representation of their consumers or capability to bring consumer insight to the boards, through to those who have marketing committees with the explicit responsibility to bring consumer insights to the board to constructively contribute to/drive a customer centric strategy. Some chairs ask me to specifically recruit consumer experts to the board, e.g. those with direct FMCG marketing/leadership roles - even for B2B and commodity businesses. I also have B2C businesses who say that marketing/consumer experience should sit with management and therefore that experience is not needed on the board. I find the latter an "interesting" position that reinforces a board that may suddently find themselves still selling buggy whips, completely out of touch with their changing market if they don't have some in their ranks who walk the supermarket ailes or are e.g. excited users of the new technology. All this speaks to the heart of the value of diversity (broadly defined) on the board - some gender, some geographic, some consumer, some industry, some legal, lots of financial, some IT experience, etc - not to provide specific expertise, but to provide meaningful challenge to management. I would be very interested in your thoughts. warm wishes Judi
I have been invited on a panel to discuss the "Customer Culture Imperative" for organizations. As a partner at Heidrick and Struggles leading the board practice, I have been asked to contribute a perspective from the top (Boards). My initial thoughts are that as building a customer centric culture is central to strategy, the imperative lies on the strategy continuum you describe above - therefore (and supported by my observations) some boards will have little representation of their consumers or capability to bring consumer insight to the boards, through to those who have marketing committees with the explicit responsibility to bring consumer insights to the board to constructively contribute to/drive a customer centric strategy. Some chairs ask me to specifically recruit consumer experts to the board, e.g. those with direct FMCG marketing/leadership roles - even for B2B and commodity businesses. I also have B2C businesses who say that marketing/consumer experience should sit with management and therefore that experience is not needed on the board. I find the latter an "interesting" position that reinforces a board that may suddently find themselves still selling buggy whips, completely out of touch with their changing market if they don't have some in their ranks who walk the supermarket ailes or are e.g. excited users of the new technology. All this speaks to the heart of the value of diversity (broadly defined) on the board - some gender, some geographic, some consumer, some industry, some legal, lots of financial, some IT experience, etc - not to provide specific expertise, but to provide meaningful challenge to management. I would be very interested in your thoughts. warm wishes Judi