How valuable is a board of directors to the performance of the business it governs? Does it influence business performance; or does it act as a policeman, "simply" monitoring the chief executive; and, do we even know? Many have attempted to answer this question. More often than not, the responses have been based on statistical analyses of secondary data (surveys, questionnaires, public data). Descriptions of what actually occurs in the boardroom typically remain hidden. Insights from direct observations of boards in action or from first-hand interviews are rare, so it pays to take note when they become available—as occurred when Nigel Bamford, chief executive of fireplace manufacturer Escea went on record this week. His comments, reported here, provide some interesting insights for boards to consider:
The Bamford interview provides a much-needed glimpse into the boardroom of a successful company. However, and thankfully, the Escea experience is not unique. The insights are consistent with emerging research about what boards need to do if they are to exert influence on business performance. Consequently, important questions for your own board to consider include:
  • The Escea board meets monthly, for two hours per meeting. Despite this small amount of time spent together, the board manages to monitor past performance and look ahead. This suggests that the chairman has a disciplined approach to meeting protocol, and that the board has at least one eye on the future success of the business.
  • The board is comprised of directors with "a whole range of different perspectives and different disciplines". Decision quality appears to have benefited as a consequence.
  • That the board is comprised of three company founders and two external directors suggests that technical independence (as promoted in many corporate governance codes) is not necessary for board effectiveness including effective decision-making.
  • The emphasis in Bamford's comments is on debate and diversity of thought. Gender and other forms of observable diversity were not mentioned.
  • The Chief Executive expects the board to 'add value' by challenging proposals and driving the decision-making process.
  • A one-size-fits-all approach to board practice and corporate governance is not appropriate.
  • While the Escea board looks ahead, strategy was not explicitly mentioned. Whether the board works with management on the development of strategy, or critiques strategic options and proposals presented by management is unclear.
Bamford's final comment is perhaps the most telling. "In time, a board is useful for all businesses of reasonable scale and ambition." Two important lessons emerge from it:
  • Formalised boards and board practices are helpful once ambitious (growth oriented) businesses have achieved reasonable scale, and if attention is focussed on the future.
  • Formalised board structures and practices are not always necessary (beyond statutory requirements), especially very small businesses where the same person or group of people both own the company shares and manage the business. Meet your statutory requirements but don't burden the business with unnecessary corporate governance and board practices. They are not required.
  • How might the insights discussed here help your board lift its performance in pursuit of business success and value creation?
  • Might a discussion at your next board meeting, to consider the appropriateness of your current board practices be useful?