The Impact of Board Decisions

The question of insider trading at Berkshire points out the need for boards to take their leadership role seriously; not to succumb to the temptation to actively or passively ratify senior management actions or decisions without considering their impact. J. Robert Brown Jr.’s comments highlight the importance of boards having appropriate policies, routinely enforcing them, considering the implications of potential policy or ethical violations before speaking publicly on the matter, and modifying decisions when new information or the lack of effectiveness of the current approach suggest different actions would serve the organization better. Sometimes being an effective board member demands difficult conversations around the board table so that key issues are adequately explored, even if it involves questioning the opinion of a trusted leader. After all, boards exist to provide diverse perspectives on big picture matters so that critical decisions are made with information and judgment beyond the limited insights of one person.

Board Member Qualifications

At a recent Canadian farm organization conference, a board member shared that a key to the effectiveness of his organization’s board is its practice of clearly defining board member expectations and holding board members accountable to fulfilling them. He suggested that it is very important for a board of directors to indicate the knowledge, skills, and attitudes that are musts for someone to be eligible to run for a board position. He indicated that they have listed competencies that board candidates must have the day they become board members so they are adequately equipped to serve the organization and its owners well. This organization also lists the valuable board member competencies that board members can develop after they are elected or appointed, if they aren’t already strong in these areas as well.

Many board members I have talked with in other organizations are not in favour of any screening of board member candidates. They believe that such a practice interferes with the grassroots democratic process. They suggest that the necessary requirement for board members is to be a member or owner of the organization or company who is willing to serve on the board. They prefer putting the names of all interested on the ballot for consideration by the voting members or owners.

What are your perspectives on the benefits and pitfalls of either or both of these opinions about board member qualifications?

The Board’s Role in Selecting a New CEO

When an organization’s CEO leaves, it is the board’s responsibility to select a quality replacement. How the board engages in this selection process varies greatly. Some boards review all the applications. Others establish a selection committee to short list the best candidates. Yet others engage an outside third party to assist with the process. In some organizations the full board interviews the top few candidates and selects the best fit, while in others the board ratifies the first choice candidate presented by the board’s selection committee. And there are many other elements and variations on how the board exercises its responsibility to select the new CEO.

What are your experiences and thoughts on effective CEO selection strategies? In what steps is it meaningful for the whole board to be engaged? In what ways can a sub-committee or third party provide useful assistance to the board as it selects the most appropriate CEO to lead the organization’s operations?

Board Policies: Firm or Flexible?

Are board policies firm rules or flexible guidelines? I have worked with some boards who enforce their policies consistently and with other boards who permit exceptions to their policies under various circumstances. What is the impact of each approach?

Feedback Equips Servant Leaders

Although annual performance reviews are considered a best practice for employees, few board members receive such a gift. Due to the potential for discord many board members are uncomfortable confronting a peer with concerns. However, regular performance feedback is sincerely appreciated by leaders who wish to serve their organizations.