As a non-executive board director, I have been thinking a great deal about what it means to do this role in today's environment.
We exist in a dramatically different economic climate. With that comes increased scrutiny by stakeholders and governments alike, and with good reason. If our companies are the engine for bringing us out of the doldrums, then we need to have the best foundations and tools for them to do just that.
The nature of what it takes to be a responsible board member anywhere in the world has changed. Simply looking over the shoulder of the executive team and offering an occasional word of wisdom or direction is not sufficient. Non-executive board directors today need to be proactive in their approach to ensure that the organizations they serve do not simply survive but thrive. And nothing less should be demanded of them than that.
The best organizations of all sizes, in both the for-profit and not-for profit sectors, are looking for active, engaged, and independent board members, and they encourage a climate in which having those people on the board can bear fruit. These board rooms are environments in which board members are comfortable, and indeed required, to ask hard questions, challenge the status quo, and step up to assist in areas where they can.
Independent board directors should bring independence in word and deed and a fresh perspective to the organization. Proactive board directors engage and reach out. They ask questions inside and outside of the organisation and seek advice from fellow board members, senior executives, staff and investors to gain a fuller understanding of the challenges their organization confronts, as well as the resources and capabilities it has (and needs) to master them. This implies a number of different strategies.
First, and especially at the point when joining as a new director, I have found it useful to reach out to existing directors and get to know them beyond their bios and outside of the structured board setting. Getting to know my fellow non-executive and executive board directors contributes to building board cohesion and can make a real difference in avoiding confusion and misunderstandings in the heat of the board room. Boards function better when the people around the table know and trust one another and feel that they are moving in the same direction.
Second, this focus on people does not stop at the board room. Today's board directors must engage much more broadly and deeply - both inside, and outside, the organisation.
By being approachable and reaching out to people, board members are able to talk with, and especially listen to, senior managers, staff, and investors. They need to, understand and respect their views, and help harness their passion and commitment to the organization, thus ensuring its endurance and robustness. Importantly, hearing the voices from the stakeholders directly means non-executive board members can form their own ideas and perspectives on the information they are receiving in board papers and reports.
Third, understanding the nuts and bolts of the business also means, and indeed requires, asking the hard questions. It means not being satisfied with simply asking the questions, but following through and doing something with the answers. In my case, I have a special interest in finance, risk, and the audit committee, so for me that means being comfortable asking the hard questions about the numbers, past, present, and future.
Fourth, non-executive board directors need to keep an eye on the global factors that shape the broader landscape in which their organization operates - from government regulation to customer expectations to a constantly shifting competitive environment.
This outside independent perspective is indeed one of the greatest assets board members can bring to the table. Keeping on top of these developments is necessary, and, in our electronically and humanly networked world, it is more possible than ever. Equally important is seeking and recognizing opportunities for the organization to shape the environment in which it operates.
This has meant great gains and enormous strides in boardrooms around the world, from a better understanding of new forms of communication like social media, to helping the organisations keep up, innovate, and move into issues around corporate social responsibility, sustainability, and other areas that will help future proof the organization.
To bring things back to the board room: sensitivity to local and global issues, internal and external matters, and understanding the human and material assets of the organization and how new ideas can be introduced and integrated into the organization are core components of the proactive approach.
In a nut shell, as an active, engaged, and accountable non-executive board member, board directors must constantly strive to have the best possible understanding of the business the organization is in, and the one it wants to be in; and what the organization is, and what it wants to be.
On that basis we can help devise feasible and viable strategies to get from one to the other, and contribute to guiding the organizations on whose boards we sit into a successful and sustainable future - and to do the job we have been hired to do.
Note: An extended version of this was originally published on the Marcus Ventures website and on CSRWire Talkback. Also, Lucy recently gave a TEDx talk on Boardroom Activism.
Follow Lucy P. Marcus on Twitter: www.twitter.com/lucymarcus
I would like to make a suggestion regarding the need for board members to ask the hard questions and to follow through and to do something with the answers, as far as the operational side of the business is concerned. This process saves a lot of time, grief, and surprises, I promise you! I advise board members to establish clear criteria (aka board policy) that set out for the CEO (1) what must be achieved (for whom, at what worth) and (2) what are the limitations of legality, prudence and ethics inside which the CEO must operate. With the help of a few other key principles, these criteria can be created in a way that is clear, comprehensive, concise, and therefore very practical. Then, when it comes time for board members to ask questions (i.e., to monitor compliance with these criteria), it all comes down to two main questions: 1) is the CEO's interpretation of board policy reasonable, and 2) has the CEO provided evidence that supports compliance with the policy?
Now everyone knows all the rules of the game in advance. The process of asking questions about operations becomes substantially more intentional, comprehensive, time-efficient, and focused on what matters according to the board. Plus, the more time the board can save in reviewing the past, it gains in designing the future.
Many have critiqued the strength of applicable laws, the bifurcation of ownership and management, and corporate governance best practices. What resonates with me about this article is the way Marcus reflects on her own experience as a non-executive director to call for personal responsibility, bringing to the forefront the concept that individuals who assume directorship positions are duty bound to actively participate. She cautions, with credibility and conviction, that “[s]imply looking over the shoulder of the executive team and offering an occasional word of wisdom or direction is not sufficient.” She is exactly right.
Directors, as guardians, should maintain a healthy skepticism, listen, analyze and honestly and objectively critique the matters before them and encourage each other to adopt a similar approach. Engaged directors who actively participate are much more likely to pave the way for our companies to innovate, grow and thrive, and to leave a lasting, positive legacy, both personally and for the companies they govern.
(See "Changing the Landscape of Corporate Governance: Twitter, the Board Directors’ Resource". http://bit.ly/tcgrl)