Yesterday, it was Target, Yahoo, Sony and Wells Fargo. Now, it’s Equifax, Deloitte and Uber. Others inevitably will face a crisis. The question that interested parties always ask is, “Where’s the board in all this?”
The risk to shareholders of an ineffective board seems not particularly well mitigated, even after more than a decade of increased board education, attention, governance review and regulatory action. The willingness or ability to address emerging threats or uncomfortable matters remains too low and slow.
“Governing with agility” is an emerging best practice and prerequisite for boards to effectively address uncertainty. Passive boards providing “wait and see” oversight too often results in a high risk of being behind the eight ball of activists, institutional investors and government regulators. It has been said these boards are much like “the parsley on the fish.”
The culture of an agile board is typically not a “get along culture.” Some amount of collegiality is replaced by high performance and prideful achievement. To achieve agility, though, requires a proactive and collaborative board culture and a chair who places a premium on facilitating director engagement and continual examination of alternatives, however uncomfortable.
“The building blocks for an agile board reflect a balance between dynamism and stability.”
We offer a prescription for building an agile board—a team that is more attuned to its responsibilities to shareholders and populated by well-informed and “all in” directors, led by a chair that, together with fellow directors, is committed to a culture of informational depth, exploration, debate and inclusion.
Building Blocks of an Agile Board
The building blocks for an agile board reflect a balance between dynamism and stability, enabling a board to pursue business transformation while supported by the structure and controls coming from adherence to core values and long-term business vision.
- The chair leads a durable governance coalition.
Coalitions tend to form around a board leader who offers a compelling agenda for the future to “transformation-ready” and opportunistic directors. The chair must adroitly lead the coalition toward value creation, not simply preside over a collection of wise and thoughtful directors.
- Directors are independently well-Informed and analytically prepared.
The wisdom of any director has a “half-life” and must be continuously refreshed for his or her relevance and value to continue, not just tap into a dwindling wisdom reservoir.
- Directors deliberate with a dispassionate view of the business.
Agile boards routinely challenge themselves in the same manner that activist investors analyze and pursue their targets. They take an “outside in” perspective.
- Directors are accountable to one another.
This building block is more personal. It addresses directors’ expectations for the behavior of fellow directors. Shared accountability puts the spotlight on each director’s competency, their reliability to one another and their acceptance of common goals. Support and dissent can coexist when directors feel mutually accountable. Neither the loudest nor longest-tenured director should necessarily win debates and dominate decisions.
- “First mover” temperament is expected among directors.
It is said “Good generals make their luck by shaping the odds in their favor.” Likewise, agile boards shape the odds in their favor. Readiness is a necessary element for an agile board’s instincts to detect forces of change emerging in the marketplace and believe that first mover temperament is a competitive advantage.
- Core values have a perceptible impact on policy making and judgment.
Successful boards don’t leave the company’s culture to chance. They identify core values that are aligned with the vision of the business and signal priorities and choices the board is prepared to make. This is the way “tone at the top” makes a perceptible impact on an organization.
Building and Sustaining Board Agility
The chair and the board’s governance committee in concert play an important role in building and sustaining an agile board through governance policy, chair leadership and through the recruitment, development, evaluation and refreshment of directors.
There isn’t a blueprint that exists for reproducing another company’s agile board. And, the breadth and practices of an agile board will change as board leadership and market dynamics change. A mindset of collaboratively considering each decision from the “outside in,” with a commitment of director inclusion enabling judgmental insights, raises the odds of continually successful transformations.
On a personal level, when agility gains traction and becomes the board culture and shareholders benefit, directors experience fulfillment, personal impact and shared accomplishment.
To be an agile director translates to a passion and a discipline for winning, a commitment to professional relevancy and a willingness to offer keen business insights without overbearing ego. Agile boards seek inclusive, loyal team players who willingly collaborate and who know when silence is warranted and contribution is counted on.
While being a director of a board seeking agility is challenging and demanding, it is far more satisfying professionally than being in the cross hairs of investors who oftentimes impugn director reputations for ineffectiveness and inaction. So, if you are agile and believe in shareholders first, your services will be in demand.