Responding to Say on Pay
February 4, 2019
Board of Directors – Your Responsibilities
February 4, 2019
Several trends are contributing to more effective boards. Fortunately, albeit slowly, there is a positive trend of increased board diversity—on public boards in particular. Term limits are more common as are restrictions on the number of boards one can participate on. For decades, well-connected individuals could participate as active directors on 10+ corporate boards for Fortune 500 companies. A small number of individuals wielded a great deal of influence and interacted, sometimes, in an almost incestuous manner. Greater regulation, shareholder activism, increased director liability, and baby boomers seeking board positions have all led to the creation and growth of director and board education. The ICD in Canada, National Association of Board Directors in the United States, and IOD in the United Kingdom are leading the way in providing director education.
Board chairs are now most often highly skilled—particularly in publicly held companies. They are becoming more versed in the difference between governance and operations. When they are elected positions and where term limits exist, chairs typically hold considerable experience in leadership, business acumen, stakeholder engagement, risk management, and governance.
Gone are the days when directors could dedicate somewhat minimal time to their board responsibilities. In the 1970s and 1980s, many of North America’s elite establishment sat on multiple boards simultaneously. They comprised a relatively small, well-connected group, typically white males from Ivy League schools with solid business acumen and, often, military experience. This is no longer possible. Participating as a director on three to four public, private, or crown corporation boards is the most that is manageable. Director roles are more demanding and time consuming; this is particularly true for committee and board chairs. The increased workload, responsibility, and liability have weeded out those who are not fully committed to the organization they are representing. While there are some exceptions, directors today are committed to the success of the organization and the CEO. The best board chairs are keen to offer wisdom, insight, and to act as a mentor and sounding board for the CEO.
