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Long Term Habits Of An Effective Board

Posted By Ewald Consulting, Tuesday, May 5, 2020

Harvard Law’s Forum on Corporate Governance’s article, The Long-term Habits of a Highly Effective Corporate Board, gives some excellent insight into what it takes to ensure the long-term success of a board. The article was written by Ariel Fromer Babcock, director at FCLTGlobal. Here are some takeaways:

    Whiteboard with markers
  1. A focus on strategy
    Boards that have demonstrated long-term success spend almost twice as much time discussing strategy. This includes refining the business model, company values and evaluating risks. John Vaske, head, Americas, at Singapore’s Temasek, explained, “Boards have to be really immersed in strategy; it can’t be at a superficial level. Directors that are long-term have the time and inclination to dig into those strategy-related questions—that’s where value-creation happens.”
  2. Careful consideration of meeting materials
    The article states that about half of board members believe the agenda prevents the board from properly discussing strategy. The Harvard Business Review suggests limiting the number of items on the agenda to six at most and to only focus on items that will prompt productive conversation. This will prevent the board from getting bogged down with unnecessary discussion topics.
  3. Members are prepared
    Assigning reading outside board meetings can also significantly reduce unnecessary discussion. The article gives the example of Netflix’s board. They use an online live memo that has a forum for questions in advance of their board meetings. Maximizing time in board meetings can lead to long-term success.
  4. There is finality after discussing items appropriately
    It is key to let some things be settled. Re-opening items for discussion can be tempting, but letting some things be final can open up a significant amount of time for new items that will allow the board to move forward. The article suggests that one great way to do this is via the meeting minutes. Using language such as “the board decided…” over “the board discussed…” can demonstrate this finality.
  5. There is strategy outside board meetings
    Great board members should not stop after the board meeting is over. Members who spend some time researching competitors, talking with others in the industry or considering other ideas to discuss at board meetings are concerned for the long-term welfare of the organization.
  6. Diversity is encouraged
    Having a broad range of perspectives is crucial to the long-term wellness of the organization. This goes beyond racial diversity to include differing genders, ages and levels of experience. FCLTGlobal’s research showed that diversity is associated with lower financial risk.

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