Balanced And Effective Boards

The magnitude and severity of an imbalanced board can unleash a multitude of scandals. Several significant transgressions have occurred over the past few decades. The Corporate Finance Institute has done a nice job compiling a list of the top ten e.g. Enron, WorldCom, and the Lehman Brothers.

Common barriers boards face are: 

·      Unclear roles for directors and the board as a whole

·      Separation between management and ownership

·      Mismanagement of board processes

·      Organizational strategy does not align with board membership

·      Poor board dynamics

·      Inadequate board orientation for new members.

What is more, Executive Bord Composition And Bank Risk Taking  contends:

·      Younger executive teams increase risk-taking

·      Boards with a higher proportion of female executives lead to riskier business conduct

·      Boards with more members holding PhD Degrees have less risky business practices.

Designing a board, recruiting members, and facilitating effective board synergy is multifaceted. The Scholarly Kitchen contends “Boards of directors are there for oversight and to generally prevent executives from making bad decisions…”. Moreover, "Nothing is more important to the wellbeing of a corporation than its board of directors" helps to further showcase the importance of balanced and effective boards.

Boards of Directors: Assessing Their Functioning and Validation of a Multi-Dimensional Measure exemplifies common board performance facets to note are:

·      Effective internal communication and teamwork

·      Effective leadership by the Chair

·      Effective committee leadership and management

·      Effective meeting management and record keeping

·      Effective information management

·     Effective self-assessment of board functioning

·     Effective internal performance management of board members

·      Clarity of board member roles and responsibilities

·      Risk and compliance management

·      Oversight of strategic direction

·      Remuneration management

Ideally, having the right people at the table should be at the forefront of board design. One common method for board recruitment is to utilize existing members networks to identify potential board candidates. Though this process may be the most timely, and easiest, it likely will not yield a balanced and effective board. building and sustaining an effective board starts with recruiting the right people. AlphaMille can help diversify your board membership.

Some structural elements for building a balanced and effective board are:

·      Establish benchmarks to determine what skills and attributes fit the board’s needs

·      Diversify board composition to Increase scope and depth of insight

·      Recruit an experienced leader for your board chair

·      Establish clear roles for the board and its membership

·      Facilitate board trust, respect, and capacity to challenge one another

·      Require regular board attendance

·      Encourage equity involvement

·      Design and implement a board membership contingency plan

·      Utilize executive sessions to evaluate CEO’s

·      Create audit and compensation committees.

Nevertheless, it’s important to note, ultimately, the epicenter to ensuring balance and effectiveness within the board hinges on the health and effectiveness of the social system. Constructing parameters to guide the board is an integral component, but will not guarantee optimal board output. Thus, AlphaMille believes developing a robust team that is not afraid to roll up their sleeves and flush out the truth, challenge one another, and argue issues from time to time will produce the highest functioning board.