Turn Your Board of Directors Into a Key Strategic Asset

Common practice has been for recruitment and selection of new board members to be left either to the CEO or to a small group of directors on a nominating committee who meet only during that period of the year when the bylaws require that directors be nominated and put before the shareholders for election.  While this approach seems easy and simple it actually substitutes convenience for the opportunity to establish an important competitive advantage.  Over the years it’s become clear to me that the board of directors can and should be a valuable part of the core competencies of the company and a significant contributor to the achievement of the company’s long-term goals and objectives.  The process of creating a board that is a key asset begins with making sure that you find the best people to join the board.  Failure to take this process seriously can result in problems relating to oversight of management activities, delays in decision making and legal action by outside shareholders that depend on the directors to look out for their interests.  In many instances, companies fail to pay sufficient attention to the board recruitment process and the result is a group of directors who are poorly trained and lacking the skills most needed for the specific company.
I strongly recommend to founders and other senior executives that they take the time to develop and implement guidelines that establish and maintain an orderly process for recruiting and selecting new members for its board of directors.  I outlined some specific suggestions in an article that appeared on Business Law Currents, a Thomson Reuters publication, on assisting companies in putting together a skilled and diverse board of directors.  As I mentioned in that article, the centerpiece any such initiative is creating a permanent committee committed to working year-round on board development including not only the traditional recruiting and selection activities but also mapping out a long-term strategy for the composition of the board and ensuring that current board members are informed about “best practices” for being knowledgeable and effective board members (e.g., orientation, training and assessment).
One simple, but often neglected, step in board development is creating a description of the duties and responsibilities of directors.  It’s like a job description and should be written in a manner that informs candidates about the types of behaviors that will be expected of them.  Consider the following list as an example:

• Attend regular meetings of the Company’s board of directors, which are held at least four times per year and which generally extend for approximately four to five hours in duration.
• Be accessible for personal contact with other board members and Company officers in between board meetings.
• Participate on, and provide leadership to, at least one of the committees of the board. Prepare in advance for active participation in board meetings and board decision making including thorough review of materials distributed in advance of meetings.
• Participate in orientation and training activities for new and continuing directors and proactively seek out other self-education opportunities on issues and problems that are being considered by the board.
• Responsibly review and act upon recommendations of board committees brought to the entire board of directors for discussion and action.
• Participate in the annual self-review process required of all board members.
• Participate in the annual development and planning retreat for the entire board, which is usually held in January of each year.
• Understand and comply with the terms and conditions of all policies, procedures and agreement applicable to board members in general and to you specifically including fiduciary obligations imposed on board members under applicable laws.
• In general, use your personal and professional skills, relationships, experiences and knowledge to advance the interests and prospects of the Company.

A description of director duties and responsibilities is obviously important during the recruitment, interviewing and selection process; however, it also can be used as a guide in the development of orientation and training programs and creating of an assessment framework to evaluate how well directors are fulfilling their obligations.
This article appears in “Board of Directors: A Guide for Sustainable Entrepreneurs”, which is prepared and distributed by the Sustainable Entrepreneurship Project.  Keep up with the activities of the Project by connecting with Alan Gutterman, the Project’s Founding Director, on LinkedIn and following him on Twitter and on Facebook.