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The 21st Century Board - Strategies for the progressive boardroom of the future
IEDP - International Executive Development Programs, Dec 2011, Pages: 72
The research work ‘The 21st Century Board’ by Professor Ulf Lindgren is an interesting and extremely valuable contribution to promoting the discussion on how the work and performance of the Board can be further developed beyond control and governance issues.
Due to many regulatory initiatives and existing laws the liability of Board members is constantly increasing and might lead to a ‘tick the box’ mentality. If no risks are allowed to be taken in business activity there are no returns. The Board’s primary role is to create long-term increase in sustainable value for all stakeholders. To this end a well functioning teamwork in the Board as well as a very professional interaction with the executive management are a must. Membership of the board, and especially the Chairman’s role, is today already a profession and requires substantial work and time investment. It is no longer about prestige but is hard and challenging work for people who have enough time, knowledge,and intellectual curiosity to constantly challenge and learn new things.
What does it take to be a good Board member? Personality is the starting point. High ethics as well as respect and trust of other Board members and executive management areessential. A Board is also typically a team of strong individuals and therefore mature team behaviour is critical for its success. The Chairman must understand how to be the leader of the Board team. A Board member has to bring industry knowledge, technology insight, functional experience as well as the right geographical and cultural expertise. Because seldom one individual brings all these competencies to the table, diversity of Board composition is the key. Greater diversity allows for a wider range of perspectives and real value creation in the Board team as well as in the interaction with executive management
What is essential for value creation? Both the Board and the executive management have to understand the constantly developing customer needs in different geographical areas. Therefore an interaction with key customers is needed. Strategy formulation is a key joint responsibility for the Board and executive management. Choosing the right people, organization, and business processes as well as safeguarding the agility of the company to adapt in changing circumstances are managed by the executive management but must be well understood and actively followed by the Board. Getting enough exposure to key talent and technologies for the company must be arranged, and achieving the right ‘checks and balances’ is a critical guiding principle.
A well-functioning relationship between Chairman and CEO is a fundamental success factor for every company. This relationship requires respect, trust, professional behaviour as well as clearly defined rules of engagement. Continuous learning is a must for an active Board member.
The quality of every Board is tested when companies face fast changes in the global market place or otherwise experience sudden crisis. This extremely valuable work by Professor Lindgren should be a stimulating basis for extensive discussions in all Boardrooms, and shows how to develop its work as a real value creator to the long term benefit of all stakeholders.
Excellent corporate governance is about leadership and people!
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