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“Board Basics” Rule

August 21, 2016

This post reflects a collaboration between Dr. Dale Meyerrose, major general, U.S. Air Force (retired), president of the MeyerRose Group and Maureen Metcalf, founder and CEO of Metcalf & Associates, and is written in conjunction with a VoiceAmerica interview that aired on August 16, “Emerging Roles of the Board and Cybersecurity.”

Many aspire to join boards, and other leaders aspire to manage their boards in order to promote organizational success. Much has been written about responsibilities of boards of directors, but few distinguish those task lists from the essential roles of a board and its directors. By understanding those few, basic requirements of a board, the savvy leader can maximize effectiveness in driving organizational success.

Dan walked into the board meeting to discuss the company’s performance and strategy going forward. He was confident that this would be a smooth meeting because he meets regularly with board members and has a clear understanding of their values and past guidance. As a veteran CEO, he understands the importance of working closely with his board and that progress means that the entire senior leadership team is working from the same “sheet of music.” Key to his success as a senior corporate official is to comprehend everyone’s role and anticipate the board’s needs as they work together to ensure the organization’s success. So, what does Dan know regarding “board basics” and roles that allow him to have this confidence?

  1. He understands the importance of a collective corporate conscience. Board members must ensure that the entire organization acts in a socially responsible and ethical manner. While it is true that public corporations have the primary goal to deliver stockholder value and create sustained value, they must also act in a legal and responsible manner in the process. We submit that corporations that over-emphasize profit (some people would argue there is no such thing) can put the organization at risk by “cutting ethical corners.” A single, historical example says it all:  Enron. While the complete case study of Enron is beyond our purposes at hand, their clear fixation of profit over ethics and unnaturally fast growth over sustained growth provided business schools with the stereotypical example of an organization lacking a corporate conscience or ethics.
  2. Shareholder advocacy is self-evident to most business people. However, Dan knows that stakeholder considerations go beyond just the shareholders. Leaders and boards are always making trade-offs to ensure all key stakeholder interests converge in the right way for the right reasons, at the right time for the good of the organization. The board is responsible for creating the strategy and oversight to instill trust of all stakeholders in the corporate culture. Shareholders can vote with their feet if they feel that their interests aren’t taken care of, as can rank-and-file employees and management. Further, partners and suppliers have options of price and contractual protections that potentially make the cost of doing business with the company problematic. While profit remains the main measure, it is not the only performance assessment of overall health and trends of the enterprise itself and its eco-system of stakeholders. We believe that John Mackey, co-founder of Whole Foods, embodies these principles. He is clear in his passion about his company making a strong and sustained profit—and that he sees part of that equation being fulfilled through the creation and nurturing of a healthy eco-system of employees, suppliers, partners, customers, and the environment. The results of his company in his market sector validate this approach by successfully meeting ALL stakeholder expectations.
  3. To ensure sustainability, Dan recognizes that the board serves as a “strategic compass” for the organization to safeguard corporate well-being and long-term growth. This means organizational focus is on the long-run and is constantly attuned to changes in the company, the industry, consumer tastes, technology, and society in general. The key is differentiating that which matters from that which is merely interesting or important, and anticipating future roles and values for the corporation. Again, there are many epic failures of a board being less aware, or completely unaware, of the conduct and performance of their company. We find that there are relatively few organizations with both the board and senior management capable of weathering changes over time. In 1950, the average company stayed on the S&P 500 for half a century. By 2012 the average company stayed on the S&P 500 for thirteen years. The dynamic forces facing corporations in the 21st century are changing the nature of business—and the speed with which change occurs compounds the complexity.

If you are part of senior management, like Dan, do you have confidence in dealing with your corporate board? If you’re one of “Dan’s” board members, do have the reciprocal trust in him? Understanding “board basics” is critical in today’s challenging business environment. If you are senior management, it is important to understand the roles that your board fills and to leverage them to ensure the success of the enterprise. If you are a board member, are you fulfilling these roles? Or, has the “to do list” and urgency of the present obscured your focus on these basics that rule? Or, as many in the workforce might say: “Basics rock!”

 

AUTHORS’ INFORMATION

Dr. Dale Meyerrose, major general, U.S. Air Force (retired) is president of the MeyerRose Group—a cybersecurity, executive training/coaching, and eHealth technology consulting company. He is an adjunct instructor at Carnegie Mellon University, Institute for Software Research running their Cybersecurity Leadership Certificate program. General Meyerrose, a Southwest Asia veteran, was the first Senate-confirmed, President-appointed Chief Information Officer for the Intelligence Community after over three decades of military service.

Maureen Metcalf, founder and CEO of Metcalf & Associates, Inc., is a renowned executive advisor, consultant, author, speaker, and coach.  Maureen designs and teaches MBA classes in Leadership and Organizational Transformation. She is also the host of an international radio show focusing on innovative leadership, and the author of an award-winning book series on Innovative Leadership, including the Innovative Leaders Guide to Transforming Organizations, winner of a 2014 International Book Award.

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