On Being a Director

Many directors gain election (or appointment) with limited understandings of their duties, let alone how to be effective.

This short piece is aimed at those who would like to better understand, and serve, on boards of directors whether corporate and/or not-for-profit. It draws from a variety of personal experiences, including those of valued mentors, and from a variety of books, many referenced below. It is not to be treated as professional or legal advice.

Many boards are less effective than they could be. Some are seriously dysfunctional. Not unlike some governments. Individuals appointed or elected to boards nearly invariably enjoyed success in their prior work, typically for work other than as a director. These individuals may have been highly successful entrepreneurs or professionals. Ironically, success in directors' work outside the board may depend on qualities (attention to detail, the need to control, high stakes, loss of face in the event of mistakes) that risk directors becoming managers in conflict, rather than a group that is adequately informed, adequately forward-looking, and adequately directs those who are supposed to be managing.

Why serve?

Ask yourself "why would a person, perhaps myself, sign on?"

If we are talking about a voluntary member-based organization, you may seek to improve things, and to learn in the process of doing so. You may even feel a duty to serve. You may also seek, and enjoy, to escape the monotony or stress of your "day job" for the company of peers, and to seek or enjoy involvement in committee work, and the opportunity to travel to meetings convened both locally and at a distance. You may have political aspirations both within the organization and without. You may also make "connections" that will benefit you in later ventures, although you are not supposed to have gained undue advantages. As we can see, there are a great many motivations.

Survey the landscape

Ask yourself:
  • how much work is required of directors?
  • how much of this work is supported?
  • does this board already function well?
  • are there evidence of problems in this board and what is its history of handling problems?
  • does this board change positively in response to internal and external pressures?
  • does this board invest in its directors' personal development and in the evaluation of their performance?
  • if I still want to do this, but I find myself in conflict, how might I get out, undamaged, principles and soul intact?

The answers will take some work on your part. You might base your first two answers on the experience of a few current or past directors with whom you surmise the most in common. While some legislation precludes directors to be paid, there is almost universal provision for costs and expenses and sometimes other variably transparent ways to offset what is given up to direct.

Answering the remainder will take a lot more work. An organization can run efficiently without a competent board, predicated on a capable CEO and senior staff. That is, if an organization is running without too many problems, it may just be that the board is superfluous, just as governments can be run purely by their bureaucrats. This, of course, is not a desirable situation. The directors of such organizations risk not only contributing little but, worse, can find themselves unable to be properly accountable, if anything should go really badly despite the staff's best intentions.

Tiger country

Does this board already function well?

Arrange to observe a meeting. Meetings vary not only in their content (agenda items), but also with the institutional culture and attitudes. Identify, if you can, the adequacy and balance of assertion, analysis, and nurture. Are difficult – but necessary – discussions entertained, and do the disparate views get fully-enough reconciled before business proceeds to the next item?

Ask non-executive directors how agendas are developed. Are they satisfied that they can gain debate on all items of importance? Do they discern any pecking order within the board, or other constraints under which they feel it necessary to function? Are they satisfied with the board's current function?

Ask for copies of the board's agendas from the past 12 months, and review the minutes. It may be enough to review the summaries meetings if these go out to the members, or it may be that you need to review copies of the official minutes. How do the two align? Compare these to external guides which set out what boards are supposed to be doing. Ask directors to what extent the steps in the evaluation of the CEO matched or fell short of what is set out for example in guides example 1, example 2 and example 3.

Are there evidence of problems in this board, and what is its history of handling problems?

Cross-check the actual business of the board against the organization's strategic plan. How do they align? Determine, if you can, the extent of pursuit of ideas, the extent of questions being asked, the extent of options being explored, and of pros and cons being evaluated. What extent of dissent proved evident in any discussions? Is the basis for dissent adequately clear? Are you satisfied with its resolution? Are all of the current directors?

Does this board change positively in response to internal and external pressures?

Ask to review any reports in which the effectiveness of the organization and in particular of that the board have been studied. How long ago were these received and considered? If changes were recommended, have those changes (those which could have been done) been made?

Ask to review the reports of Annual General Meetings as well surveys. Have the members asked for changes and, if so, what changes have ensued?

What risk assessments have been considered by the board, and what has the board resolved, and done in followup, to address these risks?

Does this board invest in its directors' personal development and in the evaluation of their performance?

Ask current and previous directors to describe for you the extent of any orientation they received. How long did it take them to get comfortable with their duties and responsibilities? Were their views solicited and accorded adequate voice? Was there ongoing consideration, within the board's business, of board development and function? Have directors had individual feedback on directoral and overall board performance, and on what were these based?

If I would serve, only to find myself in conflict, how might I get out, undamaged, principles and soul intact?

Review your state, provincial, territorial or national legislation (typically Societies Act or equivalent for non-profits, and Companies Act for for-profits) as well as your own organization's Constitution and Bylaws, its terms of reference and duties for the directors, managing director(s) and/or executives, and any code of conduct, conflict of Interest and disciplinary and dispute resolution policies. What are the procedures by which complaints would be lodged and acted on? What are the procedures for any removal of directors and officers and executives? What consequences and liabilities can befall you? What protections would you be afforded, and what would be the exclusions, and clauses under which these can be rescinded? Will the organization provide you independent legal counsel of your choice, paid by the organization, and is this anywhere stipulated in writing? Are there any past incidents that would demonstrate how complaints and disputes have been handled, and can it be known whether both sides were satisfied with any resolution? Can you be provided with a list of all directors who have resigned, and their reasons for resigning? If you would believe it necessary to resign, will your defensible reasons for resigning be able to be known by the owners, members and/or stakeholders?

If I still want to do this, how might I do it well?

Understand the mission, vision, and values of your organization, and come to your best understanding of its true current state, and where it's going. Then, educate yourself using any combination of the following (links appended).

If you are in a position of significant influence over a board that only wants in its effectiveness, or one in which you and others can start "fresh", combine John Carver's "Boards That Make a Difference" with Bob Garratt's "Thin on Top" chapter "Developing the Learning Board".

If you are concerned that the board or organization's problems may be more serious, involving multiple directors and/or issues of culture or entrenchment, you may better start with Garratt's "Thin on Top". Professor Garratt is a company chairman, consultant, and academic working on corporate governance, board and director performance and strategic thinking issues. He is a veteran of 25 years, is based in London, and works on five continents. Garratt maintains that if directors are ignorant of their rights, duties, roles and tasks, and if chairmanship is weak, then abuse of the key corporate direction-giving process around the boardroom table is ensured. While its early chapters' historical sections are slower to read, the follow-on discussions of organizations in trouble make compelling reading. I particularly enjoyed reading how companies who had hired the author as consultant were rather shocked to find their self-assessments to be so wanting.

As to how to get a board to better understand the nature of its problems, the "mirror method" employed in Bob Garratt's "The Fish Rots from the Head" may be just what the doctor ordered.

Resources

I am documenting some of my own learning journey in a few places online, including:
  1. Board 101: A document that I wrote (and which I posted publicly on google docs)
  2. Miscellaneous references and clippings from across the internet, on DirectorsDuties.

Other resources:
  1. John Carver's Boards That Make a Difference: A New Design for Leadership in Nonprofit and Public Organizations
  2. Bob Garratt's "Thin on Top"
  3. Bob Garratt's "The Fish Rots from the Head"
  4. Engaging doctors in leadership : review of the literature. http://www.hsmc.bham.ac.uk/work/pdfs/Engaging_Doctors_Review.pdf
  5. Short paper: Effective Boards: The Way Forward by David Beatty.
  6. Final report: Beyond Compliance: Building a Governance Culture – Joint Committee on Corporate Governance (sponsored by Canadian financial institutions).
  7. Book review: "Forces for Good: The Six Practices of High-Impact Nonprofits" Amazon
Topic revision: 21 Dec 2009, JamesBusser
 
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