Effective board management involves a lot of factors, including the correct combination of people and structure. But it also includes an environment that encourages open debate and questioning, as well as the ability to engage and effectively communicate with the CEO, other board members, employees and independent directors. These skills and behaviors can make a huge difference.
The best mix of ingredients will differ from company to company. The best boards are composed of personality types, skill sets and experience in the industry. They will include people with the courage and conviction to raise red flags even in difficult situations. They will have a high level of trust in each other and the CEO. They will be adept at quickly and efficiently comprehend the complexities of crucial business issues, including operational, financial and strategic challenges and opportunities.
Boards should also ensure that they are aware of their roles within the organization. This is particularly true for boards that are not for profit, as they face significant legal liabilities should they fail to perform their governance responsibilities.
Finally boards should be able to identify and assess their own board effectiveness. A rigorous process for assessing their effectiveness will help them address talent gaps, create an open and transparent board culture, and clarify the strategic goals and make sure that the board is aligned as whole with the CEO.
Additionally, it is essential to evaluate the structure of committees and ensure that it has been designed to support the board in achieving its objectives. It is possible to look at removing committees which are no longer necessary or altering the composition of existing ones. A committee focused on climate change risks might not be needed for a bank with no physical assets in the area.
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