Beware the Board of Protectors
Getting clarity about the role of the board
You’ve probably heard the story of the blind men and the elephant – six blind fellows each encounter an elephant and make grand proclamations about it based on their perspectives. After one of them falls against the elephant’s side, he states that elephants are like walls. Another, who grabs the tail, believes elephants are like ropes. In the end, they all are arguing about what elephants are like. John Godfrey Saxe’s poem about this fable declares that each of them “was partly in the right, and all were in the wrong!”
In the business world, the noisy chatter about boards seems similar to the argument over elephants. Strong voices announce their views:
- an ambitious CEO expects board members to open important doors to grow the business
- an over-zealous board member believes his experience in human resources means that the best way for him to add value to the company is by coaching the HR director
- a disillusioned investor demands that the board safeguard her life savings
Each of them is partly right. But all of them are wrong. They are each so focussed on their own perspectives, they are failing to see the whole picture.
Picture the Director’s Job
Some corporate directors focus on helping the CEO do his job well but give lip service to their duty to work on behalf of shareholders. While their input ought to aid the Chief Executive Officer, the board’s prime responsibility is to work for the shareholders. In the simplest of terms, the role of the board is to direct and protect in the interests of the shareholders. Not just a few shareholders, to the exclusion of others. Not just the major shareholder. And certainly not the board members themselves, even if they are among the shareholders. The board’s obligation is to make decisions that advance the best interests of the entire ownership base—all of the shareholders at the same time.
That’s My Money
It doesn’t take a Gallop poll to figure out that shareholders care about their investment. With the wave of alarming accounts of corporate mismanagement and executive excesses, it’s not surprising that investors are demanding greater oversight by boards.
But what does this look like and what are directors to do? The trend in legislation is to impose many more forms and checklists. More committee meetings. More reports. More audits. More bureaucracy. The jury’s out on whether this will lead to more protection. But one thing is certain—it will take more time and cost more money.
Directors Direct
There is a reason that the board is called a board of directors. Together, this assembly of seasoned, informed, and committed people declare the destination for the company and determine milestones for the journey. Directing addresses the highest level of strategic planning for a company. In their board role, directors rise above the fray of day-by-day operations and look at the big picture.
Some board members, and especially CEOs, become uncomfortable with the thought of the board giving direction but that’s because they have seen boards miss the mark. The board of a public restaurant company spent two meetings debating what pudding ought to be on the menu. This is not direction—it is distraction. The CEO and management team deal with the implementation of strategy and all other operational matters.
Looking at the big picture and considering strategy are what attract Jim Estill to board service. Jim, the founder and President of EMJ Data Systems, sits on a variety of public and private company boards. He is an impassioned entrepreneur, especially eager to help leaders of promising younger organizations navigate the growth journey. But he admits that the increasing bureaucracy being legislated upon directors is a deterrence for him to commit more of his future to serving on other boards.
Jim is not alone. The problem is that many strategic thinkers who can add tremendous value to boards are becoming disillusioned with the shifting demands of the role. They want to help lead the company to a bright future, not just keep it out of the ditch.
Beware the Board of Protectors. This is ultimately a tight-fisted, short-term-thinking, prove-it-to-me bunch that lacks leadership. For this group, risks are not to be managed, but avoided. The paperwork is in excellent order. But the company’s future is flat-lined.
Great boards hold their ‘protecting’ mandate in balance with their ‘directing’ role. They boldly look to the future and expect the company to charge new hills and capitalize on new opportunities. They hold the CEO accountable to move in the desired direction, to achieve the expected results, and to adhere to the agreed-upon values. They make calculated risks. And by taking those risks, their companies advance the interests of the shareholders and generate returns that reward these owners well.
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