How to go from good board practices to excellent ones? Here, I will briefly go through some key issues. This text has been previously published by Amcham Finland.
1. The Board and Management have different roles
The success of a company depends on leadership. The CEO and executive team can make or break the company.
The Board can support good leaders and the right leadership spirit or destroy the leadership and success. The Board cannot successfully lead a company. The roles are different.
The role of Management is to make proposals for decisions and to prepare material for discussions on strategic and operative issues.
Management is not supposed to “sell” anything to the Board, but instead openly have strategic dialogue with the Board.
The Board needs to be engaged in the formation of the strategy.
Management needs to have the courage to tell the Board if they do not have a clear answer to the present challenges.
Additionally, management should report mistakes made by the company. When making important decisions, the Board needs to have several alternatives on the table out of which the CEO proposes one for approval.
Clarity of these roles and the decision making processes is the foundation for good leadership in a company.
We require that the CEO makes a written proposal for the Board’s decision on every agenda item.
The CEO and other managers present in the meeting should leave the meeting feeling inspired, empowered and happy.
They should not feel relieved that the Board meeting is over and the pain can wait until the next meeting.
Management by fear is not a long term working practice. However, a healthy, high-quality tension is positive.
A good Board member is challenging, but equally supportive.
2. CEO and management succession planning
For the Board, one of the important duties is to assess the CEO’s performance and senior executive team.
It is also important to verify that the company has a well-functioning, objective performance assessment process in place.
This process should be linked to the development of individuals, remuneration and promotions.
3. Board (self) assessment
A Board Assessment is mandatory in enlisted companies in the Nordic countries.
The outcome of the Assessment is reported to the Nomination Committee. It is, naturally, also given to the Board and Management for developing the Board work.
After every Board meeting, we have a quick, informal discussion amongst the members. The aim is to ask ourselves, “How did we do in this meeting?”
Once a year, we have a confidential e-questioner consisting of 10 – 100 questions. As the Chair, I have a one-hour discussion with all Board members individually where both parties give and receive feedback.
We then formulate a joint conclusion of the Board based on these discussions and report them to the Nomination Board.
It all boils down to two points:
1. If you have the right strategy and a good CEO in place, the rest is a piece of cake.
2. Have fun and make money – that is business. Make sure that your net sales are high enough, compared to expenses, and always have cash available; that’s all you need. 🙂
This text has been previously published by Amcham Finland.
Read the first part here.
