Boards Dilemma – Constitution & Composition

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Boards – There have been several debates around what defines a Great Board from an ordinary one. While this may appear subjective to a wide audience, I believe it is this single most important factor that goes on to shape the destiny and endurance of any institution.  The Purpose, Gravitas and Urgency that Boards bring in their decision making process have significant influence in the strategic objectives and business outcomes of global enterprises.

So what defines purpose of Boards and its function? I firmly believe governance practices begin at the portal of the “safe keepers” (The Board) and that these need to seen through the lens of the “Purpose” and the “Identity” of an enterprise. Their actions are best defined through the sharp focus on interests of the broader stakeholder community irrespective of the demands and pulls of short term gratification – which is it’s the institution they represent in “TRUST” that takes centerpiece in all of their decisions and actions.

Significant portion of this malaise lies at the doorstep of the remuneration committees constituted by the Boards, which seem to perpetuate and promote management practices that align short term performance needs to incentive structures. This blind faith in short termism has led to irreversible and permanent damage to the culture of storied institutions.

All affirmative actions, including what percentages we need to have representation from a particular gender, community, ethnicity, age all take a back seat.

Board constitution (and composition) needs to strictly follow a practice that exhibits the following approach –

  • Define purpose and value systems of the institution
  • Define selection metrics based on the purpose and value systems
  • Identify individuals who reflect these ethos and bring complementary experience and mindset (irrespective of background, ethnicity, gender)
  • Actively promote a board constitution that challenges homogeneity of thinking and promotes dissenting views
  • Define performance benchmarks for the institution that looks to reward ethical, transparent and credible behaviour
  • Realign performance incentives to the long term goals and objectives – this will ensure only individuals with long term vision come on board
  • Set expectation standards for each individual irrespective of her being Independent or Executive Director
  • Device an open and transparent rating mechanism that puts emphasis on consistency, quality and uniqueness of inputs and decisions
  • Appoint a Chief Values Officer on the Board to give an independent review and perspective on execution of an institution’s value systems

The above are some key learning and experiences that I have gone through in my own professional journey and thought of sharing the insights with you. Hope you find these useful.

 

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