How is your board performing?

Many organizations, both nonprofits and for-profit businesses, have a board of directors.

These people are responsible to the shareholders for governing the company, so shareholders should periodically assess board performance. After all, participation on a board of directors can have a major impact on a company's performance.

Because of the potential impact on a company, shareholders should hold board members to a high standard of performance and contributions.

These are some questions shareholders should be asking themselves about their board of directors:

• Is the board of directors providing strong support and guidance to management?

Is it providing meaningful input and guidance to management during board meetings? If management raises legitimate questions or concerns about business issues during board meetings, are they able to respond in a meaningful, thoughtful fashion?

• Is the board of directors holding management accountable?

Board members have a fiduciary duty to shareholders to ensure that management is efficiently managing the company on behalf of the owners. This means that the board cannot wink at management failures and award underperforming management compensation outside of what is contemplated in employment agreements. All too often, it seems that one hears stories of poorly performing senior management being rewarded by boards of directors for failure.

• Is the board of directors actively engaged?

A board is not a social club where members are compensated just for showing up. If there are board members who are regularly unprepared for meetings, missing meetings, unable to provide meaningful insight during meetings or other behaviors that demonstrate a lack of engagement, they should no longer be part of the board.

• Is the board of directors able to assist in putting in place strategic relationships?

A key aspect of a board member of a growth company is the ability to bring strategic relationships and key introductions to bear on behalf of the company. These relationships can be as diffuse as introductions to potential customers, lenders, investors or any of a host of possible value-adding introductions that can benefit the company.

• Do they bring meaningful credibility to the company?

One of the biggest attributes that a board member can bring to a company seeking to elevate its profile is credibility. By having a person on the board who is known within the industry - or further - the company is asserting that it is a player to be taken seriously. Potential customers, lenders or investors can get a sense of comfort when they perceive that someone substantive has taken a leadership position as a board member.

If shareholders cannot answer most - preferably all - of these questions with a resounding "yes" for each board member, then there could be an issue with the board of directors.

After all, each member of a board of directors should be generating value for the company well in excess of his or her compensation. Ongoing membership of those who are not contributing appropriately should be thoughtfully revisited.

This can be a difficult, and delicate, process. But if handled appropriately, the results for the company and its shareholders will be well worth the effort.

 

Bruce Rector is president of The Rector Group management consultants. E-mail him at brector@therectorgroup.com or visit www.therectorgroup.com.