This month's issue of Acredula continues our focus on board composition and the “expertise” board: A board selected based upon the diversity of their competencies.
A survey of financial institution directors by Harvard Business School found that directors themselves believed their boards did not have all of the expertise and competencies necessary to understand the risks inherent with the business models and strategic direction of the institutions.
The media and commentators have blamed boards with headlines such as “Independent boards, but ineffective directors.”
The SEC began requiring publicly heldcompanies to disclose, with respect to its directors, “the specific experience, qualifications, attributes or skills that led to the conclusion that the person should serve as a director for the registrant at the time that the disclosure is made, in light of the registrant’s business and structure.”
Examples of bad board composition that I have encountered include a board composed of an equal number of representatives of employees and of employers and one member from the “general public.” Almost every decision had to be made by the general public member.
Another was a board composed entirely of CEOs. No one wanted to serve on the audit or legal compliance committees. Another example is a board composed of 40 members of diverse backgrounds and experiences. The board was so large that a different permutation of directors appeared from meeting to meeting, often resulting in a decision by one permutation that appeared at one meeting being reconsidered by a different permutation that appeared at the next meeting.
This month's issue of Acredula contains an article on how to determine which competencies are core to a board’s composition and an article by Kevin Kinross on whether there is an optimal size for a board.
Read past issues of Acredula.