Choosing Board Members Part 2: Food for Thought

Obviously choosing a BoD properly should result into a visible and measureable set of benefits for any organization. This article will is a continuation of yesterday’s ‘basics’- article.

Most of the stuff mentioned here is also applicable when you are setting up a BoA (Board of Advisors) for your organization or any other Governance Body.

Policy, Policy, Policy
Remember, your Board Members are not just another set of over- experienced advisors. These are people who should spend a great share of their time shaping the future of the organization. These are people who should understand what policies are, how to re-evaluate & refine existing ones, and how to develop new policies.

Difference between Governance and Policy? Governance is the process, or the power, of governing - policy is the art of governance. In practical terms, governance is a set of frameworks of ‘overseeing and controlling’ (=governing) how policies are addressed and how the relevant activities are carried out.

Most people are familiar with traditional notions of Governance where the BoD (or even the BoA) receive various reports in order for then BoD to approve various action plans to be carried out by the organizations’ personnel; and then – of course, the BoD defines some kind of a monitoring mechanism for all aspects of the operation(s).

Policy Governance works through policies which enable active corporate governance. So, make sure that the Board Members whom you choose are experienced or are extremely capable in creating, structuring, implementing and monitoring policies which will ‘define’ the BoD’s job & responsibilities, and the governance needed to set / embrace the future of the organization.

Written policies are probably the best tool for conveying the BoD’s decisions to all stakeholders (CEO, other Executive Management, Shareholders, Major Vendors, etc.) in a consistent and enduring manner.

So, do you think that someone who has no experience with policy development could exercise governance and/or define the future strategy of your organization?

Board Members: How to find them?
Here are the 7 different possible ways:

1. If you are getting financing as a startup or at some other state of maturity, your VCs will install a few members on your Board and your VC could also help you find more members.
2. The old way: Recommendations.
3. Approach Existing/ Active Board Members
4. Search on your own. Define clearly and explicitly the profile of each Board Member that you would like to have, translate that into a skill-set and search (ideally on LInkedIN) for possible candidates to approach and interview.
5. Search via a Director’s Professional Association- for example the National Association of Corporate Directors (NACD) or the Institute of Directors (IoD) or some other local relevant body of membership.
6. Hire a Professional Director.
7. Use the help of a serious Executive Search firm that could offer that service. This is an assignment not to be handled by a junior or a senior headhunter but by a partner who himself/ herself has at least the experience of having served in a BoD. I hate to say that, but to the best of my knowledge only one young (year- old) small company in Ghana has that experience.

What is a Professional Director?
Professional directors are people who serve on BoDs as a full-time job/ career.

They tend to be seasoned senior/ C-Level consultants, or lawyers, or bankers and VCs or retired executives; in general they tend to be people who bring along an extensive additional expertise of having served or actively serving now in various BoDs and BoAs. Yes, it is both acceptable and common for someone to seat themselves in the BoD of more than one corporation.

The Plus: (i) Professional directors might have participated in several governance settings and they most likely have witnessed a full spectrum of both successes and failures.

(ii) In theory, they do have more time to dedicate to your BoD/ BoA, since this is their primary job/ occupation.

The Minus:
(i) Objectivity and Independence, if they view the executive management team as the umbilical cord to their income – so they will never challenge the CEO and his/her executive team.

(ii) Commitment- they might lack ample time to concentrate on your organization's issues when they serve multiple Boards.

(iii) Watch out for those who see the ‘Boardship’ as a form of active retirement – this is full lack of motivation.

Other considerations- a few tips.

• Your corporate lawyer, s/he can attend BoD meeting if applicable, but s/he should not have a seat on the Board. It’s serious conflict of interest.
• Actually don’t place any employee on the Board so you can avoid the situation where the CEO is hesitant on managing that employee for fear that s/he could retaliate as a BoD member.
• Typically the BoD Member recruitment is a key responsibility of a nominating and governance committee. If you are a smaller company or an owner/ founder, please set up a committee- don’t make all these decisions of potential Directors just on your own- extra ‘minds’ help.
• The BoD setup- process should begin by evaluating the identified needs of your organization and relevant gaps. So please do perform a proper Organizational Capacity Assessment.
• When it is finally assembled, the composition of your Board should be in accordance to your organization’s strategic, operating, and functional needs.
• Think whether it is applicable for you to have some BoD members with International Experience. A must if you are moving into new international market segments.
• Ok, you have interviewed your potential BoD members and they have no meaningful question for you about your organization and the BoD setup? Are they plants/ brain-dead or are they completely uncommitted, unmotivated and genuinely indifferent to your organization?
• Are they asking you what is it expected for them to do as BoD Members? Especially if the prospect BoD Chairman is asking that, be nervous. Very nervous!
• It’s of paramount importance that your Board embodies and reflects the culture of your organization.
• As mentioned in Part 1 of this article (yesterday's posting), make sure that you are putting in place a BoD whose members have good relationship and rapport among each other as well as with the organizations executive management team.
• Should you invite inexperienced Directors to your Board? A lot of the Board-specialized recruitment firms argue that Directors can be taught compliance, so you should focus on Subject Matter Expertise and Experience. Sure it could be true for the right person and every rule has exceptions, but can you afford to set up a Board with just domain experts?
• Remember that setting up a Board takes time because someone has to also set the board processes. So, plan for it.
• When applicable, you can have people not formally elected to the Board participating in board meetings as observer or advisory directors.
• Aim for Indepedent (from the organization) Directors.

eBoD Members from far geographies?
In today’s world, with all the connectivity and people travelling constantly around, your BoD members do not even have to sit around on the same conference table – ok, it’s nice to have the majority of them in the same room and just one or two of them been present in the meeting via a (video)conference call.

If the organization's articles allow for it, of course the BoD members can participate in Board meetings remotely; there should be a remote participation policy in place where the whole BoD agrees with and adheres to.

What does a policy like that, looks like? It defines for example: the maximum number of people to be remotely participating or who from the BoD is allowed to, how to check that remote participants understand what is said (remember they might not be able to perceive any visual cues), how is the turn- to- speak passed to them etc.

Is this a common phenomenon? Yes, it is an acceptable practice. For example American Express does it and so do several other companies; please google for names/ to find out who they are.

In Conclusion
Selecting people to form a Board of Directors is a vast topic on it’s own and these two articles just give a quick overview of this topic: just enough Food for Thought to create awareness. Yesterday’s article can be found here: www.modernghana.com/news/693466/choosing-board-members-part-1-the-basics.html

Whether you are busy setting up or about to set up your BoD or BoA, it's good to be aware of some of the key- elements that go into forming a Board.

Thank you,
Spiros
About the Author: Spiros Tsaltas, a Top-Tier Management Consultant and a former University Professor (RSM MBA, CUNY, etc), is a seasoned Technology & Operations Executive. Spiros has hands-on experience on setting up all sorts of Startups both in the US and in Europe. He is an active transformational leader and strategist with extensive experience on Boards of Advisors & Boards of Directors. He is currently assisting a couple of Ghanaian companies with the setup of their Boards.

Spiros welcomes any feedback/ comments/ remarks/ suggestions via your email message to [email protected]

© 2016 Spiros Tsaltas
(All of Spiros' previous articles can be found here: www.modernghana.com/section/BoDStartups)