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01 May. 2019 | Comments (0)
(This post is part of The Conference Board ESG Center series on the job description of a corporate director from the perspective of various stakeholders. Quotes from this Q&A is highlighted in Just What Is the Corporate Director’s Job? Business Media’s Perspectives on the Board Member’s Job Description.)
Ralph Ward is an internationally recognized writer and seminar leader on boards of directors, seeking board opportunities, and making boards part of a personal career strategy. Publisher of the online newsletter Boardroom INSIDER, he has also edited The Corporate Board magazine, the international journal of corporate governance, since 1990.
He speaks extensively in the U.S. and internationally on board and governance issues, including his highly popular "Boardroom Masterclass"? seminar.
Ward is the author of the books Boardroom Q&A (2011), The New Boardroom Leaders (2008), Saving the Corporate Board (2003), Improving Corporate Boards: The Boardroom INSIDER Guidebook (2000), and 21st Century Corporate Board (1997).
He recently spent some time talking with Gary Larkin, the author of The Conference Board report, about the job description of a corporate director. What follows are his thoughts.
As a longtime member of the business media, how do you see the job of a corporate director in today’s business environment?
It’s become very contradictory and difficult because of the demands put on board members of publicly traded companies. No one acknowledges the fact that boards were never set up to do anything. It was always management who did everything. Now, we expect boards to be more involved in the business. Now, expectations are much higher for boards. Sarbanes-Oxley [Act] hiked board responsibilities into high gear. Those responsibilities have gotten really granular. In the end, the board is a group of amateurs, who are really capable people, trying to oversee a group of professional managers.
What role does the business media play in the job of a corporate director?
They have an important role of nipping at the heels of the corporation. They look into those in management and the board who were asleep at the wheel when there is a crisis and checking who was trading on the inside when that crisis took place. The problem is there really is a lot of good corporate governance statistics on boards. But, it’s primarily for the Fortune 200 and 300 companies at best.
Over the last 15 years, corporate governance news has gotten pushed into the spotlight. Some stakeholders have used boards for a means to an end. In fact, if you Google the word “boards” today and click on the News tab, you will see stories on diversity. Such coverage is forcing boards to address such issues.
According to today’s standards, it doesn’t behoove boards to see themselves in news articles because that usually means something bad has happened to the company.
Who owns tone at the top – the board or management?
The board owns it in an indirect way. The most important responsibility they have is Socratic in nature as they can ask management questions. They also have access to the company hotline. If management wants to know how many hotline questions there have been on fraud or sexual harassment, they can get that from the board. But if the board is telling those below the C-suite about the hotline results, that could set off alarms.
What do you think the ideal characteristics of boards should be? Are there other characteristics boards should look for during board refreshment?
It’s simple: curiosity and the ability to use the [oversight] tools at the board level. Board members have to realize that [power and control of the company] is going to be tilted toward the CEO. However, the more transparency available from management through dashboards that can sometimes show that something is off, then the more opportunity there is for the board to take power back.
What about those dashboards? What do they do?
They get into tactical areas. They are what the board uses to see what the CEO and CFO are seeing and to see what the company’s numbers are and how far out of variance they may be. A dashboard allows a board to be effective by being able to look at the [risk-related] numbers, balance sheet information whenever they want to. Board portals make it easier for boards to get what they want when they need it.
How does a board guarantee it is getting sufficient information about its company? What kind of balance should there be between what they receive from management and external sources?
It has to be about the CEO and management. The board portal works here. For management today, sometimes the information is late or incomplete. That’s not acceptable anymore. The board needs to go and get information on their own. They should Google it and use the board portals to share what information they find. They should be able to tell management, “Hey, here are some rumors I found about the company.” There should be no closed doors. A director should be able to go below the C-suite without getting permission. If the CEO has a problem with that, then that is the CEO’s problem.
Should all directors have an opinion on the emerging theory of companies having a social purpose?
I think they must have an opinion on this. On ESG issues, board members are the ones that have to look beyond the quarterly results and see what effect sustainability will have on long-term results. They need to ask if this [coming up with a social-related strategy] will be a good idea five to 10 years from now. Board members must ask questions about that.
The views presented on the ESG Center Blog are not the official views of The Conference Board or the ESG Center and are not necessarily endorsed by all members, sponsors, advisors, contributors, staff members, or others associated with The Conference Board or the ESG Center.