What exactly is the "perfect board"? The answer, written to address a corporate versus nonprofit audience, provided me with some "hmm's" I wanted to share for conversation. I have inserted my own commentary into the article from Utah Business.
ARTICLES , LEADERSHIP Jul 20, 2018
When it comes to corporate governance, there’s no one-size-fits-all solution. But factors like board composition and the decision to utilize or eliminate earnings guidance are important decisions every company must make, particularly when it comes to positioning their board for short- and long-term success.
good point, yes!
How To Pick Your Board Members
Ron Poelman, senior of-counsel attorney at Jones Waldo and Chairman of the Board of the National Association of Corporate Directors Utah Chapter (NACD Utah), says board composition is the foundation of everything. Ideally, he says, you’ll want someone with some accounting or finance experience. Then you’ll want someone with marketing and sales experience. Then you’ll want someone with technical software experience. “Having the right mix of people on your board is really important. One thing I advise is to first start with a list of the ideal expertise [you want] on your board… then try to create a board that covers all of those.
While I would likely recommend accounting or finance expertise as very useful, I would not instantly think about marketing and sales experience or even more unlikely, technical software experience. And yet, the current and future environments, equally for nonprofits as corporate, probably suggests these to be important skills.
Robert Gross, principle and founder of Robert C. Gross Associates and President of NACD Utah, says what is most important in terms of board composition is what is best for the company itself. A retail company, for example, needs a very different board composition than that of a financial services company. “Gender diversity and ethnic diversity are also becoming more important,” he says. “You can think of [board composition] in two regards. One is based on skill set and one is based on demographics.”
Now here's where I agree but with perhaps a slant from a nonprofit sector. What is most important is what is best for mission for a nonprofit versus and certainly not exclusively for the nonprofit.
Regarding diversity, recent research states that nonprofits are surprisingly not that far along in achieving diversity goals although unlike for-profits, nonprofits have been long affirming their commitment to diversity but claim a failure to succeed and perhaps the real answer, try harder and better.
A board should also have a good mix of insiders and outsiders, Mr. Poelman says. It should be made up of some who work at the company and some who don’t. That way the company benefits from inside intelligence and outside perspective. “Insiders are involved in the personal relationships of working together every day and office politics, but outside independent directors don’t live in the tree, so they can more easily see the forest,” Mr. Poelman says. “When you have a mix of both, the best decisions are made.”
One might instantly write-off this statement as not being pertinent to nonprofits but I would argue that the "insider" board member is one who is "loyal" to the exec and/or founder members motivated by pleasing them versus what is best for mission and nonprofit. So the point is valiid.
Finally, the number of board members makes a difference as well. Three members is the bare minimum, Mr. Poelman says, and beyond seven can make it difficult to reach consensus. Odd numbers help with that conundrum. If it ever comes down to a vote, majority rules.
I agree that odd numbers matter but seven is not enough to achieve a greater range of expertise and opinion nor diversity. Five more to 12 does better.
The article added one more topic I thought particularly helpful for nonprofit boards: Use Your Board Meetings To Discuss The Future, Not The Past
“Board meetings should be mostly about the future, not the past,” he adds. “Boards should not focus on short-term objectives unless it’s a critical issue. The day-to-day should be handled by company officers, like the CEO and the COO. The most important thing a board does is hire and manage great officers. Those officers should then execute on a short-term basis the long-term strategy that’s developed by the board itself.”