”The Shifting Sands of Board Dynamics”

Reflections & Ideas by Chris Clarke

”Greetings. As President & CEO of Boyden global executive search, I shall take a liberty and put forth some of my personal views and thoughts. These are personal opinions, based on my own knowledge, experience and recent research. They do not reflect those of our organization.

Like sand dunes in the desert, Boards of Directors are blown this way and that by winds of change. The bursting of the dot com bubble and the scandals of ENRON and others led to Sarbox and all its unintended consequences. Worst of all, despite the costs and restrictions imposed on corporations by the legislature, Sarbox did not prevent the problems raised by the recent financial crisis.

The resulting turmoil of the greatest recession in living memory has whipped up new sandstorms for boards. In this paper, I reflect on how recent events have led to changes in the dynamics of board member interaction with one another. This gives pointers to some clear and present dangers and areas where further research is needed.

CEOs fear the Kangaroo Court

Board members’ remuneration is relatively low, when weighed against increased in risks to their reputation and careers, that have resulted from recent scandals. As a result, the importance of the Executive Session has grown immensely in recent years and months.

I have observed that CEOs, especially those that sit on other boards in executive sessions, nervously await the outcomes of what some perceive as a potential Kangaroo Court.  Many CEOs identify very closely with their corporations. This is an important driver of their success. The CEO may see the business as an extension of his or her persona. The idea that part time, less well informed outsiders might be discussing strategic issues and CEO performance, without the their presence, can be deeply unsettling.

In periods of great turmoil, board risk aversion is enhanced. Boards may flip flop between being a light touch or a passive ‘Governance Board’ to becoming a step on the brakes, ‘Strategic Board or a ‘Micro management Board’. From a CEO perspective, this may seem like a period of Board Schizophrenia or a Jekyll and Hyde approach. CEOs need to adapt to these dynamics or be replaced with those who can handle radical changes, with diplomacy and patience, as boards switch styles according to their current situation.

Boards need to be sensitive to CEOs’ feelings and needs. Often the biggest and toughest-seeming leaders are the most thin-skinned and sensitive, when it comes to their own roles and how they are judged…..”

Source: Boyden Executive Global Search

https://www.boyden.com/japan/media/3791/the_shifting_sands_of_bo/index.html

The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.

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