10 Flaws on Boards

These are provided by Paul Tellier – a corporate director and the former president and CEO of Canadian National.

A few years ago he spoke to an audience of well-nourished diners at the Conference Board in Montreal and he delivered 10 zingers. These are 10 flaws that he has observed in corporate boards in Canada. At least 5 of them can be attributed to a lack of training (or perhaps willful ignorance).

These are equally applicable to non-profit organizations. I’ve seen every one of them –repeatedly. How many apply to your board?

Here are some excerpts from that presentation:

1. The chairman is not sufficiently inclusive. Some chairs tend to create two classes of directors and favour an inner circle without the equal involvement of all. This is a waste of talent which could eventually create tensions.

2. The dominating role of a strong CEO. On most subjects to be discussed, the CEO is usually the most knowledgeable. He also has the advantage of controlling, to a large extent, the information flowing to the board. The chair and all directors share the responsibility to ensure that the CEO does not control the agenda.

3. Too much focus on projects may be to the detriment of discussing the broad strategy and neglecting risk management. Directors should leave the day to day management of the enterprise to the executives. Directors should instead consider where the corporation should be in the next five years and focus on how to get there.

4. The role of consultants can be too pervasive and intrusive. This is especially true when directors are dealing with issues of human resources (such as compensation) and of mergers and acquisitions. Consultants should tender their advice and then leave the field to the directors.

5. Power Point presentations take too much time, to the detriment of greater dialogue and discussion.

6. Directors should not limit themselves to the boardroom. They should take every opportunity to get to understand the underlying realities of the company they oversee.

7. Directors may stay on too long, I stayed on the boards of Bell Canada/ BCE for 14 years- this was too long. British guidelines refer to six years as a director: in exceptional circumstances, up to nine.

8. The chair is reluctant or too slow to get rid of non-performing directors. A chair must have the conviction to approach a board director to inform them that he or she is not adequately performing the job.

9. There are still too few female directors and progress has been too slow. Among Canada’s top 500 private and public sector companies, only 13 per cent of directors are women. Canadian corporate governance will not live up to its potential so long as we find excuses to exclude the available talent.

10. Neglecting the creation of shareholder value. Directors may lose sight that their prime fiduciary responsibility is to create value for the shareholders. Beyond the effect of the recent financial crisis, there are some companies where shareholders would have been better off over the years to invest in Canada Savings bonds rather than shares in these corporations. Many of the problems were the result of bad decisions made by some boards.

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Filed under Association, Association Management, Governance

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