Boards of Directors: Horsepower or Anchor?

Posted by Jim Connolly on 8 September, 2009  Email This Post -  Print This Post

As a business leader, if you think leading and managing an organization is a challenge, add a board of directors into the mix and you could get a glimpse into what it would be like to be attacked by on octopus.  

Today’s article in the Wall Street Journal on GM’s new board of directors and their new activist interest at many levels of the operations of GM gives me pause to consider the advantages, disadvantages and the proper role for a board of directors.

Advantges:  A board of directors represents the intersts of the shareholders and provides additional avenues of input, ideas and resources that are interested in and available to an organization’s leaders.

Disadvantages:  If the relationship between the board and the organization is not properly set up and maintained, boards could either micromanage the company’s operations or be relegated to the role of rubber stamp for the CEO.  I’ve seen both in a variety of client organizations.  Neither situation is beneficial to the shareholders, employees or customers.

Proper Role:  Both the board and the operations side of the organization should have clearly defined roles that do not overlap.  In fact, there should be a robust monitoring system that throws a flag at the first sign of encroachment on either side.  In addition, the only link between the board and the operations of the organization should be the CEO.  The board has one employee, the CEO.  The operations side has one leader, the CEO.

If properly set up, a board of directors can multiply the value generated by an organization.  If not properly set up, you might wish that the octopus would come in and finish you off.

If you have interest in learning more about how boards can perform effectively and complement the role of the organization, contact us.  We’ll point you to several very good resources.