In its capacity as a fiduciary for shareholders that oversees a company, a board of directors should be prepared to effectively oversee the response to an extraordinary circumstance or crisis that can potentially very negatively impact a business. Crisis management can differ depending on the event in question. Regardless, a detailed crisis management plan developed by management and approved by the board should be “on the shelf” and “rehearsed” to address such value-threatening and potentially life-threatening situations.
Governance is critical for companies of every size. The maturity of a company can impact the scope and detail of a board of directors’ responsibilities. A board should grow and evolve with a business. For smaller businesses, the board is often involved in specific decisions, especially if the CEO is a first-time leader of a company, as opposed to the more typical oversight role in larger companies.
Replacing or adding a board member is a time- and labor-intensive process that starts with determining the skills an organization needs. Hopefully, a board has an existing skills matrix that shows the attributes of the existing directors. From there, the board can cross-reference its obligations with the skills of current members and assess what is missing given its objectives.
There are increasing conversations and more support from various governance organizations about term limits of generally about ten years for directors of publicly traded companies. The idea is to refresh boards and adjust for an organization’s changing needs and director skill sets. However, the downside of term limits is a lack of organizational knowledge, more time dedicated to recruiting and onboarding new board members, and the risk that new directors will not be effective.
Many occupations require licenses to prove competency, including accountants,
investment professionals, physicians, private investigators and security guards.
While licensees are not necessarily excellent at what they do, a license does
guarantee that a licensee has fulfilled the requirements for a given role determined
by a reputable authority.
Navigating Chief Executive Officer succession is critical to the success of a company, even one that has been established and successful for some time. One of the board of directors’ most important roles is naming, evaluating and compensating the CEO. While important input is often provided by the sitting CEO, the head of human resources, often an executive recruiter, and sometimes an industrial psychologist, the board is ultimately responsible for this critical hire.
Career advancement often requires a willingness to make difficult choices that affect families. For many, this can mean relocating to an entirely new city. While remote work offers some flexibility for employees, I generally believe that you have to live in the community where you work to be fully successful in the office and at home.
Choosing to sell your business may be one of the hardest decisions you make in your career. Often, selling a business is a natural part of retirement by a controlling or sole shareholder, but an owner may also be looking to move on to a different venture or even a different career. Not only does the decision to sell the company involve a close self-examination, but an ultimately successful sale starts with extensive planning and organizing well in advance of starting a sale process.
A strong board of directors is the cornerstone of many companies and is the group charged with the oversight of the corporation on behalf of the shareholders. In general, a Board is responsible for hiring, evaluating, and compensating management. They also assume oversight of corporate strategy as well as financial reporting, capital structure, and compliance. An effective relationship between the Board and management can have a very positive impact on the company.
Joining a board of directors can potentially be overwhelming for anyone who is not adequately prepared. Beyond being expected to help make key decisions in the oversight of strategy, capital structure and financial reporting, and management, board members play complex, important roles. An effective director onboarding or orientation process can help make a director and the entire board more effective.