Egon Zehnder brought together a group of 18 CEOs and directors from large US-based public companies for a discussion focused on what makes a good board. These leaders have shared their experiences, challenges, and lessons learned on board his governance best practices.
Boards are more diverse than ever
Lisa Brace, who leads the firm’s U.S. Board practice, opened the conversation by highlighting a key trend shaping board dynamics globally: board diversity. In S&P 500 companies, more than 7 of her 10 new hires are women of underrepresented minority men. Globally, the share of women is also growing fastest in the last decade. As our Global Board Her Diversity Her Tracker shows, women now make up 27% of her board of directors.
However, a gap remains between representation and inclusion. Creating an inclusive board culture is critical to good board performance. It starts with intentionally thinking about how the chair leads the board before, during and after the meeting, recognizing each member’s individual journey as part of the wider group.
Who gets seats on the board of directors?
Boards are grappling with emerging challenges such as technology, cybersecurity, sustainability and broader ESG issues. Against this backdrop, it becomes increasingly difficult to select the right directors. Variables such as previous board experience, CEO and CFO backgrounds, current or retired executives, and job surges in these key areas further complicate the search. However, all participants agreed that well-chosen leaders with diverse backgrounds, experiences, ages and specialties can create great value.
Fostering an inclusive board culture
The chair’s role in establishing an inclusive board culture is gaining attention. For a truly effective board meeting, the chair must be a “culture champion” and create a meeting room that fosters communication and collaboration among board members.
In this regard, the chair should ensure that all directors are heard and appreciated in the room by adjusting the level of dialogue and engagement. As one board leader said: Part of that is being sensitive to each person’s personality. Another participant said, “Chairs need to make introverted directors feel comfortable while at the same time encouraging more inflammatory members to act.”
Overall, there were some pointers regarding board impact. “It is a rare opportunity to build a public company board from scratch. In that experience, chemistry, mutual respect, and complementary skills were key,” explained one leader. This does not mean that boards should strive for homogeneity and groupthink. “Don’t just want a good board. Don’t be afraid to enter the gray zone between governance and management.
Plan your board effectively
A successful board depends on a thoughtful planning process. “The chair should set aside time to discuss and reach agreement on strategic issues that the board plans to devote time to,” said one participant. Conducting individual and collective calls before the meeting, checking in with each director after the meeting, and updating management on the outcome of the meeting are examples of how the chair manages an effective board meeting.
From the CEO’s point of view, this moment after the meeting with the Chair is very important to align what was discussed, align priorities, and get general feedback. “This executive his session with the chair providing feedback has been most helpful to me,” said one CEO.
Beyond pre- and post-meeting planning, there are plenty of things you can do between board meetings. “A lot of value can be created [out of it]said a board member, noting that frequent phone calls between not only the board chair and the CEO, but also the executive team and committee chairs can be very productive. outlined. “Boards should always feel that they have a complete grasp of what is going on. Some people are.”
Various opinions were also received from the participants regarding the evaluation of the effectiveness of the Board of Directors. This should be a constructive opportunity for boards to hold themselves accountable and identify dynamics that can be improved. “What we really want to get out of it is transparency and proper accountability. Everything is anonymous, everything is qualitative.” Boards need to establish what a high-performance board looks like and evaluate it against that standard.” Chairman. “
Set the right tone between the chair and CEO
For a board to be successful, the partnership between the chair and CEO must be intentionally productive. The chairman of the board said, “You have to give the CEO confidence that he can be vulnerable.” “Only then can we discuss difficult issues. In this vulnerable state, we have deeper connections and can dig into more difficult conversations. Otherwise, it’s very procedural.”
Another concern for participants was the fact that the line between good governance and giving management the slack to do their job is very fine. To that end, one participant said, “The key to a great board is a great CEO who knows how to get the most out of it.” One of the mechanisms for overcoming these potential challenges and obtaining positive results is to create a meeting rhythm between the CEO and the chair of the board for relationship building. “Over time, building a relationship with the CEO should allow the chairman to build enough relationships to know how far to push.” This also adds a lot of value to the board. “The most valuable time is spent when CEOs are presenting their thoughts, rather than fully formed ideas, on topics such as industry dynamics, potential acquisitions and leadership teams,” said the board. leader concluded.
