Commonsense Principles in Action: Board of Directors’ Responsibilities

The Commonsense Governance Principles presented by some of the biggest names in corporate governance and business offer a wide variety of best practices for boards of all types of companies. Last week we talked about the Composition and Internal Governance principle – this week we are moving on to the Board of Directors’ Responsibilities principle.

This principle lays out what board members are responsible for as far as meetings and communication.

Every board member should have input in the agenda – this helps board members feel valued. The goal is to make sure everyone’s concerns are considered and every board members feels like they are contributing to the overall success of the company. By including everyone in the agenda planning process, this goal is met. To include everyone, it is a good idea to have every board member fill out an agenda form where they indicate what topics they would like to cover in the next meeting. The forms are collected and consolidated to create the actual agenda.

The agenda should also include several elements in addition to board member generated topics. One of those elements is to increase expertise and strengthen values. Every great leader is constantly looking to improve their knowledge. With higher level of expertise comes more informed decisions. Board leaders should arrange for lessons on the industry, operations, and HR to help board members to become better informed and more confident.

Strengthening values might be the most important agenda topic.

The values, mission, and vision of a company is really the glue that holds it all together. It is a strong connector of board members. Directors are able to rally around the values when times get tough to reconnect and stop negative interactional cycles. It is crucial for board leaders to refresh board members on the values and remind them what is the core motivation for decisions. Board members who have a clear understanding of values will be more emotionally connected and make better decisions that are more in line with the company’s goals.

Another agenda topic that should be addressed is assessment of the board, CEO, and overall company. Emotional connection should be part of these assessments. Questions should include: Do you feel safe and emotionally connected with your board members? Do you feel like you can be engaged in discussion regularly? Do you feel that disagreements are respectfully considered and appreciated? Are you fulfilled in your role as a board member? Do you feel that your worries and concerns are being heard?

If the answer to any of these questions is “no” or “unsure”, actionable steps to increase emotional connections should be identified and implemented. When the board is not performing well, it is not because they lack communication skills or can’t agree on agenda items, it is because board members are struggling with disconnection.  These assessments can help you pinpoint where emotional disconnection is happening so you can address it as a board and take care of it sooner by going through the process of reconnecting with your board members.

The Board of Directors’ Responsibilities principle also says that each meeting should include free discussion without the CEO.

This is important for empowering board members to share their thoughts and opinions without the additional pressure of the CEO’s presence.

Having sessions without the CEO present actually helps the brain to remain calm and connected during discussions. This is because board member’s brains instinctually seek connection to the CEO as their leader. In stressful situations when they are concerned about a topic or the CEO, their communication may be stunted as they don’t want to offend their leader or lose that connection. Removing the CEO from the discussion gives board members the freedom to speak freely without threatening that connection.

However, communication with the CEO must be maintained for obvious reasons. The Chair or lead director should act as a liaison between the board and the CEO – having one person in charge of the communication creates one united and consistent message. It is important that both sides always have the opportunity to hear each other’s concerns.

Independent directors need to maintain emotional safety because it allows them to be more vulnerable and speak openly about their worries and concerns which cultivates more effective discussions on  strategies that would be best for the company in moving forward.

Overall, the responsibilities of the directors are mostly concerned with increasing communication and creating safe environments for board members to share and discuss the topics that they feel are important to the company’s growth. This communication improves when the board regularly addresses company values.

Next week we will cover the Shareholder’s Rights principle and how to apply it to your board. For more information of creating better board dynamics, please contact us at [email protected].