Great ideas: The myth of the omnipotent board

Written by ProfitGuide

Boards are often portrayed as the omnipotent masters of a company’s fate. In many cases, this has as little to do with reality. The directors may have collective responsibility, but it doesn’t necessarily follow that they know how to deal with critical situations. In many of the major corporate disasters of recent years, the problems of the companies concerned were not clearly known to their boards until shortly before, and sometimes after, the disastrous event. In his book Great Myths of Business: Everything You Think You Know is Wrong, William Davis offers ideas on how to contol your board.

  • The chairperson and chief executive positions should not be held by the same person.
  • Limit the number of directorships your own directors can hold; Davis would not invite anyone who already sits on more than five boards.
  • Directors should be chosen after a careful search by headhunters rather than by the old boys’ network.
  • Pay and conditions should be set up by a remunerations committee composed of non-executives and the details should be made public.
  • The chairperson should not be allowed to treat the board as a rubber-stamp for executive decisions. It should have the power to remove the chair.
  • Anyone who purposefully misleads the board, or causes others to do so, should be dismissed.
  • A non-executive who is frequently absent from board meetings, without an acceptable excuse, should be asked to resign. He cannot do a proper job if he does not fully participate.
Originally appeared on PROFITguide.com