Inside board rooms


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Qualities for a would be director!

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Inside board rooms

  1. 1. Inside board rooms
  2. 2. DESPITE the copious literature on corporate governance, stocks and shares, mergers and acquisitions, decision-making and the like, the magic and mystique of the board room is beyond the ken of a lay citizen or even of an otherwise shrewd investor or professional analyst.
  3. 3. <ul><li>To have a complete grasp of the galvanising group dynamics inside that sanctum sanctorum, one has to have actually been either a member of a board or an observer of long standing of its deliberations with access to all the papers relating to the agenda. </li></ul>
  4. 4. <ul><li>Sometimes that kind of close involvement also does not fully enable one to interpret and understand the body language, mood swings, tantrums and turbulence of a boardroom. </li></ul>
  5. 5. <ul><li>Even experienced ‘hands’ have been at a loss to find ways of emerging unscathed from the buffeting one receives from all sides, especially when there is a flare-up on a consequential or contentious issue coming up for discussion. </li></ul>
  6. 6. <ul><li>The ability to influence, persuade and convince the board as a collective entity is not simply a matter of maxims found in textbooks. It is made up of elements which are at once elusive and intangible, falling within the composite domain of art, psychology, sociology, extra-sensory perception and even (why not?) astrology, all rolled into one. </li></ul>
  7. 7. <ul><li>In family businesses, board meetings tend to be a formality, mainly to record what has already been agreed to among family members, infused by a spirit of give-and-take, oftentimes unthinkable in companies bound by laws, rules and ethics. </li></ul><ul><li>  </li></ul>
  8. 8. <ul><li>In private companies, compatibility and congeniality govern the selection of the directors and this to an extent saves the board meetings from becoming stressful. Also, the directors of such companies are likely to be birds of the same feather, not too critical and troublesome. Even so, once appointed, back-scratching buddies have been known to become thorns on the flesh of the top brass. </li></ul>
  9. 9. <ul><li>Public sector boards are truly heterogeneous, comprising persons of disparate temperaments, backgrounds, loyalties and attainments, appointed not at the pleasure of the chairmen or the promoters, but by the Government, with professionals and public figures brought in from outside to serve as a built-in check on the caprices of top echelons. The meetings of such boards are apt to be tempestuous at times. </li></ul>
  10. 10. <ul><li>In mid-20th century, John Gunther came out with the Inside series of books ( Inside China , Inside Europe , Inside USA ) describing the situation inside several countries at a time when people were relatively ignorant about them. It would be worthwhile if some enterprising experienced director-writer would give a similar readable account of what really transpires inside the boardrooms of the corporate world. </li></ul>
  11. 11. <ul><li>Let us make an effort to list out the basic traits of a would be successful Director </li></ul>
  12. 12. <ul><li>D IRECTOR </li></ul><ul><li>D – emand and deliver </li></ul>
  13. 13. <ul><li>D I RECTOR </li></ul><ul><li>I – mpress and improve </li></ul>
  14. 14. <ul><li>DI R ECTOR </li></ul><ul><li>R – ight and righteous </li></ul>
  15. 15. <ul><li>DIR E CTOR </li></ul><ul><li>E – mphatic and empathetic </li></ul>
  16. 16. <ul><li>DIRE C TOR </li></ul><ul><li>C – onfident and courageous </li></ul>
  17. 17. <ul><li>DIREC T OR </li></ul><ul><li>T – rust and talent </li></ul>
  18. 18. <ul><li>DIRECT O R </li></ul><ul><li>O – bserve and object </li></ul>
  19. 19. <ul><li>DIRECTO R </li></ul><ul><li>R – eward and retain </li></ul>
  20. 20. <ul><li>Your inference on the above expansion of the letters in the word DIRECTOR is as good as mine. But remember to be competitive and contributing, convincing and converting, compelling and cajoling, our DIRECTOR is expected to play a crucial role inside and outside the hot boardrooms! </li></ul>
  21. 21. <ul><li>To refresh our basics, the board is the link between the shareholders and the company's management. It is on its effectiveness in business leadership that the success of the company depends. It consists not only of the chief executive designated as managing director but also of executive directors (who are full-time officers of the company), independent directors and, in some countries, nominee directors (as in India) </li></ul>
  22. 22. <ul><li>Almost invariably, boards consist of eminent lawyers, chartered accountants, cost accountants, business school graduates and IT professionals. The pre-eminent duty cast on the board is that it is to deliberate in detail all aspects of the issues coming up before it. Each director will have his own view in the matters coming up before the board, and these need to be expressed freely and unhindered. </li></ul>
  23. 23. <ul><li>But the board is no debating society. It is a decision-making body. Normally, therefore, what are recorded are the decisions on each item of the agenda. It is not as if voting takes place on each and every item that comes up before the board. There are free exchanges of views, arguments and counter-arguments. In other words, the pros and cons of the matter are discussed threadbare </li></ul>
  24. 24. <ul><li>Elaborate rules and guidelines may be prescribed for the composition of the board, how the directors are selected and what are the roles of the chairman and the non-executive directors. But how they actually function in practice depends on the directors themselves. </li></ul>
  25. 25. <ul><li>Apart from their experience, qualifications and commitment, it is what the directors actually contribute to the deliberations of the company, the stance they adopt on various issues that makes the crucial difference between a good company and one that falters — not only in performance but also in adherence to good corporate governance practices. </li></ul>
  26. 26. <ul><li>You can buy talent, you can buy technology, but the key to making the business exciting and distinctive is how you pull it all together, and that is a cultural thing. This applies aptly to boardroom - Boards that are stuffed with yes-men who question little what the chief executive suggests are no good </li></ul>
  27. 27. <ul><li>Poorly performing boards will take major decisions with inadequate debate or no challenge – They will be like country club boards that will not take hard decisions, unpleasant but necessary decisions. These board meetings are social occasions over a good lunch with inadequate time for discussions and rubber-stamping of decisions. </li></ul>
  28. 28. <ul><li>Thus good boards are the links between the mangers and the investors and so, potentially, the most effective instrument of good governance and constraint on the chief executive. What counts in the end is how directors behave and what questions they ask. In fact, the importance of the variety of opinions and views in the boardroom is a healthy sign, as dissent is needed in the boardroom </li></ul>
  29. 29. <ul><li>It would do a lot for the efficiency of the company functioning if only decisions are recorded rather than the views on every item, which each director puts forth as it, will prevent `tampering'. The feeling among the various sections in the corporate world is that trust, which is the basis of corporate success, is sadly missing and misused in some companies. </li></ul>
  30. 30. <ul><li>Thank you </li></ul>