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.
1. C R E A T I N G A
H I G H - Q U A L I T Y B O A R D
O F D I R E C T O R S
JONATHAN F. FOSTER | CURRENT CAPITAL PARTNERS LLC
2. 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.
3. The importance of building a high-quality Board is, therefore, critical. A combination of
factors must be weighed to determine the most optimal board makeup. Relevant skill sets,
prior board experience, and diversity are unusually key considerations. There’s also a need
for the chemistry between directors that can’t be forced—but should be considered and
cultivated.
The Chairman or Lead Director should have particular expertise and strong respect from
the other directors and management. Not only should the Chairman have a thorough
knowledge of the company and its industry, he or she should also have previous experience
on boards of directors. Given that this person is the primary liaison with the Chief
Executive Officer, the Chairman should also have strong mentorship abilities.
The three major board committees are Audit, Compensation, and Nominating/Governance.
Constructing committees with effective members is a significant part of board building
because committees do crucial work in at least three key areas. Members should have
appropriate skills, experience, diversity, and chemistry with each other. Committee work
should be shared with the rest of the Board for transparency.
4. Whether as part of a committee or the larger Board, each member must
work to establish a productive atmosphere. If board building has been done
correctly, every person should represent the company’s workforce as well
as the markets that it operates in. This diversity should be reflected in the
attitudes and backgrounds of board members and foster productive
discussion where disagreement doesn’t lead to conflict. If an entire Board
has a similar mindset, it hampers the creation of solutions and dilutes the
value of the skill sets that every member brings to the table.