Board of Directors Oversight: Do’s & Don’ts

By Christina Cornelius Tuesday, April 3, 2018

board of directors dos and don'ts

To find out what a seasoned CEO knows about board management, we talked with our friend and client Erik Nielsen, PhD. Erik has more than 35 years of experience in higher education. He is currently the Consulting Vice President of Kaludis Consulting and he served as president of Franklin College of Switzerland for 17 years.

Today we are featuring Part One of Erik’s observations about what works—and what doesn’t—when it comes to managing a Board of Directors, particularly of a non-profit corporation.

For a CEO, what are some of the differences between a non-profit Board of Directors and a for-profit Board of Directors?

The dynamics and motivating forces on a for-profit can be a little different when it comes to CEO performance. In many cases, trustees serve on for-profits because of the nature of their expertise in the fields of endeavor or their degree of investment in the enterprise. They may have significant personal wealth tied up in the enterprise and are strongly motivated to protect that.

Hence, they can be more critical of CEO performance and react more quickly to protect their personal investment. Tolerance for mistakes or poor choices resulting in low ROI may result in more heated debate and demand for immediate correction. In those instances, CEOs need to come prepared to strongly debate and defend their choices.

It would certainly work to their advantage to create the one-team approach but that may be more difficult when personal wealth is involved and individuals feel personally threatened. In these instances CEOs need to work much harder to gain the confidence of all members of the Board and that may require more one-on- one time out of Board meetings.

 

Can you give us a snapshot of the approach you took as the chief executive of Franklin College in Switzerland?

To begin with, I had a wonderful board whose members were extremely supportive and genuinely concerned for my well being. My experiences were extremely positive.

However, I have seen other situations where CEOs have not been as fortunate and where they may have handled things less effectively. Here are four keys to working with a board:

Honesty – Don’t try to bluff or cover up; if there is a mistake, own it, and make sure they hear it first from you and not through a back door, which only results in a breakdown of trust. Remember the buck stops with you. Don’t throw someone else under the bus.

Clarity – Boards don’t spend the time you do with the detailed issues the institution faces. When you have a problem or see an issue explain it and make sure they understand.

Respect – too many times I have seen members of Academe assume an air of superiority regarding academic matters. It can be the same with CEOs on matters where they have some expertise. Nothing could be more damaging or further from the truth. Trustees are extremely bright and usually very successful businessmen and women. They know how to solve problems. Use them to help you

Collegiality – recognize that your board hired you and want you to succeed. They want to work with you not against you. Treat them as colleagues. There is no need to be defensive. You’re all part of the same team.

 

Describe the way you viewed your role during a board meeting.

My role was to keep my board informed of all issues the institution faced by providing the big picture. I didn’t need to get down into the weeds on issues. In fact, that would have been counterproductive, as that wasn’t the board’s role. 

I wanted to promote discussion on matters where I felt I needed advice or reassurance the board was in agreement with my approach since we were a team. I wanted to make sure I was hearing the board correctly and that I understood the views of all members of the board. I wanted to make sure the board saw any issues on the horizon so we all had time to think of alternate approaches if we need to take corrective action.

Don’t be afraid to ask for advice. The board doesn’t assume you are infallible. Use the meeting as a think tank opportunity. Providing a forum that engages all trustees will make it more invigorating for them and make them want to stay on the board.

However, don’t create unnecessary issues to elicit meaningless comments so trustees will feel they are being included in decision-making. Trustees will see through that and feel they are being manipulated.

I have heard some CEOs say that they often give the trustees some small issue to chew on so they won’t focus on the more important issues at hand. That’s bad advice and creates a situation where the Board and the CEO are adversaries.

Give them genuine issues with which to grapple but always on the big picture. Don’t get down the path of looking at particular operational details unless they speak to a broader systemic issue or an operating principle.

 

How would you define a successful board meeting?

A successful meeting, for me, is one in which everyone came away feeling they understood the state of the institution, where the issues lay and that they had an opportunity to express their opinions.

The board needs to feel that honest discussion took place and everyone was heard and respected even if complete agreement was not forthcoming. There are many powerful and successful individuals on the board, and they have strong feelings about issues.

Don’t expect there to always be unanimity if there is honest discussion. Sometimes you will find open disagreement and that is healthy. It prevents the trustees from running off the cliff like lemmings, simply following each other. However, it is important that once a decision is made everyone gets behind it to the degree they can with honesty.

Don’t forget to visit our blog next week for Part Two of “Board of Directors Oversight: Do’s & Don’ts.”

 

 

 

 

 

 

 

 

 

 

 

 

 

Disclaimer

THE AUTHOR OF THIS BLOG ARTICLE IS NOT A LAWYER AND HARVARD BUSINESS SERVICES, INC. IS NOT A LAW FIRM. THE ARTICLE ABOVE IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. THIS SHORT ARTICLE IS STRICTLY TO MENTION SOME ASPECTS OF DELAWARE’S CORPORATION LAWS AND/OR LAWS RELATING TO OTHER FORMS OF ENTITIES WHICH YOU MAY NOT BE FAMILIAR WITH. WE RECOMMEND THAT YOU CONSULT WITH A LAWYER BEFORE FORMULATING A STRATEGY WHICH WILL BE SUITABLE FOR YOUR SPECIFIC CASE.

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