Board books: Boards in future?

Think dispassionately for moment about global trends. Finance market mayhem, cyber crime, grand scale corporate corruption, organisational complexity, environmental apocalypse and terrorism to order are individually and collectively testing the robustness and relevance of corporate institutions.
So it is with boards. Are they still relevant? Do they work? Do they, indeed, have future?
Harvard Business School professor Jay Lorsch, an academic the book’s dust jacket calls an “authority” on corporate boards, has gathered the thoughts of clutch of top-level governance thinkers and practitioners, interviewed 45 directors of some of the world’s largest enterprises and edited their conclusions to create his latest book, The Future of Boards – meeting the governance challenges of the twenty-first century.
Boards, he and his contributors concede, haven’t made good fist of guiding business, particularly but not exclusively, banks and financial institutions, recently. Consequently, capitalism is at “crucial juncture in the evolution of business and the economy”. Lorsch, who back in 2004 co-authored Back to the Drawing Board – designing corporate boards for complex world, doesn’t think much progress has been made in rethinking boards and how they operate.
Part of the problem is, he suggests, that there’s too much emphasis on financial and legal matters and not enough time given to understanding the human dynamic of governance. Boards are obviously bound by legal and regulatory requirements and deeply involved in financial and strategic choice. But at their most basic level they are groups of experienced part-timers from different careers who “come together to govern company”, he offers.
“Getting such groups to function as an effective governing body is, if nothing else, challenge in establishing and sustaining effective human relationships, not only among board members, but also between the board and its top management, especially its CEO,” writes Lorsch.
The book’s contributors explore how boards should function to govern effectively in future. Some focus on what boards should do while others target the leadership issue. Collectively, they think the relationship among directors and how they engage with each other and their senior executives is the “defining factor” in boardroom success.
This is hardly revolutionary thinking. That leading academics like Lorsch should be suggesting that the human element of governance is the key to the future says something about what is causing the breakdowns in organisational performance.
The contributing authors are mostly from Harvard Business School. professor of business administration, another of management practice, an adjunct professor who is former chairman, president and CEO of Merck & Co, professor of leadership development, one of human relations, the chair of accountancy at the University of Southern California, the vice chairman of global consultancy Marsh & McLennan and professor of organisational behaviour. Given the reservoir of intellectual horsepower, it’s surprising how few new ideas or evolutionary insights they generate.
Instead, they tackle topics like strategies to govern effectively, managing CEO succession, the pay problem and need for new, actually anything but, paradigm for executive compensation, recognising negative boardroom dynamics, the argument for separate chair which is more an American issue than it is here, and the argument for “lead director” – another counter to the combined chairman and CEO role that is still pervasive in the US and, one could argue, the real reason US governance is shot through with problems.
Lorsch and his other contributors are “concerned with what lies ahead for boards”, like the continuing efforts by some institutional investors to “assert themselves and gain power”. Proposals from these shareholders may lead to new legislation or regulations around the way in which boards function, making boardroom life more complicated. Future problems, therefore, will rest in the “ability of boards to navigate any such changes”. What an extraordinary conclusion for so many smart people to come to.
Of more concern, they say, is the “growing complexity” of the companies that boards oversee. Globalisation, not any of the issues thrown up in the first paragraph of this review, is the big problem. Rapid changes in technology and growth in the size of companies means companies will become more complex. So, they ask, how can directors who are faced with time constraints and lack of “deep knowledge” of their companies grapple with even greater problems in the future?
That of course is the nub of the matter. And despite the author’s introductory promise that the chapters following would “provide ideas for how boards can best deal with such challenges”, I didn’t see anything of the sort. Perhaps, dear reader, you will.