Egon Zehnder gathered a group of 18 CEOs and board directors from large U.S.-based public companies for a discussion focused on the question of what makes a great board. These leaders shared with us their experiences, challenges, and lessons on board governance best practices.
Boards are more diverse than ever
Lisa Blais, who leads the Firm’s US Board Practice, kicked off the conversation highlighting a major trend that is shaping board dynamics globally: board diversity. In S&P500 companies, over 7 in 10 new hires are either women on underrepresented minority males; and globally, female representation has seen the fastest growth of the last decade—women now hold 27% of board positions, as our Global Board Diversity Tracker shows.
But there remains a gap between representation and inclusion. Shaping an inclusive board culture is critical for good board performance, and it starts with the chair being intentional about how they lead the board before, during, and after the meetings and being cognizant of each member’s individual journey as part of the broader group.
Who gets a board seat?
Boards are grappling with emerging challenges such as tech, cybersecurity, sustainability, and broader ESG issues, among others. Against this backdrop, it’s increasingly difficult to choose the right board director. Variables such as previous board experience, CEO and CFO background, being an active versus retired executive, and having functional spikes in these critical areas pose an extra layer of complexity in the search. But all attendees agreed that diverse leaders, whether it’s in background, experiences, ages, and areas of expertise can add enormous value if they are well chosen.
Fostering an inclusive board culture
There’s a heightened focus on the role of the chair in setting an inclusive board culture. For a truly effective board, chairs must be “culture champions,” creating a boardroom conducive to communication and collaboration among directors.
In this regard, chairs need to ensure every director’s voice is heard and valued in the room by calibrating the level of conversation and engagement. Said one board leader: “Chairs should create a sense that everyone has an equal space to contribute, whether you’ve been on the board for two or 15 years.” Part of that is being sensitive to each unique personality. “Chairs have to make sure the introverted directors feel comfortable as well, while facilitating behaviors among more agitating members,” said another participant.
Collectively, there were several pointers relative to board impact. “You rarely get the chance to build a public company board from scratch, and in that experience, chemistry, mutual respect, and complementary skills were important,” a leader explained. This doesn’t mean boards should strive for homogeneity and groupthink. “You don’t just want to have a nice board. Don’t be afraid to go into the grey zone between governance and management. Sometimes boards are too nice and won’t do that.”
Planning board meetings effectively
A successful board meeting relies upon a thoughtful planning process. “The chair should find time to elevate and agree on the strategic issues they’re going to spend time on as a board,” a participant stated. Holding pre-meeting individual and collective calls, having post-meeting check-ins with each director, and bringing the management team up to speed on the meeting’s outcomes are examples of how chairs manage effective boards.
From a CEO perspective, this post-meeting moment with the chair is critical to calibrate on what was discussed, align on priority items and get feedback in general. “This executive session with the chair delivering feedback has been the most helpful thing for me,” said one CEO.
Beyond pre- and post-meeting planning, there’s a lot that can be accomplished in the time between board meetings. “A lot of value can come [out of it],” a board member said, outlining that frequent calls between board chairs and CEOs, but also the C-suite team and committee chairs, can be extremely productive. “Boards should always feel like they are completely knowledgeable about what’s going on. And some of the best CEOs have reached out to the chair or other people on their board whose skills and experiences can be leveraged.”
Participants also had a variety of thoughts regarding board effectiveness evaluations. This should be a constructive opportunity for boards to have accountability and identify dynamics that can be improved. “What you really want to get out of it is transparency and proper accountability. All nameless, all qualitative.” To do that effectively, as a leader outlined the chair should “establish among the board what a high-performing board looks like and evaluate against that criteria,” adding that the best chance to do that is “when you’re first moving in as chairperson.”
Setting the right tone between the chair and the CEO
For a board to succeed, the chair and CEO partnership should be intentionally productive. “You want to give the CEO confidence that they can be vulnerable,” a board chair said. “Only then you can discuss the hard issues. In this vulnerable state, you have a deeper connection and can dig into harder conversations, otherwise it’s very procedural.”
Another concern for participants was the fact that the line between appropriate governance and giving management the leeway to do their jobs is very nuanced. To that end, one participant said, “The key to a great board is a great CEO who knows how to get the most out of their board.” One mechanism to overcome these potential challenges and get positive outcomes is to create a cadence of meetings between the CEO and the board chair for the sake of relationship-building. “Over time, by building the relationship with the CEO, the chair should have enough of a relationship to know how far to push.” This also generates a lot of value for the board. “The most valuable time spent is when the CEO is presenting thoughts, not fully formed ideas, on topics like industry dynamics, potential acquisitions and their leadership team,” a board leader concluded.
