On Being a Director

Many directors gain election or appointment with limited understandings of their duties, let alone how to be effective.

This short piece is aimed at those who would join Boards of Directors whether these would be of corporations, companies or societies including not-for-profit. Given how language and laws vary internationally, it can only serve as a general resource. It draws both experience, including mentors whose value to me has been irreplaceable, and from a variety of books, and in particular "Thin on Top" by Bob Garratt.

Professor Garratt is a company chairman, consultant, and academic working on corporate governance, board and director performance and strategic thinking issues. He is a veteran of 25 years, is based in London, and works on five continents. Garratt maintains that if directors are ignorant of their rights, duties, roles and tasks, and if chairmanship is weak, then abuse of the key corporate direction-giving process around the boardroom table is ensured. His earlier works include "The Fish Rots from the Head".

Before You Start

The above provide a perspective on why it can be hard work to get an effective board developed. I understand that the same is true of getting government to function. Many people who are appointed or elected to boards were very successful in their prior work, which will typically be for something other than having been a director. These may have been highly successful entrepreneurs or professionals. One of the ironies is that success in some people's prior and ongoing work may depend on qualities (attention to detail, the need to control, high stakes, loss of face in the event of mistakes) that risk directors becoming managers in conflict, rather than a group that is adequately informed, adequately forward-looking, and adequately directing those who are supposed to be managing.

Ask yourself "why am I even considering doing this?" If we are talking about a voluntary member-based organization, it is possible that you may seek to improve things, and to learn in the process of doing so. You may also seek or enjoy to escape the monotony or stress of your "day job" for the company of peers, and to seek or enjoy involvement in committee work, and the opportunity to travel to meetings convened both locally and at a distance. You may have political aspirations both within the organization and without. You may also make "connections" that will benefit you in later ventures, although you are not supposed to have gained any undue advantage. As we can see, there are a great many motivations.

So, the proper motivation and the proper focus are required. But they are not sufficient.

Ask yourself:

• how much work would be required of me?
• how much of this work is supported?
• does this board already function well?
• are there evidence of problems in this board and what is its history of handling problems?
• does this board change positively in response to internal and external pressures?
• does this board invest in its directors' personal development and in the evaluation of their performance?
• if I still want to do this, and find myself in conflict, how do I get out without either getting damaged or losing my soul?

The answers to these will take some work on your part. The first two points above are best answered by a few current or ex-directors. I suggest you base your expectations on the experience of directors with whom you find the most in common. While some legislation precludes directors to be paid, they make provision for costs and expenses and may have other ways to offset what is given up to direct, but this needs to be transparent.

As to how well the board functions, that is going to take a lot more work. It is possible that an organization can run well without a competent board, if it has a capable CEO and senior staff. That is, if an organization is running without too many problems, it may just be that the board is superfluous, just as governments can be run purely by their bureaucrats. This, of course, is not a desirable situation. The directors of such organizations risk not only contributing little but, worse, can find themselves unable to be properly accountable, if anything should go really badly despite the staff's best intentions.

Next Steps to Answer

Does this board already function well?

You can only answer this question properly once you know what an effective board is supposed to be doing and achieving. I would recommend that people read the chapter "Toward a Learning Board" in "Thin on Top". Once you have done this, ask for copies of the board's agendas from the past 12 months, and review the minutes. It may be enough to review the summaries of meeting that may go out to the members, or it may be that you need to review copies of the official minutes. How do the two align?

If you are permitted, observe a meeting. Meetings will vary not only in their content (agenda items), but will vary also with the institutional culture and attitudes. Identify, if you can, the adequacy and balance of assertion, analysis, and nurture. Are difficult but necessary discussions entertained, and do the disparate views get fully-enough reconciled before business proceeds to the next item?

Ask non-executive directors how agendas are developed. Are they satisfied that they can gain debate on all items of importance? Do they discern any pecking order within the board, or other constraints under which they feel it necessary to function? Are they satisfied with the board's current function?

Are there evidence of problems in this board, and what is its history of handling problems?

Cross-check the actual business of the board against the organization's strategic plan. How do they align? Determine, if you can, the extent of pursuit of ideas, the extent of questions being asked, the extent of options being explored, and of pros and cons being evaluated. What extent of dissent proved evident in any discussions? Is the basis for dissent adequately clear? Are you satisfied with its resolution?

Does this board change positively in response to internal and external pressures?

Ask to review any reports in which the effectiveness of the organization and in particular of that the board have been studied. How long ago were these received and considered? If changes were recommended, have those changes (those which could have been done) been made?

Ask to review the reports of Annual General Meetings as well surveys. Have the members asked for changes and, if so, what changes have ensued?

What risk assessments have been considered by the board, and what has the board resolved, and done in followup, to address these risks?

Does this board invest in its directors' personal development and in the evaluation of their performance?

Ask current and previous directors to describe for you the extent of any orientation they received. How long did it take them to get comfortable with their duties and responsibilities? Were their views solicited and accorded adequate voice? Was there ongoing consideration, within the board's business, of board development and function? Have directors had individual feedback on directoral and overall board performance, and on what were these based?

Before I find myself in conflict, how might I get out, without either getting damaged, or losing my soul?

Review your state, provincial, territorial or national legislation (typically Societies Act or equivalent for non-profits, and Companies Act for for-profits) as well as your own organization's Constitution and Bylaws, its terms of reference and duties for the directors, managing director(s) and/or executives, and any code of conduct, conflict of Interest and disciplinary and dispute resolution policies. What are the procedures by which complaints would be lodged and acted on? What are the procedures for any removal of directors and officers and executives? What consequences and liabilities can befall you? What protections would you be afforded, and what would be the exclusions, and clauses under which these can be rescinded? Will the organization provide you independent legal counsel of your choice, paid by the organization, and is this anywhere stipulated in writing? Are there any past incidents that would demonstrate how complaints and disputes have been handled, and can it be known whether both sides were satisfied with any resolution? Can you be provided with a list of all directors who have resigned, and their reasons for resigning? If you would believe it necessary to resign, will your defensible reasons for resigning be able to be known by the owners, members and/or stakeholders?

If I still want to do this, how do I do it well?

I wouldn't pretend to have all of the answers, but can't help but think your interest so far is a great start. In the main, you want to:

• understand the mission, vision, and values of your organization, and where you stand in relation to what you believe to be the current state
• educate yourself. At the present time, I cannot more highly recommend:
  1. Book: Thin On Top has 3 reviews at Amazon. While (for balance) I do document a less-than-friendly review here for the reader to judge, and many readers may skip past some of the historical sections, the chapters on signs of organizations in trouble make compelling reading. I particularly enjoyed seeing how companies who had hired the author as consultant were rather shocked to find their self-assessments to be so wanting. The best parts of the book describe practices that organizations should pursue by way of "the learning board".
  2. Book: Boards that make a difference : a new design for leadership in nonprofit and public organizations, by John Carver. This book, as well as Thin on Top (above), offered a lot of insights. Chief among them was the capacity to understand how working boards (whose directors serve dually as the organization's staff) can easily fail to hold separately the directive duties as opposed to administrative and management duties.

1. Short paper: Effective Boards: The Way Forward by David Beatty.
2. Final report: Beyond Compliance: Building a Governance Culture – Joint Committee on Corporate Governance (sponsored by Canadian financial institutions).
3. Book review: "Forces for Good: The Six Practices of High-Impact Nonprofits"
4. Book review: Bob Garratt's book "The Fish Rots from the Head"
5. Board 101: A document that I wrote (and which I posted publicly on google docs)
6. Miscellaneous references and clippings from across the internet, on DirectorsDuties.