Pozen argues for smaller boards to guard against “social loafing.” People tend to hide in large groups, he asserts: “Instead of taking personal responsibility for the group’s actions, they rely on others to take the lead.”
He also advocates board membership for corporate executives with deep experience in the company’s industry. To get around conflict of interest and antitrust concerns, “… most independent directors will have to be retired company executives (but not of the company in question).”
While acknowledging that large diverse boards often are lazy, disengaged and uninformed (not to mention in the hip pocket of the CEO), I fear Pozen’s solution could create a new problem. Specifically, a small group of industry insiders may not be able to take the broad stakeholder view that increasingly is important to building authenticity and trust, as articulated in the Page Society’s reports on those topics.
In fact, I believe boards benefit from having a broad societal view. Directors who understand the perspectives of diverse stakeholders are much more likely to question management decisions that jeopardize or fail to build brand and reputation.
A major problem, in my view, is that boards don’t know enough or work hard enough – a point Pozen also makes. Board members with little experience in the industry who spend too little time learning the business easily can become captives of management, too ignorant or afraid to challenge conventional thinking. Pozen recommends that directors spend at least two days per month on company business between board meetings (with a commensurate increase in compensation) so they are knowledgeable enough to be effective.
So how about this as an amendment to the Pozen proposal: Smaller boards, yes, but not quite so small. More industry expertise, yes, but not exclusively so. This would leave room for a handful of directors who bring diverse perspectives. And definitely more time invested by directors to ensure they really know the business.
I believe the result would be a much more focused, engaged and professional board that not only understands the company and its industry, but the broad perspectives of society as well.
Oh, and one more thing: How about reserving a place on the board for a retired corporate communications executive? I believe most boards would benefit from the perspective of a director with deep experience in building and defending brand and reputation.
SVP, Communications, Aetna (Retd.)
Senior Counselor, RBC Strategic Consulting
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