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What people think about directors and their performance

There’s an interesting article in the April/May issue of NACD Directorship. It is based on work by Deloitte and Korn/Ferry International. The piece has the title “Main Street’s View of Directors Improves”, but there are some other interesting points, including these:

  • “Directors are getting more involved and demanding greater transparency from management, especially as it relates to risk management. They are encouraging management to find a workable balance between risks that create value versus those that protect value. They are also examining strategy and creating a shortlist of business risks, then evaluating how to measure those strategic risks on an ongoing basis. Directors want to make sure they are not only checking the box to meet requirements, but that they are on the road to a more sustainable consideration.”
  • While the survey indicates that “the overall opinion of both directors and CEOs has improved slightly”, it also concludes that When asked to rate the credibility of directors, the majority of 580 respondents described performance over the past 12 months as “adequate” or “poor.”
  • The group that finds the board least effective in protecting shareholder interests is the “C-Suite”! 34% of top executives and senior managers rated director performance as ‘poor’. Even the directors who answered the survey were less than happy, with 20% putting boards represented in the ‘poor’ category.
  • CEOs also fared less than brilliantly, with many more directors rating their performance ‘poor’ than ‘outstanding’. Few members of the executive management team rated their CEO performance as either ‘good’ or ‘outstanding’.
  • An interesting section compares the level of influence the CEO has in practice to how much she should have. The results: everybody believes the CEO has too much influence.
  • Every group believed the posts of CEO and chairman of the board should be separated. The group that supported the separation least was – the board.

What, if anything, caught your eye? Did anything surprise you?

  1. June 30, 2011 at 10:40 AM

    This kind of thing makes me furious!

    http://www.boston.com/news/local/massachusetts/articles/2011/06/30/merrimack_education_center_official_in_fraud_case_takes_leave/

    This happens all the time. You get a panel of board members who are either stupid or so blinded by their own egos and the ego of the executive director, that they lose all sense of critical thinking skills. This can happen all the way from a sports boosters organization all the way up to the national United Way. People prefer to go along to get along. They can’t bring themselves to rock the boat, and they don’t do anyone any favors by being cowards.

    I was the treasurer of a board that supported a common chronic disease. One reason I was recruited was to bring an independent and analytical viewpoint to an organization that was quickly withering away. The annual deficits were eating away at the fund balance and I prepared projections that showed the organization would be out of business in less than 5 years. We succeeded in getting the 2 incompetent staff replaced by a singe executive director, which stemmed the red ink temporarily. But the new executive director proved to be just as clueless as the previous one. When I tried to enlighten the board, they chose to ignore me, so I resigned. About a year later, the chapter was disbanded as a result of their fiscal failure and folded into a regional chapter. That was a shame.

    The Maine Turnpike Authority has been in the news recently for similar shenanigans alleged to have been perpetrated by the executive director, Paul Violette. I sincerely hope that he get indited. If he is found guilty of crimes, I hope he goes to jail.

  2. Ck6
    June 30, 2011 at 11:48 AM

    I am not sure these are valid observations. The third bullet points seem to be saying, “.. neither management or ownership are comfortable with each other. If the ownership (represented by the board) is not happy with management, management should be discharged. If not the board is accepting performance that does not align with ownership’s wishes, they should be discharged.

    Another issue that I have with the observations concerns the splitting of the CEO and Chairman positions. They should be split. All of the boards that I have been associated demanded that they be split which explains my weariness with the findings.

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