Need Boardroom Yardsticks? Here Are Five.
BY Ralph Ward
What are best, worst, and in-between practices in the boardroom? Here are a few answers to the question, "if you had one tool to measure the value of a board, what would it be?"
1. "How much equity does each director have in the company?" is a key test for Charles Elson, head of the Center for Corporate Governance at the University of Delaware. It shows, in the most direct of benchmarks, just what the director thinks of the company. But how much equity? "A benchmark of about $100,000 means something." (Elson is also strong on attendance at board meetings -- "100% is the target? 99% is just OK.")
2. Here are a few boardroom measures I find telling: What is the average director age? (If the board average rises above the early 60's, start thinking young.) How many directors have "retired," "former," or "emeritus" in their titles? (One maybe, but two or more and the board is looking backward rather than forward.) How many directors are insiders or former insiders? (More than 2 nowadays makes it look like a management committee.)
3. Len Simon, president of the Board Effectiveness Institute in Massachusetts, suggests that, during your next board meeting, someone keep tabs on just how many questions outside members of the board ask the CEO or other managers. Forget quality of questions for the moment -- how many are asked AT ALL? It's hard to give a target number for this, but if a 3-hour board session draws one query per hour, assume someone's asleep.
4. Also from Len Simon: "Board and CEO evaluation? is the board doing these at all?" If not, the board needs to launch a program for both, and start it yesterday.
5. Cathie Linebach, a principal of management consultantcy Strive.com, sets a tough standard for board strategic leadership. "What percentage of strategic concepts for the company are coming from the board? What percentage of motions at board meetings?" Her target for both: 90%. While she admits this is pretty unlikely in the real boardroom, it remains a viable target. "The higher the percentage, the greater the value the board is bringing."