According to Steven Korn, a well-organized board of directors is essential for a corporation to function efficiently and achieve its aims. This became clear recently when Walmart announced plans to reduce its board of directors to 14 members as two of its executives retire. Oversized company boards are likely to have trouble getting the job done. But the right balance of board members can be extremely advantageous to a company’s success, as business executive Steven Korn explains.
There’s no right or wrong way to organize a corporate board of directors, but there are some general guidelines that top executives recommend. According to Investopedia, having too many board members presents serious challenges. A massive board can be cumbersome and make it difficult for every member to have a say.
That’s why most corporate boards are fairly pocket-sized. Indeed, a Corporate Library study found that the average board size is 9.2 members and that the majority of boards range in size between 3 and 31 members.
Steven Korn, former Vice Chairman and COO of CNN and a current board member for the Brown Shoe Company, explains that smaller is better when it comes to corporate boards. “Most public company boards are not that big to begin with, not should they be. I think boards should be between 9 and 13 members. Now, there’s no magic to the number of members on the board. What you’re looking to do is fill certain competencies and make sure you’ve done that,” Korn explains.
Based on his advice, Walmart made a good move when it decided to keep its board at a smaller size. When CEO Lee Scott and executive Chris Williams retire in June 2014 – due to Walmart’s corporate-governance guidelines – Walmart’s board will be reduced to 14 members. The news serves as a prime example of why even the most massive corporations should have somewhat pint-sized boards.
In terms of getting the job done efficiently, large boards can be unwieldy. As one Forbes article puts it, organizations already struggle with “a ponderous, slow and unresponsive governance decision-making process,” which means that when fast decision-making is necessary, “it is often impossible to get the association’s machinery to grind fast enough to respond constructively and on time.”
Many corporations want to ensure there is a diversity of representation on their executive boards. But it only takes some simple math to see why a massive board of directors is simply not practical. For example, if every member of a board of 50 directors spoke for 5 minutes during a meeting, the meeting would last 20 hours. It’s important for every member to have meaningful representation, but it would be difficult to get anything done if that were the case.
Steven Korn advises that representation does not translate to democracy. Including a large swath of representatives doesn’t mean that their interests will be stood for. Executives who aren’t sure about the optimal board size can judge this based on whether the board is able to effectively discuss all issues and make decisions efficiently.
There are other ways that leaders can ensure all members have their views heard. Korn recommends that CEOs make a practice of speaking with each director between board meetings. This allows the directors and the CEO to talk at length about the company and its opportunities and challenges without the time limitations that are necessarily part of board meetings.
Of course, having the right members on your board is still one of the most important elements to making your board successful.
“You need people who are financial experts and financially literate. You need people who understand the industry. You need people who, generally speaking, understand regulations and legal issues. You need people who understand marketing and sales, depending on what your products or service is. And, obviously most importantly, you need to put together a board that has a good collegiality and a board that works well together and with management. There’s a sweet spot there,” Steven Korn explains.
Finding that “sweet spot” could be the key to making your organization or corporation successful.
In a Harvard Business Review article, Ana Dutra explains that forging a successful board of directors takes some real strategy.
“To add such strategic value, high-performing boards must be ‘talent-centric,” Dutra writes. “An enterprise must attract directors who can provide valuable, strategic input, while building a board that can draw on the diversity of its members’ expertise and backgrounds — across geographies, gender, race, and experience — to create a whole that’s literally greater than the sum of its parts.”
Directors have the responsibility of addressing needs and concerns, giving constructive feedback, and offering guidance to make the board more effective. Dutra believes that effective corporate governance is “more complex and challenging than ever,” as leaders must handle complex, multi-faceted issues and meet regulatory compliance.
Forging an effective board of directors is certainly no drop in the bucket. It requires strategy, a clear understanding of individual member needs, effective leadership, and an overall plan that is in line with the goals of the corporation. As experts like Steven Korn and Ana Dutra contend, once you find a sweet spot with your board of directors, corporate goals are far easier to achieve.
Carly Fiske contributed to this article.
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