Board Leadership: Danger in Troubled Waters
From small non-profits to privately-held companies to giant public corporations, there is great turmoil in the boardroom. Public outcry on corporate executive corruption, greed, and board malfeasance is placing an extraordinary demand on boards to "clean up their act. The recent scandals (Enron, Tyco, Global Crossing, and Worldcom) coupled with Sarbanes-Oxley legislation are changing the way boards of every type conduct business and select new board members. Even the NYSE is not immune. New York State Attorney General Eliot Spitzer has recently filed suit against former New York Stock Exchange chairman and CEO Richard Grasso for misleading the board of directors on his compensation package (a paltry $187.5 million). The board of directors was also faulted for failure "to conduct proper inquiry."
Gone are the days when organizations of every type simply selected Aunt Louise or Uncle Louie to serve on their boards and blindly rubber-stamped executive decisions.
While Sarbanes-Oxley legislation spells out conduct for board leadership in public companies, there is a definite trickle-down effect into privately-held companies and non-profits.
The board selection process is far more complex now, requiring significant due diligence on the part of the selection team. For example, organizations seek out board members with excellent corporate leadership experience across different functional areas including finance, marketing, operations, and legal. A premium is placed on executives who have a demonstrated track record of integrity and experience on corporate boards and board committees.
The selection committee also seeks out diverse board leaders whose different temperament styles can offer greater breadth of understanding and insight into corporate leadership issues. According to David Keirsey, the creator of the Keirsey Temperament Sorter, each of the four temperaments has a unique leadership and intelligence style:
Artisan leaders are more tactical and excel when the situation calls for immediate actions and quick trouble-shooting. They are highly practical, but also able to mobilize resources quickly.
Guardian leaders are more talented in the areas of logistics and administration and can create the most efficient pathways for getting materials to the right place at the right time.
Rational leaders have the greatest talents in strategic planning and can devise intricate plans, detailed goals, and complex systems.
Idealist leaders excel in diplomacy and developing productive personal relationships. They are naturally democratic, build high morale, and inspire employees to produce more.
Often board members, or potential board members, are asked to take a personality assessment, such as the Keirsey Temperament Sorter, to determine what unique qualities and skills they can offer to the company. (This personality test is available at www.advisorteam.com.) By knowing the areas of strength for each board member, they can then be assigned to the appropriate leadership position.
This can also be helpful for one of the greatest challenges a board faces: resolving its own internal conflict. The board can also work more cohesively to solve conflicts and make correct decisions when board members understand each other's temperament styles.
If you would like to serve on a board, it is imperative to conduct due diligence on the organization, whether it is a small community non-profit or a giant public company. Conduct comprehensive research on the financial condition of the organization, review prior organization and board conduct, interview current board members for leadership styles, and gain a full understanding of your role, responsibilities, and liabilities as a board member. You should also verify that the organization carries directors and officers insurance (D&O insurance) covering board member liability.
But finding the right board members with board experience and all the right attributes can be a daunting challenge. The selection team should work long, hard hours before making a selection. The right board members can provide the oversight and leadership that drive an organization to success. The wrong board members can precipitate business failure and open the door to severe civil and criminal penalties.
Individuals can register with the International Board Registry to be considered for public, private, and non-profit board opportunities. Go to www.boardleaders.com
We encourage you to actively serve on community and business boards. It is a rewarding challenge and a service that is desperately needed.
Copyright 2004, The Institute for Executive Board Leaders. All rights reserved. Reprinting or reproduction in any form is expressly prohibited unless authorized by The Institute. For information contact don@boardleaders.com or at (916) 783-0860.
About the Institute for Executive Board Leaders
The Institute for Executive Board Leadership (IEBL) connects executives to board seats for public and private companies and nonprofit organizations. On an ongoing basis, the IEBL conducts online e-learning seminars for executives worldwide on topics relevant to board governance, compliance issues, liability issues, and leadership development. The IEBL also assists senior level executives in the development of world-class executive bios.
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