Be strategic about board composition: it is naive to assume that all directors are equally capable in every respect. Boards need to be built on multiple diverse talents and perspectives to execute their responsibilities effectively.

• Author: Crawford, Curtis J.

BOARD COMPOSITION is the cornerstone for enlightened corporate governance. I believe a smartly composed board is the most pivotal tactic for making boards more independent and effective. Board composition is the foundation for venturing beyond compliance and demonstrating conviction to maximize long-term shareowner value.

While board independence is defined and mandated by regulators, knowledge and engagement demonstrate enlightened director independence. The more you know, the more you engage in board deliberations. The more you are engaged, the better you understand board issues and challenges.

Board composition is not legislated; it is a choice. Boards have an option to disregard the need to be strategic about board composition or to capitalize on the opportunity.

In simple terms, board composition is a function of size and diversity. It is defined by the number of directors and their multiplicity of experiences, backgrounds, and perspectives.

Corporate directors are chosen from a pool of highly qualified people, and being selected as a shareholder representative is a very significant achievement that demonstrates that the director has cleared a high hurdle of competence. However, it is naive to assume that all directors are equally capable in every respect. While traditional boards might find it useful to maintain this polite fiction, all directors and boards are not equal. Maintaining this position is an excellent way to enforce a status quo that limits the board's performance. Although all directors are high-achievers with equal legal responsibilities to serve, exercise duty of care, and act in good faith, they differ substantially in the kinds of value they can contribute to the board. Each director embodies differences in experience, background, interests, and tenure, which is desirable, considering that multiple talents are necessary for the board to execute its responsibility effectively.

Taking size into consideration

The size of the board is an important factor in board performance, because the effectiveness of each director is strongly influenced by the number of other directors with whom each individual must interact. Today's corporate boardroom is the setting for serious work, not friendly chitchat. Board membership should balance congeniality with independence.

A director on a board with too few members will experience isolation, limited input, interaction with a narrow field of vision, and pressure to reduce his or her...