LESSONS LEARNED FROM HIGH-PROFILE BOARD STRUGGLES: Five ways to strengthen director decision-making and benefit from the recent problems of some public company boards.

• Author: Davis, Glenn C.

Thousands of decisions are made by corporate boards each year. The vast majority are sound, solid and well-researched. But the world is growing increasingly volatile, uncertain and complex, with ever more concerns for boards to stay on top of and ever more decisions for them to make.

Today's boards face decisions on issues that didn't even exist a year ago. They need to have a framework that prepares them for dealing with these decisions--the unknown unknowns and emerging issues--and they must be prepared to support their company management through crises by building risk-management capabilities and resiliency.

Fortunately, boards can learn quite a bit from other companies' very public struggles. Here are five lessons today's boards can take from companies that have been in the media spotlight recently.

Minimize the knowledge gap between directors and management by having a board with diverse expertise and backgrounds, fostering continual education and, when necessary, hiring outside experts or advisors. One of the biggest risks and challenges any board faces is the gap between board members' and management's knowledge of the company and industry. This gap can be particularly wide at technology and biotech companies, as well as in some kinds of finance companies. For example, board members may not fully understand the company's business model and its risks, or they may not understand a core technology well enough to ask the right questions of management.

Consider what could happen (and has happened) in the case of a start-up making false or misleading claims about the capabilities of its technology. If board members lack the technical expertise to question those claims, they may potentially leave the company exposed to significant risk. In addition, if the company is in a regulated industry, the board should have at least foundational knowledge of the compliance requirements and a system to oversee the company's regulatory compliance.

To do its job today, a board needs vast experience, spanning even beyond the company's business model, operations, industry and sector. A larger board with independent, experienced directors can provide this expertise. A good board is one of the best resource investments a company can make, offering a cost-effective way to obtain a huge amount of expertise.

If it's not possible to have a larger board with diverse expertise, a board can engage outside consultants. These consultants can help the board understand...