A position description for the board.

• Author: Louden, J. Keith
• Position: Board of directors

A position description is one of a number of measures by which the board can organize itself to make an effective contribution.

Much has been written and talked about that the United States has lost its leadership role in the world economy, particularly in certain key sectors. We must be careful not to generalize that this situation is true of all American industries. There are many companies, large and small, that are doing an outstanding job under today's economic conditions. They anticipated the impact of global management and technological changes and met them head-on.

Why certain large companies in major industrial sectors failed to recognize or act on these changes is hard to tell. Now they are facing drastic restructuring under pressure, which is never a satisfactory situation. If they had moved early on to meet and take advantage of global change and its opportunities, then this restructuring could have been done in an orderly, intelligent manner without the shattering impact that the plant closings and layoffs are now having.

When all is said and done, we must recognize that those responsible for this failure to act are the board of directors, the chief executive officer, and his management team.

If you are going to operate as a corporation, you must have a board of directors. That is the law. Unfortunately, the law does not specify exactly what this really means. The board of directors represents the shareholders' interests, but it also has a larger responsibility of making certain that the activities of the corporation reflect favorably on the governments, community, employees, customers, and vendors. It is not the responsibility of the board to manage the business on a day-to-day basis, but it is the board's responsibility to see that the company is well managed.

The membership of corporate boards to a large extent has been determined by the chief executive officer. If he is a strong, confident, competent chief executive, he will try to get the ablest board he possibly can, composed of members who understand the role of the board and have the ability to perform. If he is not that competent and confident, he will try to get a board that meets the legal requirements but little else. This latter practice has resulted in the long recognized fact that the board of directors is often the weakest link in the management chain.

There are numerous factors that make it possible for a board to be truly effective.

The membership should be chosen by a nominating committee rather than by the chief executive officer alone. This nominating committee should be composed of outside directors, one of whom acts as chairman. The chief executive should be a member of that committee, since anyone who is not compatible with the CEO should not be nominated.

The board should meet at least once a month on a regularly scheduled basis and the management should provide in advance an information package showing results versus plans and other items that will be on the agenda. This package should arrive a few days ahead of the meeting.

Mandatory retirement age for all directors should be set. When an inside director retires, including the chief executive officer, he should also retire from the board.

Structure of Meetings

The board meeting itself should be conducted in two parts. The first should be a reporting session when the CEO and key members of the management team make their reports on their progress against plans...