Problems with boards of small companies.

• Author: Edelson, Harry
• Position: Reprint from Directors and Boards, Fall 1994 - Putting In Place the Right Board for the 21st Century

Harry Edelson's article was a big hit with our readers, and was even reprinted in The Wall Street Journal: It is a biting commentary on the dysfunctional behaviors that manifest themselves in the boardroom. Edelson is managing partner of Edelson Technology Partners, a venture capital fund based in Woodcliff Lake, N.J. We will be continuing to draw upon his wellspring of management savvy and wit: Starting with the Winter 1997 issue, he will become a regular columnist for DIRECTORS & BOARDS.

IN MY EXPERIENCE, boards can be divided about equally in three categories: terrible, mediocre, and good. Why not upgrade the former to the latter? If only it were so easy. Many obstacles stand in the way, including investment agreements, lethargy, questions of control, factions, and ignorance. Putting aside the difficulty of changing a board, what about improving a board? What follows, based on real experiences, is a litany of what is wrong with the boards of small companies and what can be done about it.

The Do-Nothing Board

Problem: Outside members listen to the presentation of management, ask a few questions, and go home. In many cases, management may actually prefer this type of passive board.

Solution: Place items that you think are important on the agenda. Make sure that the agenda and a briefing book are sent in advance. Work with management to replace "do-nothing" board members with talented replacements.

The Ignorant Board

Problem: Some board members take up much of the available time to ask questions that do not improve oversight but are intended for self-education or merely for self-expression. Asking questions to learn about the business is fine but when it becomes a habit, meeting after meeting, it is appropriate to learn about the business on one's own time.

Solution: Convince those people to leave the board or, if possible, vote them off. If that fails, convince management to reply to time-wasting questions by suggesting that answers would be forthcoming one-on-one after the board meeting.

The Gutless Board

Problem: The CEO is incompetent but the board is worried that if he or she is fired, one or more of the following may occur: key management will walk; the CEO will unload stock; a new CEO will be hard to find and require exorbitant compensation; and customers may defect.

Solution: Some board members will change wives more readily than CEOs. Campaign with...