A serious board takes serious work: there is no time like the present to review the basics of building and running a world-class board.

• Author: Kelley, Jackie
• Position: BOARD DYNAMICS

CORPORATE BOARDS serve many purposes. They help companies make valuable connections, provide mentoring and management oversight, and advise the CEO and other top executives on matters from compensation to planning the next strategic transaction.

But today's boards go far beyond their traditional advisory roles and have become more actively involved in shaping a company's long-term direction. They can approve corporate philosophy and mission, establish working committees on specific critical issues, help select C-level executives, review business plans, check corporate performance against business and financial plans, and enforce guidelines for ethical behavior.

With such a wide agenda, boards play a crucial role in the success of companies. To construct a board that optimally meets their needs, companies should ask four questions:

* What do we want our board to contribute to our enterprise?

* What's the ideal composition of our board?

* How do we go about finding the right board members who have the skills that complement our strategic objectives?

* How can we ensure effective communications between the board and senior management?

What boards contribute

An ideal board composition is designed to meet the needs that a company has at a particular stage of its growth. Directors should ask challenging questions, make ongoing contributions, add to the board's diversity and reflect the company's diverse workforce, and have an appropriate level of expertise, whether it be in industry, operational, financial, or other experience.

One of a board's most vital functions is to help the company maintain a long-term perspective. While company management supervises daily operations, it's up to board members to stay focused on a larger world view that extends several years into the future. As an example, boards should have a solid understanding of the products and services of the organization so they can help to guide management in evaluating product life cycles, areas for additional investment, or potential offerings to discontinue--all with the goal of ensuring that the organization remains on task to create long-standing value to its shareholders.

Good boards also ensure that companies are adaptive. A company's viability depends on its ability to formulate and implement a long-term strategy, but that strategy may need to be modified (perhaps quickly) depending on economic or industry changes. A good board will guide the company in adapting in...