What it takes to make a good board.

• Author: Edelson, Harry
• Position: Board of directors - Column

Here are a few positive attributes that are likely missing from lesser achieving boards.

Like daily newscasts which focus predominantly on bad news, the literature on boards of directors usually focuses on the failures of boards. There is nothing exciting about a board of directors that works well. Its effectiveness is sublimely unappreciated by the public.

Because the literature is so comprehensive on the subject, it is tempting to describe a good board in terms of what it should not be. Instead, it is instructive to articulate the positive traits that make the difference between an ordinary and a good board. Of course, the quality of each director, as far as experience and personality, is a paramount consideration, but we will assume that all boards can be improved.

The board as a whole

A Confluence of Talents. A board of directors is the sum of its parts. Directors should have complementary talents. To overload a board with financial advisers or lawyers or single industry management experts often produces a canceling effect, unnecessary posturing and the suppression or dampening of individual contribution. Obtain the best person available for a particular expertise. Do not settle for two or three directors with lesser stature.

The board does not have to be clubby to be successful. A little tension is desirable because management should not believe that the board is a rubber-stamp pushover. Management should be open to ideas and criticism from its board. After all, management runs the company, but in the end the board has the power to replace management.

Tenure. After seven years, 10 years at most, the majority of board members should be rotated out, the exception being those with irreplaceable talents or backgrounds. It is difficult to ask a director to step down even if he or she is considered deadwood. That is why a policy should be adopted for a specific term. This policy should be broken only in unusual circumstances.

Outgoing CEO. When a CEO is replaced by an outsider, it is time for him or her to depart. Nothing dampens the enthusiasm and ability to act of a new CEO more than an outgoing CEO hanging around, and that includes serving on the board. I am not in favor of a former CEO serving on the board until at least a year has passed. This time period will allow the new CEO time to assert authority and give the company new direction. This suggestion does not necessarily apply when the CEO of a well-run company hands the reins to a...