"WHY ARE WE HERE?" What is the ultimate purpose of the board at a time when stakeholder interests have taken on more prominence?

• Author: Hayes, Bill

In the Third Quarter 2022 edition of Directors & Boards, MLR Media chairman Robert Rock told of a fellow board member who took a moment out of a meeting to ask, "What are we doing here?" She had been flummoxed by the direction of the meeting and wondered if some of the matters the directors had been asked to focus on were worthy of space on the agenda. Shouldn't the board be more focused on issues related to strategy and managerial oversight? That's a question that led us to wonder: What, really, is the ultimate purpose of the board? In a time when ESG and stakeholder capitalism have entered the governance vocabulary, isn't the board's purpose more complex than maximizing shareholder value?

GOVERNANCE OVER ALL?

Mary Bush, director of Bloom Energy, Discover Financial Services, ManTech International and T. Rowe Price Group, and chairman and founder of Bush International LLC, says the board's purpose can be boiled down to one word: governance.

The ultimate purpose of governance is to seek to assure that the company's assets are wisely and ethically deployed and invested in support of shareholder interests.

Sharda Cherwoo also cites protecting shareholder interests and bolstering the long-term value of the organization as the board's ultimate purpose. Cherwoo, a director for several organizations, including World Fuel Services, Land O'Lakes Inc. and World Quantum Growth Acquisition Corp., says it is vital for the board to provide strategic leadership and oversight, which enables the company to achieve its mission and goals.

The board of directors represents an independent perspective and fulfills its duties by implementing a strong governance framework, offering diverse perspectives and insights and being agile and adaptive to an organization's changing ecosystem. The board, therefore, should be well-informed and engaged to understand significant issues, risks and opportunities facing the organization and industry, as well as willing to ask tough and probing questions that drive attention and focus for the organization.

Beverly Cole, director of Bank OZKand Founders First Capital Partners LLC, also stressed governance. She believes the board's fiduciary responsibilities--the duties of care and loyalty--are the basis for accomplishing the board's oversight of protecting shareholder interests and maximizing shareholder valuation.

The challenge is the complexity and velocity by which enterprise risks are occurring and impacting corporations...