Ram Charan, expert in corporate governance, classified the evolution of boards into three stages: Ceremonial, Liberated, and Progressive.
The Ceremonial Board: Management kept quiet in the board room. There was scripted morning presentation that was rehearsed to the second in a tight agenda. The CEO communicated very little with the board between meetings. The boards automatically performed a compliance role. Many directors served for prestige and rarely spoke among themselves without the CEO present. They attended the meeting and rubber-stamped the resolutions proposed by the management.
The Liberated Board: Many companies have followed the “Guidelines for Corporate Governance” since 1994, leading by the General Motors board. There was no urgency for change until the scandals broke at Enron, WorldCom, and elsewhere.
Most boards left their Ceremonial status behide after the passage of Sarbane-Oxley in 2002. A new generation of CEOs now expects boards to contribute. And candidates for directorship now expect active participation as a condition of their acceptance. There is a general sense of excitement as directors embrace an active mindset.
The Progressive Board: Most boards are on the second stage: liberated boards. Liberated boards focus on the size of the board, the degree of independence, the number of committees and meetings, the separation of the CEO and Chair positions. To move to progressive board, group dynamics, information architecture, and focus on substantive issues are basic building blocks of progressive governance and a better board.
• Group Dynamics: The tone of interactions among board members and between the board and management is a fundamental difference between Ceremonial, Liberated, and Progressive boards.
• Information Architecture: How boards get information, and in what form, is vital to how the board operates. The mechanisms are typically very different for boards at different stages.
• Focus on substantive issues: What boards focus their time and attention on will determine whether boards are able to add value consistently.
Source: Ram Charan, Boards that Deliver: Advancing Corporate Governance from Compliance to Competitive Advantage, John Wiley & sons, Inc., 2005
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