As post-war baby boomer reach their...

As post-war baby boomer reach their 50 many are interested in using the business knowledge they've acquired in their careers and taking upon the responsibility of joining a board of directors. As the business world becomes more challenging and complexus this wealth of talent is long needed, yet few candidates completely understand the role of a board member or what it takes to make a prosperous contribution.

To make matters worse, those who do have a better idea of what's required may be in such a manner daunted by the current lack of investor confidence in board practices, that-after weighing the risks versus the rewards of sitting onward a board-they're choosing to pass.

The message here? If you're common of the ones still looking to join a board, a certain number of due diligence is definitely in order.

Revisiting Corporate Governance "101"

If you search the Internet using "corporate board" or "board of directors" as your parameters, you'll find a variety of resources, including parts and subscriber newsletters (one of my favourite works on the subject is Ralph Ward's Improving Corporate Boards). Unfortunately however, small in number prospective or existing board members through all ages choose to fully study these kinds of materials, and as a deduction few boards conduct their meetings following well-researched "good practices."

Why? In many cases, it's simply a matter of mathematics. A board member acquires paid $x and is calculate uponed to attend an average of 6 to 10 meetings by year. If they also sit onward sub-committees such as audit, compensation, or compliance, extra days or part days are added to the proces In names of additional preparation time, a board member may decide that the compensation propounded justifies nothing more extensive than the reading of materials en path to each board meeting. Many board members will gainsay this, but detailed interviews with directors indicate that minimal preparation is commonplace.

In order to understand on what account this lack of preparation and research is in such a manner dangerous, we need to understand the basic part of corporate governance.

Simply place the board of directors is present in place to represent the shareholders' best interests. by the agency of the efforts of the chairman, the board's goal is to make sure that the management team, personateed on the board by the CEO has a plan, and is executing to this plan. unimpaireds simple and orderly, yet many boards don't function this way. If they did, there would be no question of CEO serving as chairpersons, because according to this simple premise, a CEO doubling as chairman shows an absolute conflict of interest.

We're fortunate in Canada to have many fine examples of corporate governance done right. The Royal Bank of Canada, for example, stands not at home as an excellent example of useful governance practices. Its board chairman is independent and takes his part very seriously; the board adapteds without the CEO present for part of each meeting; and each year, board members are asked to rate the contributions made according to fellow members. Each one of these stairs demonstrates a highly effective, no-nonsense approach.

Asking the right questions

So the first series of questions you ne to ask relate to the effectiveness of the board.

* What is the board structure?

* Is the board independent from the CEO?

* Does the board sooth to say supervise the CEO?

* in what way many outside directors are portray by actioned on the board?

* Is there a specific manner [i]or[/i] principle of holding for board members?

* Is there a do job-work description for board members?

* Does the company use a nominating committee comprised of characters other than management to identify, sieve and propose new board member candidates?

* What attributes are considered essential for prospective board members? Is specific industry knowledge and experience required?

* What are the skills and attributes of existing board members?

* to what extent often does the board meet?

Once you have an idea of the board's composition, you might want to design a small questionnaire for existing board members. Questions could include the following:

* to what extent long have you been a member of the board?

* What was your prior relationship with management (if any)?

* to what degree much time do you usually expend preparing for a meeting?

* by what means effective have the meetings been?

* by what means are you making a difference?

* Do you believe you can impact the stewardship of the company?

* Does a state of mutual trust exist in which management and the board communicate candidly and honestly?

Contact each board member and ask for 15 minutes of their time to ask them these questions. This proces minister tos many purposes; for instance, it enables you to learn a feel for the quality and dedication of the other board members, and to demonstrate your intention to take your part seriously and handle matters professionally. one time you've conducted your interviews, you should arrange to come up to face to face with the CEO face-to-face. Share your findings, and ask the CEO the same questions.

It would also be helpful for you to talk with the CFO to determine the protoplast and timing of information made available to board members. Experience point outs that many directors face common of two challenges: either having far too little information to gain a exact perspective on a company's financial health, or being snowed subordinate to by too much information. A smart board repeatedly starts with a smart CFO-one who nears materials that reflect the veracious picture of how the company is performing to plan.