Tuesday, March 4, 2008

DOLLARS & SENSE: The ABC's of a Corporate Board & Social Responsibility

I was recently exposed to a book entitled “The Human Side Of Corporate Governance” by Morten House. Deep inside its pages I found a passage about “Barbarians and CEOs” which tickled me since we’re hosting a dinner on 03/11/08 entitled “Barbarians & Other CEO’s I’ve Known” with Bob Fox as the keynote. (see blog entry below)

According to my quick research on the topic, the “ABCs” of most corporate boards fit into one of three types:

  • A – “aunt boards” –typical in small firms where no one has any role other than a notch on their resume. Often described as a “pool of helpers,” they play the role of discussion-partner, crying-shoulders, and source for advice in decision-making.
  • B – “barbarian boards” –typically described as having a distant, and sometimes hostile relationship with their CEOs. They do not trust the management, and the management does not trust them.
  • C – “clan boards” –typically generated though an inner circle of connected people, constituting a distinct network. The “clan” members tend to support each other during board meetings, and traditionally, there is a mutual support between the board members and the CEO.

What becomes obvious is that while the board roles might vary depending on the attributes of the CEO (tenure, ownership & competence), the main purpose of the board is to enhance executive decision-making and improve organizational performance.

With issues of social responsibility, transparency and corporate governance in the spotlight, boards must find techniques for strengthening their organizations. Where “financial capital” used to be the primary measure of success, “human capital” has become equally critical. So described by Wikipedia, "the concept of a corporate board’s fiduciary duty has to expand to include social, environmental and human rights issues."

My observation is this: the board’s ideology of “making dollars” has to graduate to “making sense” if the organization is to be heralded and survive.

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