Dr. Earl R. Smith II

Boards are a relatively small number of people acting as representatives of the stockholders with the mission of protecting and expanding shareholder value. I have worked with a number of boards and have discovered that they have personalities and characteristics that often vary widely because of the range of individuals composing the board. Board culture relates directly to board effectiveness.

One of the areas that I work with boards on is crisis management. Boards have a responsibility to develop and promulgate plans to mitigate the risks of crises developing.

Strategy is more than just setting goals and reviewing the progress in achieving those goals. Boards of Directors are responsible for enhancing shareholder value over the long-term, and strategic planning is the process of positioning a company for success over that long-term.

Board member selection is one of the most important aspects of ensuring a continued high level of professional governance and leadership by a Board of Directors. Boards with established Nominating and Governance Committees should delegate to these committees the duty to screen and select candidates to present to the full Board as seats on the Board become open.

It would not make much sense to put a stop sign at the wrong end of a one-way street, but governments have never been afraid of looking foolish or wasting money. A corporate board of directors on the other hand is supposed to work to enhance shareholder value and to instill a sense of confidence in corporate leadership.

Some of my work with boards focuses on risk management. This attention to risk has intensified and diversified since the passage of Sarbanes-Oxley. Directors are now assessing both corporate and personal risks and sometimes the calculations become complex and conflicting.

Good governance does not turn on a single issue – or even a short list of them. It results from an organization successfully making a good faith and professional level effort to govern for the benefit of the stockholders and stakeholders of the company.

Diversity is a buzzword when it comes to board population and the trend towards minority board membership seems to be gradually increasing. There are consultants who specialize in bringing minority members to companies with the proposal that diversity is a corporate obligation.

Good governance is as much about the process of governing and the perceptions of those outside the process as the results of the governing body. The failure of character of directors and corporate management led to new regulations and other requirements on corporate America.

One of the challenges facing any board of directors is to manage the inputs from sources outside the board and maintain a deliberate process that focuses on protecting and extending shareholder value. Even boards of smaller companies face this challenge. Some of the inputs may come from advisers and consultants.