Leadership Development – Good Board Governance

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

Leadership development is an often-overlooked issue of board management. Boards need leaders – experienced and well based in critical areas. It also needs professionally qualified members who both understand and are able to meet their responsibilities to the shareholders. A director should be a leader, a motivator, a professional, and should have many characteristics important to corporate governance. Professional athletes are required to attend training camps and practices, and they are the best at what they do. The same should be true of corporate directors.

Corporate boards should develop and implement a plan for leadership development. The board should spend time developing a ‘career track’ for its members. The plan they develop should serve the board’s needs and meet the needs of the company as well. The Chairman is responsible to seeing that members develop the skills and gain the knowledge that they need to serve effectively on the board. Grounding in issues as diverse as governance, compliance and the technology of the business need to be covered. Some key areas to address are:

• Governance
• Board responsibilities and Member liabilities
• Board oversight
• Financial statement review
• Compensation standards
• Succession principles
• Shareholder rights
• Strategic planning and review
• Conflict resolution
• Compliance Management
• OSHA Regulation
• Corporate Finance Issues
• Other issues specific to the company

A key component to having complete buy-in by board members is to demonstrate the benefits of personal growth. Everyone wants to see their company successful; the issue is motivation. Recognition in front of peers is always a good motivator. Increased compensation is usually better. The premise behind an annual evaluation and raise involves recognizing the increased value the individual brings to the company by the gain in experience. Completing key development trainings selected by the board as important to the future of the company should increase the value the board member has to the company, thereby meriting an increase in compensation.

Annually, the board should assess its functions, capabilities and future needs. The nominating committee and the compensation committee should annually review future needs of the board and of management during their assessments. The Chairman of each committee should report to the board the findings of these assessments and provide information to the board of directors as it plans for the board’s leadership development. Personal growth among board members should be a key motivating factor to the directors.

Most corporate board structures have numerous committees and sub-committees to address specific issues important to the smooth functioning of the board of directors. Most sub-committees address a key, complex issue. Some of the more important and common committees include:

• Compensation Committee
• Succession Committee
• Nominating Committee
• Corporate Finance Committee

Regulations, such as Sarbanes-Oxley, touch all of the above-mentioned committees. Compliance with regulations is often a key part of the committee’s focus. Compliance management education could be a personal growth vehicle to assist directors in carry out the strategic plan of their committee, but also completing the education could make them a leader and expert on the issue.

A thoughtful strategic plan for leadership development can benefit the company, the board of directors, the corporate management, and make good governance easier for the board. A strategic plan can incorporate all of the various committees and sub-committees annual assessment work to assist in developing a strategic plan to address issues important to the board but also provide opportunities for personal growth among directors and corporate management. The extra effort put forth by the individuals should be rewarded, because a thoughtful leadership development plan will improve corporate performance by the increased value the director will bring to the company.

© Dr. Earl R. Smith II

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• Good Governance – The Compensation Committee

• Successful Board Assessment Models

• Board Succession Planning – Two Tiered Candidate Criteria

• Good Governance – Strategic Positioning for Strategic Planning

• Good Governance – Board Member Selection Criteria

• Good Governance – Keeping Ahead of Fast Company

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