Managing Leadership^®

Boards of directors. We don’t seem to have a consensus regarding who they are or what they do. Moreover, we don’t seem to be sufficiently cognizant of the narrow and conflicting agendas of those who offer answers.

Shareholders will probably tell you they don’t care, as long as the share price goes up and dividends get paid. And, indeed, that phenomenon lies at the heart of much of the difficulty with the issue.

Activist shareholders will probably tell you they care very much, often wanting activist directors to keep managers in line with their specific goals for the company. This is a little closer to the real purpose of a board of directors, which is to act as the representatives of owners in the running of a company.

Managers, on the other hand, will emphasize the debilitating effect on focus and efficiency of a peanut gallery board filled with uninformed critics. They will want the board loaded, rather, with hand-picked directors, preferably senior executives from their own ranks, and, best of all, chaired by the CEO. This way, the board helps to fill organizational sails, rather than acting as a sea anchor by asking questions that are viewed as irrelevant to managerial concerns.

But there is no escaping the fact that the interests of managers and owners do not naturally coincide. Moreover, efforts to make them do so by giving managers ownership stakes only seem to exacerbate, rather than close, the divide.

We’ll be looking at this issue again, more closely, over the next several months. In the meanwhile, take a look at these pieces:

• A BusinessWeek article on “the board’s role” in CEO succession planning, for those who had been unaware that the board has such a role. You will find the advice similarly obtuse. The worst example is to look for “CEO qualities.” On the other hand, there is a refreshingly sensible inclusion of the suggestion to develop inside candidates, and to avoid hiring outsiders. The fact that Peter Drucker advised this decades ago makes it no less worthwhile to see it mentioned in a context like this, today.
• An item from BNET, describing the mutually reinforcing failures of the Merrill board and its recently removed CEO. This is a contemporary classic example of the dangers of an all-powerful CEO. The commentary also offers samples of firms that do this better – not quite wholly right; and we’ll talk about why another time, but certainly more effectively.
• A WSJ essay on the value of older directors. Pointing out that a variety of factors are combining to drive down the average age of a director in the US (to just 59, presently), the author offers cogent reasons as to why we might want to carefully consider the consequences of that trend.

Have you thought much about the manager/director relationship? We spend a lot of time trying to tease out the duties of managers and best practices in discharging them. But do we spend enough of it assessing the effect on these issues of the manager’s (and, for that matter, the director’s) position in the owner/employee continuum? What should the relationship be? Depending on your answer, how would the relationship then effect the definition and practice of management?

Any ideas – for either answers, or additional questions?

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Today’s Tip: Lisa Belkin published, today, a very good piece in the New York Times on the issue of women in the workplace, how they are perceived there, and the effect this has on their performance and potential. It is a well designed presentation of many aspects of the problem, as they are seen from several perspectives. A good place for those who have avoided the issue to begin to appreciate its growing importance.

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