There have long been suggestions that there is not – or should not be – a one size fits all approach to corporate governance. Some of the criticisms of this approach have been that each board is different with respect to industry, culture, competition, technology etc. And while true, experience on one board does not a governance expert make.
The factors that make your board different from another are the exact reasons your board experience may not, and likely will not, transfer to another board. Yet, if you ask any board member if they are a corporate governance expert, they will undoubtedly say “yes”. While they may well be an expert on that board, they are likely not a broad-based governance expert.
Not helping matters is that when attending a large governance webinar or conference, the focus in on interviewing a board member about his or her experience on a specific board. Rare is the board member able to compare more than two boards. And, while these board anecdotes are interesting, sometimes even eye-opening, they do not provide the kind of aggregate data or information about a broad set of boards – like information about what FTSE or Russell 3000 or S&P 1500 boards are doing about a specific board challenge.
Here’s a couple things to do to avoid being a one-trick pony.
- Learn about governance, not just your company. While director onboarding is very common now, it rarely includes learning about governance as a practice, a distinct discipline. Too often onboarding programs fall short as well. According to Spencer Stuart, a lack of focus is a key problem because boards tend to focus on the recruitment process. When the process is finally complete and a new director has been nominated, there can be a natural tendency to pay limited attention to the onboarding process. While each board candidate may have done their own due diligence, the homework is just beginning, and directors must continually read up on:
- The rules and regulations about director independence, CEO succession, nominating rules, diversity and inclusion, the fundamentals of monitoring and your duty to do so. Public disclosures, regulatory filings and government or stock exchange listing requirements are a must read. For example, Nasdaq is pushing to require the thousands of companies listed on its stock exchange to include women, racial minorities and LGBT individuals on their boards.
- Industry and competitor trends, business models, strategies, opportunities and risks. For example, how do new and changing privacy laws affect governance and your fiduciary duty? Or the use and reuse of customer data?
- Beware of best practices. At the same time, it’s important to be a bit skeptical of the large capitalization company mentality of a lot of governance education. These educational opportunities often come via large scale conferences. While valuable, there is a tendency to gain knowledge of how to “do” governance, from the plethora of information about large cap companies. These also fall into the trap of a one size fits all approach.
For example, there is a lot of information about how to deal with proxy advisors and voting, but small cap companies – those generally with between $200 million and $2 billion in market cap – are often not covered by proxy advisors. Such firms also do not often have chief information security officers. Certainly, if you are at a small cap company, consider attending trade shows yourself or join the newly created Small Cap Institute.
Also, as with most of your other positions, spend time meeting people from diverse industries, market caps and geographies. Just like diversity is useful for your own board, knowing a diverse group of people with different interests and backgrounds is professionally useful when serving on a board. It’s important to adopt the mentality of “what could be” alongside the more common “what is” when thinking about becoming a board expert.
For more from Cynthia Clark’s blogs, see here.