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Title: Back to the Drawing Board: Designing Corporate Boards for a Complex World by Colin B. Carter, Jay William Lorsch ISBN: 1-57851-776-1 Publisher: Harvard Business School Press Pub. Date: 21 November, 2003 Format: Hardcover Volumes: 1 List Price(USD): $29.95 |
Average Customer Rating: 4.67 (3 reviews)
Rating: 4
Summary: Helpful Suggestions for Those Who Want to Improve Boards
Comment: Back to the Drawing Board will be of most value to those who have never sat on a Fortune 500 board or been present during the meetings of one. Much of the current concern about boards reflects a lack of understanding of how they operate. By reading this book, you will get a good sense of what the average and better boards are doing . . . and what their continuing problems are. A unique resource in the book is a survey of 150 CEOs around the world concerning their perceptions of how to improve boards. Although the total is too small to be statistically meaningful, the directional evidence will help many to see what the most glaring issues are.
A second audience for this book will be independent chairs of boards and chairpeople/CEOs who want to improve the effectiveness of the boards.
A third audience for the book will be neophyte directors getting ready for their first meeting.
A fourth audience for the book will be those who want to improve governance practices through legislation and regulation.
As a management consultant who is often asked to speak with public boards about shareholder perceptions of company management, strategy and performance, I found the material accurately reflected my experiences. Boards are overwhelmed, overscheduled, undereducated and often uncoordinated in addressing key concerns of the enterprise and its stakeholders. I had no disagreement with any of the descriptive materials that begin the book. They are valuable addition to the literature. If the book stopped there, it would have been an excellent book.
The prescriptions though that the book makes fall short of what is needed when you get past the idea of building a board and processes to fit the tasks appropriate for that board.
Here are some of the enormous issues relating to effective monitoring of a company's performance (the minimum standard for the board) that the book fails to adequate address:
Is the CFO capable of knowing whether the company is under control and operating honestly and ethically? Most CFOs are chosen for their legerdemain with accounting to make the EPS work out.
Is the CFO telling the board what is really going on in the company? Most CFOs would be fired by the CEO if they did.
Notice that until recently no director in the company needed to know anything about finance or accounting. With Sarbannes-Oxley, one person does. Big deal! Most companies could use several ex-CFOs on their board to deal with these issues.
What do the shareholders (and potential shareholders) think of the company's management, strategy, alternatives and performance? The authors suggest talking to security analysts. That's a waste of time. They just want to sell the company something. As a back-up the author suggest looking at the expensive economic analysis programs (such as sold by BCG, where Mr. Carter works). For a lot less money, you can just talk to shareholders and get regular reports on this. Many firms will do this for you at a very modest cost. In most organizations, the CEO knows less than anyone else about what is going on. Well, the board knows even less than the CEO. You have to get direct information from those you are supposed to serve, both institutional portfolio managers and individual investors.
How is the company actually performing versus competitors with customers, potential customers, desirable distributors, vendors, and in attracting top talent? There's no mention of that subject in the book (expect indirectly in suggesting that Balanced Scorecard companies share those measures with their board).
I could go on, but you can see that the prescriptions here are ones that reflect an incomplete understanding of how to inform a board and make it effective. You need someone who knows how companies work who can set up direct access to the cutting edge information that CEOs often do not go out and acquire themselves. They usually focus on meeting the budget. That's how they get their bonuses.
If a board follows what the authors suggestion, they will definitely make a lot of helpful progress. That's good. But will they be adequately fulfilling their responsibilities to monitor the company on behalf of the shareholders? Usually not. Only where they have a great CEO in place who wants to share information with them will they know what they need to know.
It's very disappointing to me that top experts like Mr. Carter and Mr. Lorsch cannot come up with better prescriptions than these after the round of awful collapses in corporate governance we have just experienced. Investors deserve better.
Rating: 5
Summary: A strongly recommended revolutionary analysis
Comment: Back To The Drawing Board: Designing Corporate Boards For A Complex World addresses what expert professional consultant Colin B. Carter and Harvard Business School professor Jay W. Lorsch see as the greatest challenge facing corporate boards today -- that many national and international corporate boards are composed of member with limited knowledge of the companies they must be responsible for, and too little time to make even the most crucial decisions. Recommending a major corporate board of directors redesign based on experience and a "what works" approach, Back To The Drawing Board offers methodologies that can be customized for each unique corporate board of directors to the benefit and bottom-line profitability of the corporation and all who serve it. Back To The Drawing Board is a strongly recommended revolutionary analysis with emphasis on practical needs and reasonable expectations.
Rating: 5
Summary: Great contribution for a challenging job
Comment: Very feasible practices and real life suggestions for an increasingly complex and risky job.
Since 1989's "Pawns or Potentates", this is the best book about director's activities.
I recommend this book: very focused and structured contribution for actual corporate board members around the world.
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