Effective Board of Directors

1. Topic: Effective Board of Directors 2. Six Steps to Building an Effective Board By:Bruce R. Evans 3. Summary: The author Bruce R. Evans is a managing partner in Summit Partners’ Boston office. He has also been a member of more than 25 boards, which include 10 public company boards. He claims that when a Board is working effectively it is a big part of the company’s success. However, an ineffective board can be distracting and cause liabilities for the company. Through his experiences he has created six steps to building an effective Board of Directors. The first step is “find the expertise you are missing”.

CEOs of companies that are similar but not in competition with your company can give you information on the industries trend. The second step is “look for board experience”. This means that getting people that are experienced are key because they know what they are doing and understand critical issues of audit, finance, and strategy. Next is “do not overlook non-CEO candidates”. Other types of executives can be extremely valuable because most of the time they want board experience and therefore will be willing to serve on smaller company’s boards unlike CEOs. Another step is “keep your board size manageable”.

The smaller and more focused boards are preferred than large ones. The more directors you have the more time you will invest in order to manage them. There should always be an odd number of directors to avoid ties in voting. The next step is “choose people who can participate fully”. The people on the board should be able to put in time for the company, and not just show up for the meeting. Members that live close to the company are preferable because when problems arise you can meet them face-to-face. The final step is “divide your board into focused committees”.

The Board of Directors work on many issues, such as, compensation, audit, transactions, financing, business strategy, lawsuits, and other problems. To increase the effectiveness of the Board Evans suggest you form focused committees on these critical areas. A diverse and experienced board can be key in the success of a business. It will offer a different perspective on industry trends that can help you avoid liabilities and take advantages of opportunities. 4. I believe that this article very accurately explains the keys of creating a Board of Directors.

All of Evans’ steps are very simplistic but are very important. Before I read the article I did not know what exactly a Board of Directors did, but now I know that they work on many key issues in the company. For that reason they need a diverse group of members so they get a different perspective on the issues. Also, it is important that they have focus groups for each issue that way they can go into each issue in depth and in detail. I am sure that the most successful companies have well diverse group of Board of Directors.