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| Best Practices |
Constructive Contention
Suzanne McGee
06/01/2004
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In his book, Lorsch argues that board members need to create
formal mechanisms to foster open discussion and constructive disagreements
without producing boardroom rifts and resentment. That burden, governance
experts agree, is likely to fall on the shoulders of the growing number of
independent directors who serve on boards. “Independent” must mean not simply
coming from outside the close-knit world of Fortune 500 executives, but actually
being independent-minded. “The sad reality is that a lot of independent
directors are passive directors who accommodate the CEO by rubber-stamping
decisions or just going with the flow,” explains Raber. Going forward, he
argues, this new generation of independent directors will need to be able to
stand up to even the most strong-willed CEOs and ask tough questions. “Before
you can even get to a point where you’re having a good debate, you have to deal
with a lot of small, structural issues.”
QUESTIONS FOR THE DEVIL'S ADVOCATE
1. Does management present the
company’s raw data in a form that I can scan and understand several days before
the board meetings?
2. Does the board schedule regular executive
sessions, among members only, to discuss regular issues in greater depth and
explore big-picture developments? 3. Does the meeting agenda allow the
time and structure for open-ended discussion? |
Flawed Reasoning
Suzanne Hopgood, a former real estate financier who has
become an expert on turnarounds and financial restructuring, has found that some
managers believe that directors are not supposed to question even the small
issues. When she joined the board of Furr’s Restaurant Group in 1996 she issued
a simple housekeeping demand that flabbergasted senior management; she insisted
management replace the foot-high stack of data the directors received ahead of
each meeting with a much shorter analytical summary of where the company stood
vis-à-vis its competitors. “They had never had anyone ask for less information
before,” she says. “But data isn’t information.” The heftier board financials
become, Hopgood contends, the less able directors are to scan, much less absorb
and understand, the raw data they contain. If they are unable do that, how can
they detect and challenge faulty numbers or flawed reasoning?
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