Title: Boards That Lead
Authors: Ram Charan, Dennis Carey, Michael Useem
Publisher: Harvard Business Review Press (November 19th 2013)
Price: Hard cover $35, Kindle edition $16.99
Reviewed by: Chetan Shah, CFA
With increasing pressure from investors especially the activist ones, regulators and governance rating agencies the role of board is transforming. The boardrooms that were too reactive, passive and accepting of whatever was proposed by the executive, have not only become better monitors for the benefit of shareholders but also have started playing active roles in areas such as taking charge of CEO succession, executive compensation, goal choices, merger decisions, risk tolerance and other functions which traditionally have been the province of management. Yet the boards have to draw a line and decide When to Take Charge (of areas like central idea, CEO selection), When to Partner (strategy, financial goals) and When to Stay Out of the Way (execution, operations).
The authors, all of whom have established global reputation in their areas of expertise, have been able to explain the complex & delicate line of responsibilities and expectations between the board members and the executive team. They have provided a number of examples in real life – both the stories of success and failure. The former includes proactive efforts of Edgar S Woolard Jr. board leader who brought in Steve Jobs back to Apple in 1997 and partnering efforts between fresh board, new lead director John A. Krol, new CEO Edward D. Breen and new treasurer Martina Hund-Mejean to turnaround Tyco from “buying engine to an operating machine”. Board blunders includes failure of the AIG’s board to acknowledge warnings including those from regulators about the firm’s risk or Motorola’s firing of the CEO Christopher Galvin just before the launch of successful mobile phone ‘Razr’ and a turnaround. Illustrations are not just restricted to corporations from developed countries but also include those from emerging countries like India’s Infosys, Bharti Airtel & GMR Group, China’s Lenovo and Brazil’s Grupo RBS (one of the premier multimedia companies).
The authors have candidly shared issues such as identifying “dysfunctional” directors as well as faltering CEOs and the practical ways to resolve the same. Lastly, they have drawn out simple check list at the end of each chapter which will be handy to new as well as experienced directors and executives at both commercial and non-profit organisations.
– C G S