Professional Documents
Culture Documents
Corporate Governance
Empowering investors sounds good in principle, but it can backfire. Pressure from investor groups all
too frequently engenders a simplistic "box-checking" mentality to complex governance issues. More
importantly, are investors fit for a more active role? Institutional investors have become so focused on
short-term stock performance and on stock trading rather than stock ownership, their interests no
longer line up clearly with the business fundamentals that make companies successful over the long
term.
The real problem is that boards cannot afford to be distracted from issues of performance.
Collectively, corporate performance is mediocre: only one company in every eight achieves relatively
modest targets for growth. According to Bain & Co. research, just 13% of companies post top- and
bottom-line growth of 5.5% or better over a 10-year period, while also earning back their cost of
capital. Companies like American Express, Dell, Lloyds and Vodafone, to name a few, have managed
to exceed this standard by keeping company performance front and center. Effective boards focus on
sustained value and how they can contribute to its creation.
What can directors do to affirm their role, drive board effectiveness and reclaim control over their own
agenda? They can start by holding up a mirror to their own board performance, as measured against
the "seven habits of an effective board." While these habits may seem straightforward, very few
boards score well in all areas.
1. Own the strategy
Most boards convene special strategy meetings and retreats, but typically they sit through
presentations of the executive team's plans. Effective boards ensure non-executive directors
contribute to developing the strategy, and feel a sense of ownership of the strategy. The more a board
understands and owns the strategy, the more responsive it can be to help seize opportunities such as
major acquisitions when they arise.
1 of 1
Article Controls
E-mail | Print | Comments | Request Reprints | E-Mail Newsletters | My Yahoo! | RSS
Related Sections
Home > CEO Network
'); //-->
News Headlines | More From Forbes.com | Special Reports