Board Re-Engineering Cited as #1 Cure for Ailing Companies

In its May 27, 2002 issue, Fortune magazine features an article on "Why Companies Fail," and cites board re-engineering as the number one "quick fix" for corporations in danger of collapse. While we would question whether "quick fix" is an accurate label for the process of board re-engineering, the idea that corporate governance is the key to company performance is right on the mark. Poised at the top of the company totem pole and vested with more power and accountability than any other group or individual in the organization, boards' ability to govern well is the number one lever for attaining any company's success or failure.

Unfortunately, the Fortune article does not proceed to recommend Policy Governance® as the best, most coherent and comprehensive governance model for corporate boards to adopt and to apply. Instead, the article recommends a number of piecemeal mini-solutions that might have some degree of effect but that fail to grasp the big picture of good governance. The article rightly points out that "Boards can be full of very capable people yet be totally ineffective as a group," but then identifies the main problem as "directors are too nice."

Determined to counteract the problem of nice directors, the article recommends measures such as holding the first 10 minutes of each board meeting without the presence of the CEO, and scheduling an annual retreat where the board "can assess its own performance as well as the CEO's." While well-intended, these recommendations have very limited merit when compared with the fully integrated, logical and intelligent system that Policy Governance comprises. Furthermore, no matter how "quick" an individual measure might be to implement, it will not survive as a "fix" if it addresses only a fraction of the problem.

The task of re-engineering corporate boards extends far beyond tinkering with meeting agendas, trying to empower employees, encouraging directors to talk amongst themselves or introducing the concept of board performance evaluation. Any meaningful attempt at re-engineering must look at the whole picture of the purpose of boards, the fundamental principles of good governance, and the nature of human relationships. Luckily, such a well-designed system already exists in Policy Governance, the closest thing to a real "quick fix" that we can suggest.