Resist Staffing Board With Staff

Generally accepted corporate governance practices are the incubators for frustration, dysfunction and corruption behind the boardroom door. Born more out of misguided notions and concessions to ego than deliberate scheming or ill intent, bad board governance is a widespread condition afflicting private and non-profit corporations everywhere. It also represents Canada's biggest opportunity to surge forward in productivity, progress and profit.

The silver lining in the recent collapse of Enron, WorldCom and others, is the increased scrutiny given to what boards of directors do and how they do it. As entrusted representatives of shareholders, members and/or owners, the board of directors is without a doubt the primary locus of power and responsibility in incorporated organizations. The problem is, too many corporations sabotage their own success by mixing and confusing the roles and functions of those who govern vs. those who execute, manage and staff.

It should be easy to remember who does what. The job of directors is to direct, and the job of the Chief Executive Officer or Executive Director is to execute the will of the board. Yet one of the most common cradles of governance breakdown is the choice that many corporations make to put the CEO or Executive Director, as well as other managers and staff members, on their boards of directors. Akin to allocating seats in the House of Commons to the Clerk of the Privy Council and Deputy Ministers, placing paid staff members in the dual role of director/manager creates an avoidable conflict.

Board members are elected or chosen to represent and to direct an organization on behalf of a wider collective, the ownership. It is generally agreed that a small group of people, like a board of directors, is better able to represent a large group of people, like shareholders, than can one person alone. Democratic principles say that a healthy mixing of multiple viewpoints, skills, insights and backgrounds generally results in a better product, in the form of policy decisions, than can be achieved by an individual. Since in most cases it is not practical or feasible for the entire group of owners to meet around a boardroom table, a sub-group of the ownership is chosen to act for the whole.

Board members, then, must first serve the interests of the ownership. They must determine what the ownership wants and steer the company or organization in that direction. The focus of the CEO is to achieve the results specified by the board, and he/she is chosen for an ability to manage resources and to get the job done. Placing the CEO at the head of the boardroom table is like having an apple chair a meeting of the oranges: the result can often be an ugly clash of interests that serves no one in the end.

It might also be described as the fox-in-the-henhouse principle, but rather than suggest that CEOs are inherently mischievous or untrustworthy, let us simply acknowledge that the CEO's job is different from that of a director, and he or she should be allowed to focus on that job to do it well. To maximize honesty, integrity and transparency, while minimizing confusion and conflict, individuals should wear one hat, and one well-fitting hat only. Recognize, also, that one of the main functions of a board is to hire, to remunerate, to monitor and, if necessary, to fire its CEO, all of which becomes a little awkward when the CEO is a sitting at the table.

Placing staff members on boards understandably creates a pull towards discussion of detailed, day-to-day concerns and issues, wasting directors' talents and time on administrative issues when the board should be looking at the big picture, creating a vision and thinking long-term.

Staff membership on boards usually flows from well-intentioned but misguided efforts to be inclusive and to counter any appearance of elitism. In reality, the staffer/director has been set up to serve a two-headed master with frequently diverging interests.

Others argue that staff membership on boards provides a window for directors to see what is going on in the organization. But the board already has the right and ability to demand any information it needs from senior staff so assigning board seats to them is a superfluous gesture.

Suffice to say that people are not perfect, which is especially evident when groups of people try to work together as one. All the more reason, then, to refine institutions and processes to help people work together at their maximum potential. U.S. governance guru, John Carver, has written extensively on this subject and his Policy Governance® model -- the most logically coherent and consistent governance model yet to be developed -- is being adopted by boards everywhere. To purge inefficiency, failure, and corruption from our system, a more rational governance model must be embraced by profit and non-profit boards across Canada. Fortune magazine recently prescribed board re-engineering as the top remedy for preventing corporate failure. While American corporations might resist any philosophy that jettisons the ego-gratifying title, "Chairman and CEO," Canadian boards could be quietly getting their governance right and striding towards new heights in progress, productivity, and excellence.