Industry experience is important and its needed presence on a board is reasonably obvious.

However the problem is when a board is composed of predominantly industry-based directors. There is not enough "outside" experience that can bring lateral and 'out of the box' solutions to the corporation.

Using the argument of enhancing industry experience to enhance performance, one might argue that corporations composed solely of industry-based directors should outperform those corporations with fewer industry-based directors. This is demonstrably incorrect. Performance to circumstance and challenge is context specific.

Surely the directors' role is to not only know the corporation's industry (that's a given) but should also have experience in bringing solutions to the corporation's context. This may or may not require specific industry knowledge. Some of the issues may require knowledge of value-chain, HR, IT, up-stream and down-stream management, financial systems, compliance, governance and so on. These are not necessarily industry specific issues although they may be.

As an analogy, there are two types of strategists: those from within an industry with extensive experience of it; and those strategists who work in all industries and understanding how stuff is done elsewhere and can import a valid solution.

The problem with the first type is they think 'like the industry'. If they were so effective, there would be no problems in those industries in which they are found because they would have solved the problems. A strategist is a tactician who has experienced other approaches to problems and knows what does work, what can work and what doesn't work.

Directors are the same.                                           

Remember that sustainability and social responsibility, as noble as they may each be, are "merely" enablers for the core purpose of the organisation - i.e. the satisfaction of owner objectives (most commonly wealth generation in some form.)

I have seen scores of corporations that forget the reason they exist and invest shareholder funds in activities that are noble but unnecessary.

The corporation must abide by all legislation and regulation. Beyond that they MUST get shareholder approval.

There are two dimensions of trust here: trust by owners/investors in management to deliver the outcomes sought by the investors; and trust by owners/investors that management will apply robust strategies/methods that will optimise the cost / risk / benefits algorithm to investors in achieving those outcomes.

Corporate Governance doesn't affect the first and only partially affects the second.

Trust therefore, becomes critical - yet there are scores (thousands?) of examples of breaches in the first dimensions and equally in the second dimension of trust.

In order to improve the situation for investors, one must LOWER THE RELIANCE on trust. To do this one needs to make the first dimension less subjective (management's) and the second dimension more transaparent so that executives are held to account for delivery of the first dimension metrics.

Without knowing what shareholders want in measurable and quantifiable terms, having robust governance is almost pointless....and no listed corporation really knows what its shareholders want.

Intuitively one would expect that small organisations with few shareholders are more “in-touch” with their owners’ objectives than larger organisations. One would further expect that the larger the organisation and the greater the number of shareholders, then the less able the organisation is to keep “in-touch” with all shareholder objectives.

Unfortunately, experience and reality show that companies, irrespective of size, are not immune from the lack of congruence between owner objectives and corporate actions.

The majority of companies are small businesses who have one or a small number of people carrying out the roles of managers, directors and owners simultaneously. One would expect that since one person carries out all three roles then “knowledge” would be “perfect” and congruence would be maximised.

Most small businesses actually have difficulty in ensuring congruence because they are too involved in operational management. It is easier to change the objective than to change the operational, marketing or business realities that threaten incongruence.

Generally boards and management of large corporations maintain that since they have many shareholders with varying objectives and they can’t effectively ask shareholders what they want; the board has the responsibility to define the core deliverables of the organisation. These deliverables are intended to keep shareholders satisfied. For reasons identified earlier, such presumptions by boards are often misplaced because they are subjectively derived. The demonstrable fact is that many (most?) corporations do not know what their owners want in any realistic, practical and measurable way.

In the case of medium size companies where management may be divorced from directorship and/or ownership, it is common to find organisations intent on striving to maximise generic outcomes rather than satisfy specific owner objectives. Certainly, a large part of this lack of congruence is caused by management failing to ask owners what they want; but equally at fault, are owners who have not made the effort of telling management in realistic and measurable terms what it is that they desire from their involvement in the company.

Very few companies, irrespective of size, really know what their owners want. In the case of small business, the owner/manager has rarely defined what it is that is wanted so that it becomes the principal driver of business performance.                  

It is impossible to determine a universal rule for "what goes into" a board report and "how much detail" is provided.

Communications to the board, much like all communications, involve three core elements: the specific understanding of the recipient; the nature of the material; and the context of the sender.

If the board is unfamiliar with the content, then more information is required sufficient to give them the ability and confidence to resolve/adjudicate the issue.

If the material is "unusual" (e.g. an acquisition when the directors have never made one, or a new plant when the directors have never embarked on such a project, or off-shoring when all the previous activity had been on-shore), then it is reasonable to expect greater detail. Similarly, if there is a significant financial or risk dimension , then you should reasonably expect directors to want to fully understand the issues and that may require more information.

If the board has little "confidence" in the author or sponsor of a proposal (e.g. may be recently promoted, recently hired, etc), then the author of the report may need to convice the reader that there is a mastery of the issues. Where the author/sponsor is long-experienced and well known to the board, then such length may not be required.

To suggest a universal right or wrong way to write a board paper, and what to put in it is somewhat naive.

"Activist Investors" is not the same as "Active Investors". The former generally act for all shareholders while the latter, generally act in their own interests. The two are often confused.

As long as directors and managers "proxy" ownership of the corporation away from shareholders and to themselves (but leave the cost and risk of ownership with legitimate shareholders) then it is reasonable to expect those shareholders to agitiate against the board and management. It has been long demonstrated that both directors and managers act in their own self interest.

Sloppy board papers may indicate incompetence or recklessness. However it may indicate a number of other things also.

1. The paper may have been written by someone whose first language isn't English (or the language of the board). This may obscure the validity of what they are writing.

2. The writer may have a disability - I know many brilliant entrepreneurs who are profoundly dyslexic (one of whom is now being offered in excess of $1.5 billion for his business which he built from scratch. They generally don't have the ability to write board papers (from a spelling and grammatical perspective).

3. It may provide insights into the approval process within the business and identify deficiencies in the oversight process.

4. It may also possibly identify aspects of corporate culture that are dysfunctional - such as people deliberately letting material get to the board knowing that the writer will be severley treated or regarded (i.e. malicious saboutage).

I've seen all of these instances in my client organisations.

Although shareholders should provide both positive and negative feedback, the reality is that the majority of shareholders are unlikely to make the effort. That does not mean they don't care about outcomes - they do - that's why they put down real money into the company.

The problem, in my humble opinion, is not with shareholder inaction, but with boards and directors. The for-profit corporation exists for the benefit of shareholders while satisfying legal and stakeholder requirements. If that is the case, then why is it that not one single publicly listed board has asked all of its shareholders what they want as a result of their investment?

You are right that shareholders have differing expectations. However, if you establish a company's shareholder metrics, (i.e. bell-shaped curve - value, benefit, growth and risk expectations) then the range of shareholder expectations prior to establishing those metrics will be wider than post-metrics. If you monitor the changing shareholder objectives over time, it will enable a much better match between corporate aspirations and owner aspirations. This is because people will invest in those companies that "share" their objectives, i.e. the company will pursue those outcomes that the majority of its shareholders want, therefore you will invest in those companies that want what you want. Over time, the outliers diminish.

The challenge for both the board and management is to resolve the dilemma of different objectives and perceptions in a way that satisfies the owners. Currently, both board and management establish a policy and a direction for their company without a real knowledge of their shareholders’ objectives.
The Shareholder Metrics process provides them with better information but does not absolve them of their responsibility or accountability.

Where they perform the task well, and satisfy many/most shareholders, then those shareholders will value that stock more highly and are less likely to quit the registry. Conversely, where board and management fail to satisfy shareholders then they will quit the registry, change the board, or change management. Isn't that the ultimate assessment of whether shareholder approve or disapprove of management performance?

These three options are currently available to shareholders (albeit some more easily achieved than others).

Over time however, it is anticipated that it will become easier for the board and management of a shareholder-centric company to solve the above dilemma, as the Investor Profile will ensure that extreme mismatches between differing owner objectives will occur less frequently.

Finally, and for whatever it's worth, I don't believe that shareholders trust directors and managers, even if they concede that both are well meaning and try to do their best. The trust is lost because of director and management subjectivity, bias, assumptions and arrogance.

If you provide additional tools to "aid corporate governance" then you will probably use the tools to make boards and management more accountable. Directors are the ones who would approve the use of such tools thus are unlikely to approve them since it would make their life more difficult and more transparent.

I have first-hand experience with this - it's a catch-22 situation - very sobering and very depressing.

When one talks with chairmen, directors and CEOs about "in the shareholders' interest" I am amazed that they subjectively decide "what the shareholder will get" and not what the shareholder wants - they don't ask their shareholders. Their actions do not match their rhetoric - and generally, perhaps with well-meaning intent, as a group, they are profoundly arrogant in their myopic view of the "value to shareholders" algorithm.

Furthermore the various director associations have more great inclination to support such worthwhile enhancements for the same reason.

Such tools are needed but unless governments impose such accounatbility, it's unlikely to happen - despite its need.

Maybe the question here is not so much "should board meetings be recorded" but rather what effect does recording have on board effectiveness?

Leaving aside the legal considerations, which are important, one might argue that if  full and frank discussions cannot take place, then decisions might be different to those had that information been presented. I suspect that a board member might be reluctant to discuss in a full and frank manner if he/she believes that those words may lead to either legal, personal of industrial implications. This may impact outcomes. As official minutes are generally santised, such problems occur much less frequently in a purely written form. Therefore I have no doubt that in many instances, recordings may hinder board effectiveness.

The other context is when a board takes poor minutes and has experienced many disputations about what was actually said and agreed at a meeting. Recordings may certainly help corporate memory but may hinder personal contribution for reasons mentioned.

I feel however, that verbal presentations made to the board by non-board executives might be recorded because the entirety of the presentation is the "evidence" upon which the board relies, deliberates on and uses to resolves matters. Opinions, comments and other statements made by executives in support of a view are important to the resolution of the issue in hand. The problem with this however, is that honestly in such statements may also be stifled as with board members. The fear of "retribution" within the organisation for honest (but not necessarily accurate) statements is a real influence on subjective decision-making.

1. How far or deep can a board of directors get involved in judging or influencing the leadership style and the leadership activities of its CEO?

The answer of course is that "it depends." Let us accept firstly the premise that a board appoints its CEO to fulfil certain tasks and to achieve certain outcomes. If the board is rational and competent, it determines the leadership and management skills and attributes needed to satisfy the board's objectives and appoints the best person it can afford who possesses those attributes to the rol. The reason is because such an appointment lowers appointment-risk and increases the likelihood of successfully achieving that which was intended.

Of course, if the board doesn't behave rationaly or competently, then the appointment may be sub-optimal or fail.

When we talk about "leadership and management skills" we inevitably include leadership style and "activities" or management practices. These too vary with the context.

The leadership style required for a predominantly "left-brain" organisation is different to one which is predominantly right-brain. Similarly, what you do and how you do it, from a leadership perspective, will vary, for example depending on whether you are changing an organisational culture, process or other corporate attribute very quickly or slowly (i.e. "big bang" change versus "continuous improvement".) Management style for revolutionary change is quite different to a "steady as she goes" type of change agenda.

To each of these myriad of contexts is applied a "management style" that will work best in that context.

If the CEO doesn't posses in his/her skill-set an ability to apply the optimal "style" then a sub-optimal outcome will occur. Sometimes this sub-optimal/dysfunctional approach can be very painful for an organisation.

The board's role, among other things, is to monitor CEO behaviour and performance. If sub-optimal leadership strategies are being applied within the orgaisation, the board, through the Chairman, should discuss the matter with the CEO in order to understand the issues: why did the CEO use that technique; is the CEO aware of the ramifications of that chosen technique; is the CEO capable of utilising the optimal strategy, etc

If the CEO doesn't satisfy the Chairman/board that they will/can remediate the situation in an acceptable time-frame, then the board may consider this one of the triggers that starts a search for a new CEO.

Remember that a CEO is meant to be "an expert" in dealing with and satisfying the challenges facing the organisation and for which that CEO was appointed. Board "involvement" and "influence" should only be applied when warranted, and that is a very subjective decision.

Unless the board is mature and knowledgable, then they too may misjudge the situation and impose themselves unjustifiably on the CEO when he/she is quite capable of handling the issues.

2. To what extent HR matters ( usually the domain of the CEO) can be treated on board level? 

The importance of HR will vary depending on the corporation, what it does and how it does it. I don't know of any company however that doesn't require people - so the importance of HR, culture, industrial relations, and so on will vary depending on context.

When the management of HR or HR-related issues threatens to destabilise the company, force the company to take on unjustified risk or expense, or when the issue threatens to  tarnish the company's reputation and ability to sustainably transact its business; then the board must interfere to ensure suitable remedies, strategies or solutions are in place. That doesn't mean that the board has to do it, but rather that it is done. If internal staff can't do it, then it's the board's responsibility to ensure that competent outsiders are brought in to "fix it".

3. What are tasks of board committees?

Each board committee (e.g. Audit, Finance, etc) has its own "agenda", own timelines, and its own objectives. The tasks therefore vary depending on those variables.

4. In what way is CEO to be involved in choosing his own successor etc?

It will vary from context to context. If the CEO has been successful, respected and is, say retiring on good terms or has been head-hunted into a new prestigeous role, then I suspect he/she will be actively involved in their own replacement.

If on the other-hand the incumbent has failed in his/her role, why would a board seek his/her involvement in the replacement?