Board of Directors Should Act like 'T Cells' in the Body to Protect Shareholder

'T cells' contribute to the immune defences in two major ways. Some help regulate the complex workings of the immune system, similar to the board of directors setting the direction.

It is not just the quality of these CEOs that companies have to be mindful of. Undesirable board members are men or women whose sole qualifications are based on their race, gender and social status. However, in the interest of the company, you need to appoint the best people on its board. These are the people who have demonstrated track records as great CEOs and not CEOs who failed and merely filling the board positions as their second jobs. You also need people who have extensive global experience and overseas connections to understand the demands and challenges involved in the marketplace. If you are a listed company, you need people who have good knowledge of the listing mechanism and stock exchange requirements.

These directors should not be serving on too many company boards, otherwise, they would not have enough time to contribute effectively. Even if they have contributed, the tenure of their appointment should be limited to serve on the board. This is a form of check and balance so that long serving board members do not become too comfortable and complacent with the management, which may not be on the right track. Also, it is important that board members remain impartial and not become too chummy that may overlook any misdeeds by the management.

The board of directors has to understand that they are not paid to do the CEO's job. When they get unduly involved with the day-to-day operations such as marketing, hiring and calling for regular meeting, they can create problems for the company. The main role of the board is to hire and fire the CEO and determine his compensation. They should participate in the major issues such as approving the overall strategy, acquisitions and major capital expenditures. Ultimately, the board must understand that they are accountable to the shareholders. They are not there to run the company but ensure that the management does it effectively.

Many board members are just pew warmers. They do not participate actively during the board discussions or attempt to understand the business issues. Hence, they do not contribute and leave the CEO to his devices. The various financial scandals sweeping the major corporations in the worldwide indicate the lack of supervision and close monitoring of the CEOs by the respective boards.

At the other extreme, we see the dichotomy in the board, between the independent and the executive directors. The independent directors often behave like big bosses questioning the executive officers and executive directors only. Whether they are independent or executive directors, all are directors. In the interest of the company each board member must actively contribute and share his know-how and expertise. It is encouraging to note that the trend in the developed countries is towards stricter corporate governance to ensure that all directors perform their jobs judiciously. The days when directors merely meet to socialise or network and subsequently adjourn for a good meal or game of golf are gone. Directors need to understand a lot more of the business.

They need to take up a more active role in order to function as 'T cells' in the company, protecting the interests of all stakeholders.

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