David Brown is managing director of Alvarez & Marsal. This post is based on a NACD BoardTalk publication.
The COVID-19 pandemic required directors to immerse themselves in the weeds of day-to-day decision-making. Small decisions, such as who came into the office and how often, became big decisions as the disruption’s massive shock waves impacted almost every aspect of operations. Now that we find ourselves in a different phase of the pandemic, there seem to be a few disturbing holdover trends from the height of COVID-19 impacting many corporate boards. Here are four of them and what directors can do to maximize their boards’ effectiveness in this time of market turmoil.
1. Too many are involved in the day-to-day operations of the company. Pandemic-related or not, some boards seem to have forgotten their strategic role, inserting themselves into areas squarely owned (and for good reason) by the C-suite. This is especially apparent in cases where an executive retires and takes a seat on the board but can’t leave their former duties alone.
How can you recognize if your board is slipping into management territory? Look for instances of micromanagement, such as board members directly calling on staff to have meetings or to weigh in on issues, or cases where the board sets spending approval bars too low for capital or other expenses. I’ve seen boards require spending approval for as little as $100,000. This added layer of approval will slow speed to value, and, in extreme cases, may disincentivize executives from making smart investments in the business.
The Fix: Hold your executives accountable for decisions about operations and spending. Eliminate non-board meeting communications with them unless there’s a crisis or unexpected event. And then only do so during a called board meeting.