When you get the opportunity of being a board member, you realize how boardroom politics is the number one killer of businesses. The most ineffective Boards are NGOs and public entities. These organizations have board members just for window dressing. They want to project a picture of being ‘well governed’ to access funds or financing.
The biggest joke is the fact that most CEOs handpick most board members.
If you are a Board member in some organization, it is likely that the managing director invited you to sit on the Board. Although these positions attract no salary i.e. they are voluntary, they come with lots of perks. For example, I know of a company where the sitting allowance is about Ugx. 3,500,000 per hour of sitting per person! With that kind of untaxed allowance, does one really need a job?
This is modern day corporate politics by the top honcho. Give good allowances to the members so that they shut up. That is why, in many cases the company secretary will give out the allowance money in cash (usually after approval by the managing director) at the end of every sitting.
Some public entities will provide freebies like mobile phones, airtime and fuel to the Board Chairman or any chair of any of committees of the main board. Whether one is rich or not, freebies remain gold. Plus the reputation that comes with being a board member of [xx] company, one will want to remain in good books with the CEO.
The tendency of being loyal to the CEO, instead to the shareholders, makes majority of boards ineffective. If no one can raise any tough question to the CEO, who will?
One eyed man
Another biggest governance joke is having one person sit on different boards. It is so bad in Uganda that it is common to find one person sitting on over 10 different boards. How can such a company get fresh ideas from the same folk?
Yes, we need board of directors that can speak the ‘politics’ of business, fix ‘strategic challenges’ and bring big business. But you need to mix them for long-term sustainability. These folks in retirement, or nearing there, don’t have time for business sustainability. They are more focused on ‘harvesting’ or retiring their investments than ‘growing’ the business. They are more focused on the present than the future success of the business.
Plus the top business drivers are information technology, information security, human resources, and fraud management. All these are things that change often and need fresh insights from people who read a lot of current stuff.
For best results, the regardless of your business or industry, the average age of your Board of Directors should be 35 at minimum. This ensures mentorship and business sustainability. Otherwise, seemingly easy decisions will take time. As the folks cannot comprehend the concepts.
Look forward to reduced influence of the CEO on the board. This can come if the guys on your board are young, financially stable and very ambitious in their own right.
I sit on the Board of a certain institution [I never indicated it on my LinkedIn profile, so don’t check]. I was appointed about two years ago. Looking back, I don’t see the value I have added. This board can drive you nuts. Seemingly easy decisions will take ages to get through.
We are 15 board members, of which 10 are non-executive directors. I am also the company’s audit committee chair. Of the 10 NEDs, I am the only one below 35 years. All of these folks are 58 years plus.
There are simple things that have made my life difficult, and I don’t see them being fixed soon.
$ Although Internal Audit reports show the company is losing over US $8,000 monthly average to fraud, there is no clear strategy to mitigate the problem. Internal audit is not resourced and provided with the right tools and skills to undertake independent review of the institution’s ICT security posture. And the IT guys know that Internal Audit does know anything IT. Considering that majority of the reported frauds are IT related, the problem could be internal than they think! I suggested the company empowers the internal audit team with tools and practical training and got resistance that they can outsource. And so you’ve an outsourced firm being paid over the roof for a one off job which your internal audit would do monthly if you invested the same money is critical training and investigation tools. How can an internal audit of this day and age ask “for a print out of an audit log?”
$ Many of our board meetings are ‘brain storming sessions’ instead of decision meetings. These people will not give you the options available and the decision they need the board to take. They want you to think for them. That will be another day of hearing everyone’s commentary on the issue and it becomes so boring other folks will say things that reveal their stupidity and lack of attention to detail.
Lots of tea and eats. These days the meetings are increasing, and it is becoming a party instead of a board meeting. You’ll spend a lot of time in break first and then lunch. Other members will slip off, and at the most recent meeting a member begun snoring. I am just realizing that the MD makes it intentional to delay contentious issues later in the meeting after these guys have had heavy lunch. By the time the issues come up, everyone is tired and wants to go. They just say, pass!
I used to admire being a Board member until I got an opportunity to become one. Of course there are few companies where you can provide insights to grow the business. I look forward to being on such boards. Once I see you have more than 15 members, I get concerned. I don’t think you can take great decisions with such big numbers.
Otherwise, most boards are not effective. And there is no accountability on the board, other than reporting on their attendance.
There is need for better evaluation methods to assess the effectiveness of each board member in terms of their key deliverables. Hiding behind the cover of risk management and oversight is not enough. There should be something concrete. Otherwise, it is another window dressing project.
Copyright Mustapha B Mugisa, CFE. 2013 All rights reserved.