24. Ralph Ward: The Rules of the Game Have Changed: Beware the Naked Boardroom

Our guest today is Ralph Ward. Ralph is an internationally recognized speaker, writer and advisor on the role of boards of directors, how benchmark boards excel, and the future of governance worldwide. He publishes the online newsletter, Boardroom Insider, and he editor of the Corporate Board, the nation's leading corporate governance magazine as well as six acclaimed books about boards and governance.  In this episode Ralph talks about how increased transparency into a board’s actions are accelerating changes in behavior in the boardroom and in how boards are composed. 

 

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 Boardroom Insider

Quotes

 

The Boeing Shareholder Case

Boards of directors need to understand that there is a lot more transparency on all their communications. There's a lot more that a good plaintiff lawyer can reasonably look at to determine just exactly how a board of directors acted – personal and work emails and texts for example.  

 

Is the transparency, the additional transparency, the extraordinary transparency that is now available to plaintiff lawyers, is that a bad thing?

 

I think it's a good thing if it's a whip to better board operations and oversight.  It’s forcing Boards to up their game.   

 

As you said, good lawyers have scrubbed the meeting minutes to the point that you really don’t know exactly went on at the meeting. It's really a record created for other people to read rather than necessarily a look at what transpired. So, isn't it holding the board of directors to the fiduciary duty that they're responsible for?

“The reality is that how the sausage is made is not always really a thing that you want everyone to see, but what's important is the balance.”

 

 

Do you think the heightened level of transparency might, in some way, stifle open and honest conversation or deter people from becoming board members?

 

I have an issue of Forbes that has a discussion of director liability issues in it, and the author raised a very good point, "Are we going to make it so dangerous to serve on a board of directors that no one wants to anymore?" And it sounds like a valid point – it was from a Forbes article in 1968. If there has been any overall frightening away from serving on boards of directors, I haven't noticed it."  but what they will do is take a closer look before they go onto a board of directors, do some more digging; what's in the background, what legal issues have come up here, who are the leaders here, what's the current climate in this boardroom, why am I joining the board? Well, because someone left. Well, why did they leave? What was the story behind that? And that's I think all to the good.

 

 

“I think if you ask the question, is it a good idea to avoid "groupthink?" Everyone would give you the right answer. Of course, we don't want "groupthink" in our board or in any kind of group of people that are making decisions. And yet, the diversity of perspective in a boardroom is something that's only really coming in to its own now.”

 

“Serving on a board is not something you do in your spare time and make a few extra bucks. Whatever the size of the company, no matter how small or whether it's a Fortune 50 company, the job is really important to the company and to the stakeholders of that company.”

 

 

Big Ideas/Thoughts

 

The sabbatical in the boardroom (during Covid) I think, really refreshed our governance in ways we never anticipated.

 

Why do we need to get all these folks together every three months in a room for a day or two to make decisions? Why can't we do it as a sort of a bite-sized chunk information. Have this section of the board meet for fifteen minutes online tomorrow, have this committee meet little bitty meetings all over the place, giving them the information, they need on a drip feed basis instead of a 50-pound board book just before the meeting. Why not try that? What could we do? 

 

The reality is that what we’ve learned from virtual meetings, along with the heightened scrutiny, has brought us back to focus on the fact that being on a board is a job and it's a difficult job and a serious job and a time-consuming job.  The reality is that to get the best people with the expertise and the experience and the other attributes you're looking for, you have to go beyond that limited network that you or other board members may have, or people that were former CEOs and have served on boards, and that I think is a positive as well.