The Need for an Independent Board of Directors

Businesses and CEOs require tested, reliable input from outside sources to remain at the top of their game. The best performing businesses receive spot-on advice from trusted sources in the form of boards. Creating the right blend of experience and personalities on a board is not easy because boards come in a variety of packages.

The idea of the CEO as an all-knowing, all-encompassing expert in the “art” of business is not reflective of the real world. Successful CEOs are more like inventors of systems and processes who build teams by utilizing successful examples set by others. As Peter Drucker states, “there are no new ideas…just combinations of old ones.” If the CEO relies only on his or her experiences, the scope is limited. To be in the upper quartile of your industry, a rich reservoir of ideas is imperative.

There are several avenues to getting input. Just be sure to keep the value in perspective. One way may be to tap lawyers, accountants, consultants, stockholders, partners and family. These all have their place, but may represent limitations for the CEO. Typically members of any of those groups have not been CEOs themselves. While they may be good at pointing out what needs to be done, they may fall short of actually knowing how to get it done. They won’t necessarily appreciate the risks and responsibilities CEOs take or understand the art of running their own business. They have a vested interest in your decisions and are prone to tell you what you want to hear instead of what you need to hear.

Other sources of board material are trade associations. There you find out how everyone else within your industry is doing. However, if you follow the pack, you may be destined to mediocrity. If Southwest Airlines operated according to industry standards, they would be hemorrhaging red ink too. To be the best, you must do things differently than your competition.

A recent The Wall Street Journal article (March 3, 2008) discussed how a “board of advisors can help steer small firms to (the) right track.” Boards comprised of seasoned individuals sporting different business backgrounds can offer a fresh and independent look at the way your firm does business, contributing insights that tell you something you didn’t already know.

Where can you find unfettered advice and ideas from different kinds of people? Bill Gates and Warren Buffet get together and compare notes. Their common thread is that they both practice the art of business and are successful in doing so. Gates just happens to make software while Buffet does a little of everything.

Another information source for the CEO is the TEC (The Executive Committee) model of an independent board of directors. CEOs from different businesses sit down and work collectively on each other’s business opportunities and challenges. Up to 15 CEOs gather, possibly representing hundreds of years of career experience. Estimates indicate there are more than 15,000 executives who participate in TEC groups. They meet monthly in small groups to help one another. Each CEO brings different skills and experience to the table to share.

Be it TEC or an alternative, the benefits of an independent board of CEOs will help you stay on the right track while perfecting the art of running your business.

If you have comments or questions about this article, or would like more information on this subject matter, please contact us.
Michael Poole

Investment Banking
mpoole@pcecompanies.com
Orlando Office

407-621-2100 (main)
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