EXTERNAL DELIVERY - 5 Topics Your Board Needs to Discuss Immediately

Last week, this magazine’s Executive Director, Dan Marino, asked me to comment on an article titled 5 Topics Your Board Needs to Discuss Immediately by Patricia Lenkov that was posted on CEO.com. Ms. Lenkov serves as Chair of the Executive Search Practice at N2growth, a global leadership consultancy with practice areas in leadership development, executive search, strategy, culture transformation, organizational design, and executive coaching. The following are my comments on her 5 topics. I hope it provides some insight!

Social Media – This is the group of online channels that focus on community-based input, interaction, and collaboration. What most Boards are missing today is the critical importance of marketing and selling through social media. The days of primarily selling goods and services through radio and television spots and print advertising are over. Today, Millennials (people aged 18-34) and Generation X (people aged 35-50) are quickly moving toward social media for information on products and services. Marketers understand this and are now developing content marketing strategies to capture and retain loyal customers. If your Board is lacking the knowledge and experience in social media, strong consideration should be given to bringing in an outside director who has experience in this area.

Diversity – I have been asked on more than one occasion if I believe having diversity in my company or Board is more or less important than having the best people in the company regardless of ethnicity. My philosophy has always been that if you hire the best people regardless of ethnicity, diversity will take care of itself.

Succession Planning – This is a process that I call the “insurance syndrome.” No one ever goes out on a regular basis to shop insurance policies. People price insurance only when they need it. Same for succession planning. This necessary Board activity seems to only gain attention when the CEO departs either by choice or no choice. Then the Board and the company are leaderless, and the results can be disastrous.

Board Effectiveness & Evaluations – I have never seen a Board that conducts an E & E review of themselves. Outside directors are brought on because they have certain skill sets that are valuable to the company. The problem is that the business world goes through changes and priorities and focus must change with it. Those changes often leave a Board with the wrong skill sets. As one example, take Topic 1 (Social Media). The marketing world has changed significantly over the past few years. The Board member whose expertise is in print media, although a real asset 10 years ago, is non-effective today. So the Board has to make the necessary changes to pass the Effectiveness Evaluation test.

Compensation – This is a topic that is never ending. How can a Board justify compensating a CEO millions of dollars for failure? Why is it that the CEO’s compensation isn’t performance based? Maybe it’s because the CEO has formed a Board of “good old boys” who take care of each other. One of the things that the SEC enacted in 2015 was a requirement that all companies listed on the NYSE and NASDAQ that utilize outside compensation consultants be deemed independent according to six independence criteria. It’s a step in the right direction, but not a total solution.

Patricia Lenkov’s full article can be read at http://www.ceo.com/business_and_government/5-topics-your-board-needs-to-discuss-immediately/.

To view this issue and all back issues online, please visit www.drug-dev.com.

John A. Bermingham is former Executive Vice President & COO of 1st Light Energy & Conservation Lighting, Inc. and former Co-President and COO of AgraTech, a biotech enterprise. He was also President & CEO of Cord Crafts, LLC; President & CEO of Alco Consumer Products, Inc., Lang Holdings, Inc., and President, Chairman, and CEO of Ampad, all of which he turned around and successfully sold. With more than 20 years of turnaround experience, he also held the positions of Chairman, President, and CEO of Centis, Inc., Smith Corona, Corporation, and Rolodex Corporation as well as turning around several business units of AT&T Consumer Products Group and served as the EVP of the Electronics Group, and President of the Magnetic Products Group, Sony Corporation of America.