What purpose does a Board serve?

Interesting questions and comments Tony. For me the purpose of the board is ‘to steer’ (etymology of the word govern). That’s what they thought in Hellenic times, although there were no boards back then. But the way our species organises itself is that every tribe has its leadership structure. From the centipede to the board (whatever structure is mandated depending on region) To steer you have to know where you started from and where you’re going to. And you have to make sure that your crew and ship can safely and soundly handle whatever seas (heavy or calm) that uncertainty throws at them. Of course then there’s the question of navigation. How good is the information you’re relying on to tell you where you are, and what your options are going forward.

Answers to the questions, “Why boards?” and, “What purpose do they serve?” can be found in the phrase ‘to ensure the ongoing performance of the company’, I think. The board needs to define what it means by ‘performance’, how it will be measured, and ensure that available capital (social, environmental, economic) is used wisely over time. Ultimately, economic capital matters most (shareholders are the residual claimants, after all), but not to the exclusion of other capitals.

Great post Tony! And then we can complicate matters more by adding the 3 dominant governance flavors: Anglo-Saxon (one-tier Board), European (two-tier Board) and Chinese model, but to me it boils down to leadership effectiveness. Small start-ups don't "need" Boards as the entrepreneur is the "centipede", but with the maturing of the organization and the introduction of capital new stakeholders need to be managed, which often exceeds the reach of the "leader"- and in larger organizations, a "countervailing power" is useful to balance short and long-term perspectives and foster the quality of decisionmaking. My concern is that there may not be a single "Purpose"of a Board, but rather a Purpose within a certain context. If a company is in (digital) transformation it may require different members with different experience to provide the proper governance in that process, whereas a company entering a merger may require an entirely different set of eyes to render effective governance. We wouldn't accept a lung specialist to oversee a heart operation now, would we? So accountability and responsibility are "container" words that are very context-sensitive and our governance models are still designed to "hand-over" these important "matters of trust" to individuals without knowing their individual, let alone their combined leadership effectiveness in such governing bodies. In soccer there's a much more effective assessment model: every team wanted Alex Ferguson or Bobby Robson as their coach gave their successful track record for success. In business IMHO there is no such thing as the measurement of leadership impact on the collective team and corporate energy whereas we all are inspired by the great leaders in this world that have built legendary brands and should come up with a code, like GAAP in accounting, by which leadership and governance effectiveness become an objective number so our company purpose in a transformation period may perhaps require leaders that excel on different objective scores than in a post-merger integration period and that communicating about this with other stakeholders will be less of a black box / voodoo experience but can be "predicted" like sales and earnings in the pre-COVID-19 period (which seems like a lifetime ago). Our quest for good decisionmaking will never stop and only become more data-driven in years to come and Boards that are keen to embrace this opportunity, but also acknowledge the new risk that data introduces to their radar screen, will be the Boards that will manage to better differentiate emotions from facts and "manage their luck", rather than be "caught by surprise". In the end, it's all about perspective vs perception and working with data gives an objective starting point for a conversation, I gues :-)

David Styles