Magazine article Strategic Finance

Managing Boardroom Challenges

Magazine article Strategic Finance

Managing Boardroom Challenges

Article excerpt

The growing complexity of today's businesses, rapid technological changes, globalization, and increasingly assertive investors have made the role of corporate boards more challenging than ever. The success of companies today depends on the ability of their boards to navigate them through these challenges. The Future of Boards, edited by Jay W. Lorsch, is a collection of eight essays covering the most important challenges corporate boards face today. Key topics include the role of boards in strategy formulation and implementation, CEO succession and compensation, group dynamics within the boardroom, independent chairmanship of boards, and the concept of lead director.

In the essay "Focusing on Strategy to Govern Effectively," Krishna Palepu, a Harvard Business School professor and leading expert in business strategy, opines that strategy formulation and implementation is the responsibility of the company's management, and the board may not have the necessary expertise and time to get deeply involved. The board, however, shouldn't passively approve the strategy presented by management. Instead, it should actively review the underlying assumptions and implications and monitor the implementation. Palepu outlines a basic framework for strategic engagement that can help board members actively engage in discussions related to their company's strategy.

One of the most important and challenging responsibilities of the board is to plan CEO succession. Joseph Bower, Harvard professor and author of The CEO Within: Why Inside Outsiders Are the Key to Succession Planning, mentions in his essay, "Managing Your CEO's Succession," that the best way for any board to manage CEO succession is to make sure it doesn't have to choose the CEO's successor. The job of identifying potential successors and mentoring them should be done by the CEO and management. …

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