The Importance of Board Composition

Board composition has garnered a lot of attention in recent years as investors focus on the important role board directors play. Boards are comprised of people who bring their individual abilities, expertise, and network to the table. But the main purpose of any board is to work together as a team to monitor the performance of the company and help the CEO.

To achieve this goal boards must be well-equipped and structured to accomplish its mission. Often, this is achieved by building a robust team that can find the truth and be a sounding board that is critical.

In general, it is recommended that boards have an equal number of new board members as experienced directors to provide a balance of knowledge and perspectives. To attain this, it’s essential to establish an objective framework that allows the nominating committees as well as the board to assess the qualities, skills and talents needed to be the ideal candidate for director positions.

A common tool is a matrix of the board that contains individual traits that can help to guide the selection of board candidates. It is important to keep in mind that the mere fact that someone has certain characteristics, does not mean that they are the best fit for the job.

A specific kind of obstacle to changes in the composition of the board can arise in relatively new organisations that are dominated by one or more founders who believe they have the best idea and do not want to take on the risk of change. This can lead to «founders syndrome» where the nominating committees don’t recognize the need for new talent and a fresh look at the composition of the board.

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