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Ten things for boards of directors to avoid

Deloitte receives a number of client questions regarding leading corporate governance practices that can help boards of directors be more successful in carrying out their duties. Recently, several directors took a different tack and asked us what they should avoid doing. In formulating a response, we looked to the experience of our professionals anddeveloped the following list of ten activities boards should avoid to improve effectiveness in the boardroom. This list is not all inclusive, and there may be other considerations for the board.

1.

Avoid presentation overload
Presentations should not dominate board meetings. If your board meetings consist of a scripted agenda packed with one presentation after another, there may not besufficient time for substantive discussions. The majority of board meetings should be focused on candid dialogue about the critical strategic issues facing the company. The advance meeting materials should comprise information that provides the basis for the discussions held during the meeting. Management should feel confident that the board will read these premeeting materials, and the board mustcommit an adequate amount of time in advance of the meeting to do so.

2.

Avoid understating the importance of compliance
There is no room for a culture of complacency when it comes to compliance with laws and regulations. As noted in the Deloitte publication Questions That Boards Should Consider Asking Regarding Ethics and Compliance Programs, building a culture of ethics and an effectivecompliance program within an organization is a business imperative. From the mailroom to the boardroom, everyone should adhere to the same high standards of ethical behavior and commitment to compliance.

3.

Avoid postponing the CEO succession discussion
CEO succession planning is one of the primary roles of the board. With the changing governance landscape and new and proposed regulations, theboard has a full agenda these days. However, it is important to occasionally take a step back to ensure the board is addressing this important responsibility. During this time of rebuilding and prior to the implementation of new regulations, boards should assess where time is being spent and perhaps redirect focus on succession. It is important to note that the succession planning process iscontinual and doesn’t end when a new CEO is selected. As the company evolves, its needs change, as do the skills required of the leadership team. The board needs to ensure that a leadership pipeline is developed and that its members have ample opportunity to connect with the next generation of leaders.

4.

Avoid the trap of homogeneity
The topic of board composition and having the “right” peopleon the board continues to receive much attention. The SEC has proposed rules that would require more disclosure about director qualifications, including what makes each director qualified to participate on certain board committees. The shift to independent board members facilitated a move away from a “friends on the board” approach to a new mix. However, the board needs to assess whether this newmix translates into a positive and productive board dynamic. Boards should take a closer look at the expertise, experience and other qualities of each member to ensure the board that can provide the right expertise. Diversity of thought provides the perspectives needed to effectively address critical topics, which can contribute to greater productivity and ultimately a stronger board.

As usedin this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.

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Avoid excessive short-term focus
Perpetual existence is one of the principal reasons for the initial development of a corporation. However, recent history offers many examples of modern...
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