Mar 29 2019

The Long-term Habits of a Highly Effective Corporate Board

A well-functioning corporate board of directors wields the power to meaningfully influence the purpose, culture, and direction of an organization. This is often among a company’s greatest untapped strategic assets.

It’s hard to focus on long-term goals with so many pressing, market-driven demands for quick rewards and quarterly projections. But companies that prioritize long-term needs tend to outperform peers that bow to short-term market pressure, whether you look at revenue growth, profitability, or job creation.

Corporate boards are vital in helping companies maintain a longer-term focus even while executing on shorter-term priorities. Around the world, the typical board member has actually served longer than the typical CEO—7.7 years compared to 6.3—which gives boards a wide perspective on a company’s current and future path. And board's unique stature, sitting atop the organization, allows them to shape corporate culture through a mix of encouragement, skepticism, and guidance.

However, boards are not immune to short-term thinking. And even those directors most committed to long-term thinking get a lot of misleading and unproven advice. Despite a substantial body of published work on board best practices and good governance, 47 percent of corporate executives report that their boards are actually an unexpected source of short-term pressure and an impediment to long-term strategic thinking. Directors themselves acknowledge they could do more to help the situation: one survey found that 60 percent of directors agreed they have a responsibility to tackle short-termism at their organizations.

This paper reassesses some of the common counsel given to directors on issues like overboarding and CEO–chair duality, where the evidence for long-term value creation is weak or contradictory, and identifies proven steps boards can take if they aim to be long-term leaders with a farsighted vision of corporate success. 

In order to make use of the practical recommendations found in this report, please use our Time Visualization MeterThis dashboard will assess how effectively your Board spends its time and compares that time allocation to industry peers and successful long term organizations:

Time Visualization Meter