FCLTGlobal has convened member executives on the topic of next-generation corporate board governance throughout the first half of 2024, including in a session at February’s FCLT Summit, CEO roundtables in April and May, and a working group earlier this month. Members have been clear in each gathering that there is no one-size-fits-all solution to designing corporate boards. Companies’ time horizons, appetites for growth relative to risk, and directors’ relationships with management are all distinctive. Future-fit boards are those that match strategically with companies in these terms.

 

1. Clear Remit: Do your executives and directors have a shared understanding of the board's role?
Do you have a clearly written statement of the board’s objectives and role that serves as a foundation for board discussions?
Is it clear to directors whose interests they represent (e.g., shareholders, employees, country, etc.)?
Do directors have sufficient independence from management to represent those interests?
2. Competitive Advantage: Would you consider your board a key long-term competitive advantage of your organization?
Is your board seen as a forthright, problem-solving partner to management?
Have board members established strong working relationships with one another?
Is board effectiveness being measured, discussed, and used to improve continuously?
3. Effective Leadership: Does the chair set the tone for the board?
Would board dynamics and culture represent the company well on the front page of the newspaper?
Is your board chair effective at handling challenging issues?
Have you considered the trade-offs of combining or separating the CEO and chair roles?
Does your board have a CEO succession plan in place for smooth and for unexpected scenarios?
4. Strategic Focus: Are you investing to pivot toward new profit streams and manage future disruptions?
Does your board spend most of its time on strategy and capital allocation rather than routine matters?
Does your board review long-term (3+ year) strategic roadmaps?
Does your board ensure that CEO compensation aligns with execution of the long-term strategic plan?
Do you use committees for discussing routine matters, such as periodic earnings?
5. Board Expertise: Does your board have the depth and breadth of skills, expertise, and experiences to make durable strategic decisions?
Is your board resourced to make these decisions?
Does the size of your board encourage both responsibility and active discussion?
Does your board promote critical thinking and avoid groupthink?
Are there tenure limits, age limits, or other mechanisms to ensure board renewal over time?
6. Long-term Mindset: Does your board have a long-term ownership mindset?
Are board members motivated by a sense of ownership to serve the corporation?
Do your board members have meaningful equity ownership?
Do your board members have at least a 5-year holding period for their equity ownership?
Are significant investors represented on your board?

Boards of directors are the key to long-term value creation – strong governance provides the foundation for success. As we build upon our work on the attributes of a “future-fit” board of directors, view our library of resources on long-term governance to learn more.

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The Long-Term Habits of a Highly Effective Corporate Board

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The Myth of the One Size Fits All Board

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15 April 2024 - There is no one-size-fits-all solution to designing corporate boards for long-term value creation. Recognizing and understanding that choices are available is the first step toward making longer-term choices and establishing next-generation board governance.

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Time Visualization for Corporate Boards of Directors

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