How To: Evaluate a Corporate Board

What does an exceptional corporate board look like?

To help current and aspiring directors answer that question, Stanford Women on Boards has developed Leading-Edge Stewardship, a series of videos presented by experienced board members, many of them GSB graduates.

It also includes a detailed roadmap for assessing where boards are on the journey from “historic” and outdated practices to an “aspirational” approach that builds on good governance and emphasizes long-term, sustainable value. This comparison tool was cowritten by Linda Riefler, MBA ’87, and Mayree Clark, MBA ’81, with contributions from Maria Frantz, MBA ’94, Bess Weatherman, MBA ’88, and other Stanford alums. Some snippets:

Board Composition

Historic: The typical board member is a “yes-(wo)man” and friend of the CEO who wants to be part of an elite club. Candidates are identified based on their anticipated allegiance to the chief executive and the stature they may bring.

Aspirational: Board composition is seen as a driver of value creation. Each board member brings unique capabilities and perspectives to create a greater whole. Diversity is sought by recruiting from a broad pool of candidates who will contribute to high performance.

Board Leadership

Historic: The board is led by one person who functions as chair and CEO. There may be a lead independent director, but they are weak.

Aspirational: The chair or lead director and committee chairs provide leadership.The chair or lead director takes responsibility for board performance and works closely with the CEO.

Anticipating Risk

Historic: The topic of risk rarely arises in board discussions.

Aspirational: Board and management teams prepare for emerging risks and unknowns.

Engaging with Stakeholders

Historic: The board follows the stock price and doesn’t see the community or employees as important constituencies. Management is mainly attuned to immediate feedback from investors and analysts.

Aspirational: The board and management team are aligned on comprehensive, proactive engagement with stakeholders. Stakeholders are respected partners who provide input to the board and management’s thinking.

Understanding Technology

Historic: Not on the agenda.

Aspirational: The board routinely considers the impact of technological developments. Board members are fluent in the use of technology across all dimensions of the business.