Don't let the board get stiff

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The Independent Online
Nick Leeson's release from a Singapore jail coincided with a judgement by Justice Parker relating to the disqualification as directors of three former directors of the Barings Group, the bank for which Leeson worked.

The judgement is scathing regarding the directors' knowledge of the business that they were running and their inaction when confronted with overwhelming evidence that something was amiss.

So what are the lessons for all companies? Directors must question their "comfortable" status and the "comfortable" status of others on the board on a regular basis. Directors need to be dynamic, changing with the needs of the company, or companies will end up with boards that are designed for where they have come from not where they are headed. This applies to smaller family or entrepreneur companies as well as the large multinational holding companies and their subsidiaries. The directors that are on a company board now may not be the directors that are needed to take the company into its next stage of development.

In Closing, The Life and Death of an American Factory, Bill Bamberger and Cathy Davidson tell the sad story of the 100-year-old White Furniture Company in Mebane, USA. The company died, laying off 200 people and affecting the whole community, because of a failure of the directors to understand the essential part they had to play in keeping the company alive. But another family company, Jarrold and Sons Ltd, a printing company based in Norwich and first established in 1770, is still going strong coming up to the seventh generation. Some of Jarrold's success at succession was luck, but the current directors are not relying on luck to ensure that the company endures. Capability at the top, and a realisation that the family interests are best served by capturing that capability, will help the company to thrive. But that may mean that the family control in such companies has to be shared with a professional board - developing a partnership between the shareholders and the board.

The Barings Bank lesson applies to all company boards and is not confined to large companies. The function of the board of directors and the qualities of the directors on the board need to change to reflect the natural dynamism that the company - and the sector it is operating in - exhibits.

Allan Blake is a Management Consultant at the PA Consulting Group's Management Development Practice. His latest book, `Dynamic Directors, Aligning Board Structure for Business Success', is published by Macmillan.