At our Private Company Governance Summit in June, the conversation at my lunch table turned to the nature and scope of board agendas. While the agenda signals what the company finds important, my lunch companions and I felt that how the agenda is set and by whom were critical issues that were not always sufficiently discussed. For companies, both public and private, many agenda items are consistent and occur on a regular cadence. For example, a board may assess executive talent every September and set executive compensation every February. Special items, such as an acquisition, are inserted as they arise.
For items that are neither reviewed annually nor time-sensitive, it is imperative to not allow the nonessential ones to crowd out the important ones. At our conference, Carey Oven, national managing partner for Deloitte’s Center for Board Effectiveness, reviewed responses to questions about director priorities from the Pulse survey Deloitte conducted in partnership with Private Company Director. Unsurprisingly, strategic planning was the highest priority for directors. And yet, 46% of directors still felt it needed more time and attention.
Private company boards have the flexibility to place more emphasis on strategy assessment. For their public company counterparts, compliance-related items, although necessary, can consume scarce board time. Private companies, bound by fewer regulations, have more time to devote to assessing the company’s strategy on a regular basis. Some private company boards I know intentionally discuss strategy at every meeting while still recognizing and respecting the boundaries between management’s role of formulating and executing the strategy and the board’s role in assessing it.
Several directors attending our conference noted that while their chair sets the agenda, in many family businesses where one person holds both the chair and CEO role, the chair frequently partners with an independent director (usually either the lead director or chair of the governance committee) to create it. While not as prevalent as in public companies, many private company boards also institute executive sessions with only the CEO and independent directors to better stimulate discussion and guidance from independent directors. This is important, as it is frequently the independent directors who question legacy businesses and assets. Or, in the words of Don Yee, a member of the Private Company Director editorial advisory board and a director of numerous companies, independent directors are sometimes needed “to say there is an elephant in the room.” By having an independent director partner on the agenda or by utilizing executive sessions, a private company can better unlock the value of independent directors.
Other boards solicit feedback on the agenda a week or so before their meetings, but also start off those meetings by asking if any directors have topics to add. This approach, combined with a carefully constructed agenda, can engender buy-in and uncover necessary topics.
In this issue of Private Company Director, we’ll explore what should be included on the board’s agenda. But just as important is how the agenda is set and by whom.