Guidelines and Attributes for Effective Independent Board Leadership

Attributes of Effective Independent Board Leadership

  • A skilled independent leader of the board
  • Effective board processes
  • Rich mix of board skills and experiences, including deep industry expertise 
  • Clear delineation of roles/accountability between board and management

 

Governance Structures That Enhance Effectiveness:

  • Robust Selection Process: In our experience, very few portfolio companies have institutionalized the process for selecting an independent chair or a lead independent director. We encourage companies and boards to adopt a framework that specifies relevant skills and characteristics.
  • The Position Should Be Sufficiently Tenured: A reasonable tenure allows an individual time to develop in the role and build good working relations with management and other stakeholders. We believe a minimum of three years is required, with the prospect of additional terms based on performance.
  • Performance Evaluation of the Board Leader: Independent board members should evaluate the effectiveness of the board leader on a regular basis. Further, the job description should also be periodically reviewed and updated to evolve with market and regulatory expectations.
  • Planning for Succession: Given the importance of the role, boards should plan for an orderly succession of a director serving in the leadership position.

 

Effective Board Leaders Must:

  • Be Good Communicators: Since the role requires facilitating discussions among board members, between directors and the CEO/management, and engaging with shareholders/stakeholders, strong communication skills are necessary.
  • Have the Required Time Commitment: Given the key functions of the position, we estimate that the role requires a significant time commitment to execute responsibilities effectively. Based on our engagement sample, the time commitment can range from one day a month (about 100 hours a year) to 2 days a week (over 800 hours a year). On average, the time commitment is between 300–400 hours a year.
  • Have Relevant Industry Expertise: Independent board leaders tend to act as sounding boards to CEOs. Relevant industry expertise enhances the effectiveness of the individual and reduces the risk of a “management knowledge- captured board."1
  • Have Personal Effectiveness: This includes personal integrity and professional credibility; ability to earn the support of other directors and management; good problemsolving skills; sound judgment and leadership.