Corporate boards are vital in helping companies maintain a longer-term focus even while executing on shorter-term priorities. Around the world, the typical board member has actually served longer than the typical CEO—7.7 years compared to 6.3—which gives boards a wide perspective on a company’s current and future path. And board’s unique stature, sitting atop the organization, allows them to shape corporate culture through a mix of encouragement, skepticism, and guidance.
However, boards are not immune to short-term thinking. And even those directors most committed to long-term thinking get a lot of misleading and unproven advice. Despite a substantial body of published work on board best practices and good governance, 47 percent of corporate executives report that their boards are actually an unexpected source of short-term pressure and an impediment to long-term strategic thinking. Directors themselves acknowledge they could do more to help the situation: one survey found that 60 percent of directors agreed they have a responsibility to tackle short-termism at their organizations.
This paper, which crystallizes the collective knowledge and experience of FCLTGlobal’s members and other subject-matter experts, offers two novel contributions: (1) it reassesses some of the common counsel given to directors on issues like overboarding and
CEO–chair duality, where the evidence for long-term value creation is weak or contradictory; and (2) it identifies the following proven steps boards can take if they aim to be long-term leaders with a farsighted vision of corporate success.
- Spend more time on strategy: Strategic counsel is an area where board members can add tremendous value, with insight drawn from real-world experience and enriched by regular attention to the company’s business model, risks, and value-creation proposition.
- Refer to our Time Visualization Meter to assess how effectively your board spends its time and compare that time allocation to industry peers and successful long-term organizations.
- Ensure that directors have a stake in long-term success: Encouraging board members to purchase and hold company stock through and beyond their tenure helps align their interests with those of long-term investors.
- Communicate directly with long-term shareholders: Although they sit outside the organization, longterm shareholders have a real interest in durable, corporate success. Listening to their viewpoint can broaden the perspective of board members, while also turning long-term investors into allies.
- Ensure a diverse board: Differing perspectives among board members can unearth new approaches and opportunities. One way to ensure that diverse views are heard is to build a board that includes people from a wide range of demographic backgrounds.
Board members looking to guide their companies toward a prosperous, long-term future can use these findings as a roadmap. And just as important, investors looking to identify companies with a long-term vision can use these results to gauge which boards are well positioned to help avoid short-term shoals.
Read The Long-Term Habits of a Highly Effective Corporate Board
