The past year has been described as a “survival year” in the Canadian mining sector. In an environment where CEOs are scrambling to cut costs and make do with less in order to help their companies weather the storm, the boards of these companies need to add significant value—or changes must be made to see that they do.
In determining what to do, don’t waste the board’s precious time with a tick-the-box board evaluation or other governance niceties with minimal impact. Instead, ask these five questions to every member of the board of directors individually and to each member of the company’s senior management team.
Question 1: What has been the board’s most significant contribution to the company over the past year?
Question 2: In your opinion, how could the board add even more value than it is today? What would be necessary for this to happen?
Question 3: If you could change just one or two things about the board to make it even more effective than it is today, what would you change—and why?
The more specific the answers to these questions, the better. For example, if someone says “the board’s good on strategy,” ask for specifics, which might be: “We were dead set on doing the ABC merger. But the board pointed out some significant concerns about our ability to integrate the operations of our company with ABC.” That’s a much different and far more useful answer.
Including company executives who regularly interface with the board in answering these questions nearly always yields good insights. Perhaps equally important, it underscores to an executive team feeling pressured to “do more with less” that the need to leverage every asset the company has extends right into the boardroom. And that sets the right “tone at the top,” which is always critical, but especially so in a downturn.
For reasons that should be readily apparent, these questions should not be posed by the chairman or a member of the board. No matter what people say, corporate executives are never as candid with board members as they are with a third party. Frankly, neither are board members. And candour is vital to make this exercise productive. There’s no point going through the motions; this is all about impact.
Individual conversations are far better than a write-in survey or some kind of “group think” in the boardroom. After all, the goal here isn’t to conclude that “the board has no problems,” it’s to find ways in which the board can add even more value during a tough time for the company. Boards that do this right typically generate three to five extremely productive ideas from this initiative.
Question 4: What are your expectations of people who serve on this board? For example, do you expect them to use their network to help with financial contacts, international or industry contacts, etc.?
Directors are sometimes recruited for their perceived network of contacts. Yet often this network is not properly leveraged, which is tantamount to wasting a significant corporate asset—at the very time the company needs every resource it can muster. Clarifying these expectations is sometimes all that’s needed to begin to harness them.
It can also be important to talk about director time commitment, which can be more demanding when companies go through tough times. In many Canadian mid-cap mining companies, outside directors sit on numerous boards. As such, it can be useful to specify what appropriate expectations are—and if a board member can’t make that commitment, deal with that issue up front.
Question 5: If we were going to add just one new director to the board, what skills, experience or background would you find most valuable?
Ask this question even if the nominating/governance committee has no intention of recruiting right now. Depending on the answers, the committee may change its mind. When questions are asked about board composition in such an open-ended way, the response is far different than asking: “Does the board have the right composition?” Make sure to ask management their views as well; typically, this generates terrific ideas that leave nominating committee chairs saying, “I wish I’d thought of that.”
In a tough economic environment, companies need to maximize every asset they have—and the board of directors should be an important part of that equation.
Beverly Behan is a New York-based board consultant who has worked with more than 100 boards of directors in the U.S., Canada and internationally in the past 17 years. E-mail: firstname.lastname@example.org.