MAYBE BOARDS COST TOO LITTLE

Corporate board budgeting is one of those items that draws little attention, and when it does, it usually consists of executive grumbling. Compensation for directors is typically its own line item, with equity accounting, cash, and benefits tucked away in their own columns. Director reimbursement for travel and other expenses could be filed here, or through other etc. headings.

Then there is the actual budget for board operations, administration, and support. This is handled in a variety of ways, with time, paperwork, research, legal needs, and technology (such as board portals) allotted among different departments. As noted, there is likely no single “Board $” accounting item. Maybe we prefer it that way, so we don’t seem how all those nickel-and-dime board expenses add up. Here’s a contrarian take — you actually spend too little on your boards of directors. Look at the lineup of talent your board presents. It may be investors, founders, skilled top execs, seasoned technical experts… you may have a well-designed slate of achievers, or an assembly of ownership and connections. Whether your board is intentional or a patchwork of interests (and even if there are some you could live without), stop to consider this total group’s networks, skills and insights. Weigh up their collective vitae and impact. I’ll bet your boardroom total talent package offers expertise that matches any consulting firm you work with… at a fraction of the cost. Plus, your board savants know the company better, and will be sticking around to answer for results. Their board pay is a bargain.

Still, board members can’t know everything they need to know to deliver the tactical oversight we

demand of them today. This is why your board and management need a frank discussion on budgeting for board advisory services. Not just essential exec pay figures and peer groups, but best practices on incentives and trends. Legal insights outside those contracted through company counsel. Independent takes on potential conflicts of interest, long-term talent needs, or strategy. Board assessment and development support from outside.

This would require some rethinking on the role of our boards. Rather than just an expense we have to bear as a compliance need, we’d need to view the board as an investment for insights and strategy. So maybe it’s about time…

Ralph Ward – Board Room Insider