Independent directors: Underpaid & unappreciated
Independent directors have been in the eye of the storm for their inability to guide companies or being able to stand up to controlling shareholders. But there is the aspect of director remuneration that still needs to be discussed.
The Business Standard India article, "Independent directors: Underpaid & unappreciated," quoted Russell Reynolds Associates Consultant Sanjay Kapoor on important director traits. The article is excerpted below.
Potential directors will be expected to be familiar with board practices including topics relating to board effectiveness and culture, governance of board committees, board evaluation etc. One can debate whether such knowledge is neither necessary nor sufficient or it is necessary but not sufficient, but clearly a test can take you only so far.
For example, if a media company wants to invest in an over-the-top or OTT platform, the board members will need to have some familiarity with the business itself, its market structure, understand choice of technology, what might upend or disrupt the business, how will you determine the addressable market size, and how it is evolving, how will you market the platform, the advertising and social media strategy, accounting standards for the business taking in revenue recognition, if subscriptions can be cancelled and content created up-front, cyber security, the kind of people to be hired. And at a base level whether to even invest in this business or not. Now you may have cleared the exam, but still not be sufficiently well-versed in all this, so what matters is judgement and behaviour.
Sanjay Kapoor of Russell Reynolds helpfully directs me to a survey his firm had undertaken a few years ago answering just this question of behaviour. Cutting through 18 traits, the ones that mattered to most and across geographies are (i) possess the courage to do the right thing for the right reasons; (ii) willing to constructively challenge management, when appropriate; (iii) demonstrate sound business judgement; (iv) ask the right questions; and (v) possess independent perspective and avoid "groupthink". There are others like remain "fully present" in meetings, and communicate in a constructive manner, but there was a global consensus regarding the first five.
To read the full article, click here.