Business Breakfast on the importance of the board for a company
Tuesday, February 23, 2010 at 8:31 I attended today in the Technopolis Business Breakfast with the topic above. There was about 20 people attending the event, which was a positive surprise. Board in my opinion has the most critical role in the success of a growth company, but the importance is not always recognized early enough in companies. The group was rather versatile, from University to small companies and from consultancies to development agencies.
The event began with a short presentation from Mika Peltonen, the CEO of South Carelia Chamber of Commerce. He promoted the Chamber of Commerce courses on "approved board membership". There will be the third local course on this matter in the spring. He noted that there is 215 tasks assigned to the board by legislation. Huge responsibility, not only outside thinking of the company strategy. Essentially the board is looking after the interests of the company shareholders. This is done by combining good governance with the added value of the combined competencies of the board members. In a nutshell the board is responsible for "what" the company does and the operational management is responsible for "how" the company operates. The chairman of the board has a special responsibility in representing the company and leading the board and using proper workflows for effective board work. It is also important for the board to evaluate its own work in order to be able to develop and help the company better in the future. The most important areas of competence ranked by 1800 companies are: 1. business accounting and financing, 2. understanding the ways of work in SME's and 3. experience in strategy work. It is notable that according to this ranking the competence in internationalization is not regarded important at all. Which sounds rather odd and not up to date - even if the three first competencies are indeed important. Also marketing competence and the importance of networking were regarded important in the discussion after the presentation.
Ari Korhonen, an angel investor and board professional noted that there is a big difference in building up a start-up in Finland and in the US. In US the company is often created by 2-4 people that complement each others' competencies and in addition they try to find professional board members from the beginning of the company. In Finland the founding teams are often small and boards limited to owners. There was a vivid discussion about the owners' and CEOs' membership in the board. The recommendation is that CEO would not be a member of the board, but in small companies that is not easy to pull through. If the major shareholder is the CEO and sees his presence in the board important, the other members of the board should be from the outside. In the end, shareholders elect the board and the final decision is always theirs. The best interest of the owners would be to build up the best possible board (regardless of ownership), which will create the best management for the company. Another approach can be to keep the steering of the company with the shareholders and hire an expert consultant to aid when needed. Open dialogue within was noted as the most important characteristic of a functioning board. The board should always look to the future, sharpening the vision and strategy, not to the rear mirror, watching what has been done.
