Should the Board drive Strategy?

‘This Board does not drive strategy adequately’ is a common criticism of Boards of Directors - we lament that Directors often don’t know enough of the company’s business to drive its strategic planning process, do not have enough hands-on experience in the industry, and so on and on.. I have had enough of such laments.. the right question to ask, I believe is – what is the role of the Board anyway? Is it to drive strategy? If it is, then what is the role of the CEO and CFO and CMO and every other CxO who makes up the senior management of the company? In many companies I work with, the CEO is also the Chairman and Founder of the company, or the scion of the founder. So he knows, better than anyone on his Board, what his company is about, and has his lifeblood invested in its well-being. In order to protect himself from ignorant Directors, he sometimes packs his Board with ‘yes men’ who will let him do whatever he likes (not always, I hasten to add.. some of my clients are very far-sighted). Unfortunately, the financial markets don’t think much of his Board.. and so on.. Clearly not a healthy situation. The way out is to understand what the proper role of the Board is. It is unrealistic to expect the Board, usually made up of people who are busy and active running their own businesses, to ‘drive’ the strategy of the company they have the honor of being ‘Directors’ of. What we can, and should expect of them, is that they should know the difference between a good strategy and a bad strategy, and, more importantly, to know when there is no strategy at all, merely a bunch of high-sounding slides. The management (CEO and his team) are the proper functionaries responsible for formulating a company’s strategy, for, remember, they are the ones who will have to execute it, and they are the ones who have to live and die by it. What the Board can and should do, is make sure they have a strategy and it appears to be well-founded and well-grounded. That is all. In an old, long-forgotten article, Elliott Jacques pointed out that, as we go higher up in any organization, the time horizon over which one ‘thinks’ becomes longer and longer. The horizon of the Board should be infinite, it is, after all, the role of the Board to ensure that the organization lives, and thrives, forever. The horizon of a CEO could be, say, ten years- the horizon over which a strategy or ‘theory of business’ may reasonably be expected to hold good. To ensure that the organization lives forever, the Board should consider the interests of all its stakeholders, including the community it lives in, and also ensure that it has a viable strategy. Of course, It should also ensure that the Management does not loot the company, and so on. But so far as strategy goes, it will never know enough to be sure it is the right, winning strategy – that is for the CEO to think about. The trouble, I think, is that many Directors were appointed to the Board because they were successful CEOs, so they naturally continue to think like CEOs. The sad truth is, being a good CEO and being a good Director are two different things..