Here are the questions small cap investors should ask when reviewing board members
The composition and functioning of a board can be a powerful indicator of future success says top expert Tim Parker of consultancy Two Brains which recently launched “Board Mining”, an initiative to help companies get more value out of their boards
With the maelstrom of fast decision-making and disruptive changes facing many small cap businesses, what should small cap investors look for in a board?
As well as providing corporate governance, the board should be a valuable strategic asset — challenging the strategy and supporting the CEO and other officers in decision-making.
Investors should ask themeslves: has a board been assembled to best achieve this?
Or has it been put together simply to meet compliance requirements or provide and engagement mechanism for major investors or senior participants?
Does the board have true diversity, by which we mean diversity of thinking, not simply gender or experience?
What’s the background to the relationship between the Chair and CEO?
And, as is often the case in a start-up, if the CEO is a strong-willed corporate entrepreneur, will he or she simply steamroll the board? Or conversely, will a major stakeholder demand a voice commensurate with their investment?
If the directors are invested in the business, are they going to be sufficiently objective in decision making? How is individual director performance assessed?
Would some independent input be valuable?
Two Brains consultancy set up the “Board Mining” process to help companies tackle these questions.
The process helps identify key business issues the board needs to address; engages with individual directors to draw out their views, and then uses creative thinking techniques to help the board focus on the identified issue when they convene for a board meeting.
This teases out strategic imperatives and the actions required to be taken by the board communally and individually, giving useful key performance indicators for individual directors.
Tim Parker and Richard Patterson are Partners of Two Brains consultancy which recently launched “Board Mining”, an initiative to help companies get more value out of their boards.
More info at www.twobrains.com.au.