From Good to Excellent Board Practices (Part 1)

Jorma Eloranta is a board member in four companies of which he chairs three. The net sales of these companies was 20 billion euros last year. His last executive position was the President and CEO of Metso Corporation. He also serves as the Chair of Directors’ Institute of Finland.

Last week, Amcham welcomed Jorma for an early morning breakfast. This breakfast marked the launch of a program titled “From Good to Excellent.” The program’s goal is to have expert business leaders convene and share their views about opportunities in Finland and ideas about how to further improve the country’s corporate culture. To kick off the series, Jorma led a discussion about balancing tensions between the Board and management.

Interested in what was discussed? Check out Jorma’s sage advice below.

1. Board Agenda

The Board should decide what the 3-5 most important issues are for the upcoming 12-18 months. I call that “the Board Agenda.”

The Board Agenda needs to have the right balance, which depends on the strategic position and financial status of the company. The focal issues should be those that have the biggest impact on the competitiveness and success of the company going forward.

2. Brutal honesty

When a company faces difficulties, the Board needs to analyze the ultimate reason for them. Only after a realistic diagnosis can the right remedy be found. Or, as former President of Finland Paasikivi put it, “Recognizing the facts is the foundation of all wisdom.”

The Board cannot delegate this analysis to consultants nor to the management, although the Board may naturally use them.

3. Role of the Chair

The Chair sets the style and the atmosphere of board discussions. He/she has a vital role in the board culture and dynamics as well cooperating closely with management. The Board makes better decisions when it has a good time and when the members enjoy each other’s company.

The Chair ensures that the Board can conduct its duties properly. The Chair sets the meeting agenda for the Board’s deliberations and ensures the timely flow of information.

The Chair presides the Board meeting and manages the schedule so that agenda items have sufficient time. He/she also needs to make sure that the Board hears presenters from various levels within the organization. The Board needs to see all executive management members at least once a year. Hearing younger talents is mandatory for the long-term development of the company.

Being a Chair of a company needs to be a top priority. If a crisis situation occurs, the Chair needs to be available to give support and leadership – and quite often – lead the process to find the new CEO.

4. Interaction between the Board & Management

Openness and transparency are vital for efficient Board work and for the communication between the Board and management.

There are certain rules to avoid unclear governance.

If a Board member wants to seek certain information from a CEO or a specialist, it’s good conduct to inform the Chair and CEO about this request. If a separate presentation or document has been prepared, it should be shared with all Board members.

Discussions with board members and actual Board decisions are completely different matters.

A Board member does not give instructions to the CEO or to any other member of the staff on any business matters related to the company.

The Board may give instructions, which are explicitly decided by the board. It is the Chair’s responsibility to make it clear that all board members agree with the decision (or disagreement by someone is specifically noted) and the CEO knows and understands the decision of the Board. The CEO is responsible for implementing all Board decisions unless otherwise decided by the Board.

Read about the remaining positive board practices featured in the next blog on October 22!

2018-05-17T08:24:54+00:00