What Defines a High-Performing Board Today?

Evaluating Board Performance

One key component of today’s high-performance boards is regular evaluation. In France, most CAC40 and SBF 120 companies evaluate their boards every three years, while smaller companies do so only from time to time when they do it. These evaluations help ensure that boards remain agile, adaptable, and capable of navigating the fast-evolving business landscape.

Key Themes Shaping Modern Boards

There are five main themes that are shaping the evolution of boards today:

Internationalization of Board Members:
Companies are becoming increasingly global, and boards must reflect this. To discuss international business decisions, you need board members who understand the geographical markets in question. Without this, boards risk being out of touch with the nuances of international operations.

Digital Transformation and Artificial Intelligence:
Technology, particularly AI, has dramatically shifted business models. In the past five years, the impact of digital transformation on corporate structures has been colossal, and boards must understand these dynamics to guide companies through the changes.

Succession Planning:
As many companies founded in the post-war era approach leadership transitions, succession planning has become crucial. Boards are more frequently renewed, and the length of board mandates has shortened from 6 years to 3 or 4 years. In today’s fast-moving world, boards must include people who reflect the current business climate and the challenges companies face.

Sustainability and ESG:
Environmental, social, and governance (ESG) issues are now a significant focus for boards. CSRD regulations are tightening globally, even in regions like Asia and the Middle East. As a result, boards are spending much more time addressing sustainability. In France, board members in ETIs (mid-sized companies) and larger firms must undergo mandatory training—several days of compulsory training per year for all board members.

Business Model Evolution:
The world is becoming increasingly uncertain, and business models are evolving rapidly. Just look at companies like NVIDIA, whose market capitalization now rivals that of entire stock exchanges. In this volatile environment, boards need to understand that their company could face massive disruption in a matter of years, even if it doesn’t seem likely today.

Evolving NED Profiles

Non-Executive Directors (NEDs) play a pivotal role in the success of boards, and their profiles are changing to meet the demands of modern businesses. In the past, boards often recruited people from familiar circles—”a system of proximity”. Today, companies must look far beyond their own networks to find the right talent. Recruitment operates on three levels. First, companies might turn to trusted friends and family to fill board positions. Second, they may tap into associations of certified directors. Finally, when seeking top international talent, companies often turn to specialized search firms to open doors to the international market.

When it comes to NED profiles, the key is to find individuals who bring deep expertise in the industry where the company operates. For instance, a banker has no place on the board of an industrial tech company. The best NEDs should also bring an address book of valuable contacts and be capable of detecting weak signals that could indicate future trends or challenges in the market. Moreover, diversity—both in terms of gender and international representation—is vital. In France, a law requires that 40% of board members in large companies must be women, and while not every country has adopted such regulations, the push for gender diversity is growing worldwide.

Recommendations for Building a High-Performance Board

To build a high-performance board, there are several key recommendations:

A lack of diversity, insufficient preparation, and a failure to recruit experts who understand the company’s industry are all factors that contribute to underperforming boards.

The Difference Between Board and Executive Roles

The role of the board differs significantly from that of executive management. Boards think in terms of the long-term future of the company, not the next quarter or fiscal year. Executive management focuses more on the operational side of things, while boards deal with issues like mergers and acquisitions, dividend distribution, and share buybacks.

Another key area where boards have a significant role is sustainability. Boards must decide what to do with the company’s cash flow, whether to reinvest, buy back shares, or distribute dividends. These decisions fall squarely within the board’s remit, and not the executive team’s.

Keys to a High-Performing Board

There are two key factors that distinguish high-performing boards:

The right NED hiring process:

Good executives do not automatically make good NEDs. When looking for NEDs, companies should seek certified individuals with experience at the board level. If a younger executive is brought on board, it’s essential to mitigate any risks through a strong selection and development process.

Flat team management:

Boards are not hierarchical. There’s no boss on a board—it’s a team with no hierarchical link between members, yet decisions must still be made. New NEDs must be trained to adopt the right posture and learn to be impactful in short, infrequent contributions. “If you don’t know your subject well, you’ll be swept away by the others.”

Conclusion

Building a high-performance board requires a focus on internationalization, diversity, and structured recruitment processes. NEDs must bring deep industry expertise and be able to challenge leadership constructively. As the world continues to change rapidly, boards need to be agile and forward-thinking, with members who understand both the present and the future of the business.

“In conclusion, high-performance boards of directors are essential for the long-term success of profit organizations. Their effectiveness in corporate governance, risk management, and strategic oversight is pivotal for guiding senior management and ensuring that the management team operates efficiently. Board members, particularly independent directors, must bring diverse expertise and experience to enhance board culture and performance. The effectiveness of the board is measured by how well it supports the executive team while balancing the day-to-day running of the company with broader strategic goals. Regular evaluations of board performance and the selection of members of the board who can challenge leadership constructively are key to improving board effectiveness. Furthermore, minimizing conflicts of interest and ensuring strong alignment with the executive director role are essential for good governance. By fostering a collaborative environment in board meetings and maintaining clear communication between the management team and the board, organizations can drive sustainable growth and resilience in the face of evolving challenges.”