The Changing Roles & Responsibilities of Private Company Board Directors
Privately held companies aren't mandated to have a Board. There are no stipulations or requirements that say they have to form a Board. There are no public reporting requirements that have to be met... So why form this team? What are the benefits to a private company? And what is the benefit to a private company Board Member? The answer is 'many.'
The fact is, much has been learned and borrowed from the public Board sector and successfully applied in the private Board sector. Although private companies don't fall under the umbrella of Dodd Frank or Sarbanes-Oxley regulations, the ripple effect of these rules for public companies seeped into the culture and approach of private companies as well as their Boards. Turns out that the transparency, accountability and other governance best-practices also could find a home in non-regulated companies. This is a good trend.
It could be argued, conversely, that private company Board practices have made their way into the public sector, too. After all, the number of private company Board Directors that are now serving public company Boards in recent years has greatly increased as the massive baby-boomer retirement track heats up - allowing for private company Board Directors to have a shot in the public realm. Another good trend.
All of this said, the requirements and expectations of private company Board Directors have evolved and changed quite drastically over the past few years - more so, in my opinion, than any regulation's or legislation's effect on Board members within the public sector in the same timeframe. Simply having a recognizable name and a successful track record are no longer enough (or even required in some cases) to ensure a seat at the private Board table. What matters most today is the private Board Director's ability to simultaneously drive performance, promote accountability, extend networks, lend credibility and act as a skilled mediator to the organization - all without the rigid structure and guardrails that public companies have created to keep this in check. Simply showing up to a Board meeting and offering up some advice definitely will not cut it any longer. Private Board Directors essentially have to operate with both 'sole proprietor' and 'team' culture characteristics to be successful - hence the lofty challenge for today's private company Board Directors to stay relevant and effective to the companies they serve. When each Board member is at this level, the entire Board is at this level. Now that's a great benefit to both the private company and the private Board Director.
What will you consider when building or evaluating your Board?
About the Author: In addition to sitting on numerous boards, Mark A. Pfister is a certified Board Director and advises public, private and non-profit boards in efficient and effective operations. He is the inventor of the 'Board as a Service' (BaaS) engagement model and an expert project/program manager frequently consulting on strategic global initiatives in their initiation and operational phases....... << read full bio here >>
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