Dawn of a New Industry - The BSP

SEP 20, 2014

The Concept of a 'Board Service Provider'

Perform a Google search on the term 'Board Service Provider' and you will likely only get three direct matches. Maybe four now with this article. In the whole (or hole) of the internet, less than half-a-dozen references? Wow. Must be something very new. So, what exactly is a BSP and how does it work? I will share with you some details as we are forging and honing the concept even as you read this article.

Simply put, a Board Service Provider is an outsourced company board

Think of a board made up only of independent directors (acting somewhat as consultants / advisors) all working under a single contract, from a single service provider (vendor) and bound to performance. Sounds like a simple concept to grasp, however, it is truly a new approach - one that should not to be confused with companies that provide executive staffing, individual board advisors, executive coaching or stand-alone independent directors. The holistic approach of a cohesive and collectively-accountable team, directly tied to a client company's performance and bottom line, is not present in these models. It is present, however, in the BSP model along with much needed transparency as well as performance-based metrics. When describing our service to clients we like to say we are an "all or nothing" model - you either get the core board team in its entirety or you get no one. This is due to the belief that it is the collective board's experience, constructive interaction and diverse industry backgrounds that elevates the mission. Additionally, a 'bench' of expert advisors supplements the board team expanding its effectiveness well beyond just the core board members in this type of outsourced model. As I discussed in a previous article, add the element of an elevated 'behavioral predisposition' to the existing 'intellectual capital' of the board team and you have an even more incredible company leadership asset. In essence, the board becomes greater than the sum of its parts.

"... A proposal for fixing boards that goes beyond tinkering"

But didn't the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act of 2010 take care of most board-related issues? Hardly. An article in The Economist summarizes "In the May edition of the Stanford Law Review Stephen Bainbridge of the University of California, Los Angeles, and Todd Henderson of the University of Chicago offer a proposal for fixing boards that goes beyond tinkering: replace individual directors with professional-services firms. Companies, they point out, would never buy legal services or management advice from people only willing to spare a few hours a month. Why do they put up with the same arrangement from board members? They argue for the creation of a new category of professional firms: BSPs or Board Service Providers. Companies would hire a company to provide it with 'board services' in the same way that it hires law firms or management consultants. The BSP would not only supply the company with a full complement of board members. It would also furnish it with its collective expertise, from the ability to process huge quantities of information to specialist advice on things such as mergers." (source ref. 1)

Interesting how in this case academia (UCLA) and practitioner (Integral Board Group) were concurrently focused on solutioning the same issue, but from different directions. There does exist, however, a fundamental difference when comparing the approaches: in our present day approach we are applying the model in its fully-designed capacity only to the private sector. On the other hand, Stephen Bainbridge and Todd Henderson propose this model for the public sector and argue "that this would require only a simple legal change" to enact. Yes, it is most definitely a simple legal change on paper, but likely a larger debate at multiple levels that could slow down its adoption in the public sector. I personally welcome this delay in the public sector as it will allow for focused traction in the private sector first without dilution from politics. We will be ready when the transition from private to public eventually occurs.

As we are the first business of its kind, feel free to track our progress - join our newsletter for updates.

For a free 30 minute session focused on:

- How to assess the effectiveness of your existing board or successfully evaluate potential board / advisor candidates,
- Tips on how to identify if a BSP is right for your organization,
- Suggestions on how your company could benefit from an effective board,

Schedule your free session via email - email mark.pfister@integralbg.com.