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A dynamic tension is emerging in the evolving relationships between CEOs and their boards. As legal requirements surrounding corporate governance increase, directors are taking a more active, independent role in their corporate oversight responsibilities. Consequently, chief executives must determine how to engage their newly empowered boards in real, hands-on work that provides value to the company but doesn't result in directors usurping essential management functions. While simple in theory, the challenge is for management to develop processes that engage their boards in the right kinds of work - and in the right way.
If a CEO is sincere about finding a level of board engagement that goes beyond mere window dressing, he or she should consider involving the board in the development of corporate strategy. A recent survey confirms, "There is little doubt that board members want to be involved in strategy". Directors "want to understand the strategy of the business and want to have opportunities to shape and influence it[1]". Yet, while some directors are both eager and equipped to contribute to strategy development, they are likely to become frustrated because many corporations do not have a process to involve them in a substantive way.
From their perspective, CEOs report that strategic planning is one of the most important issues that their boards should address[2], A study of CEOs conducted by the National Association of Corporate Directors reveals that the board's participation in "strategic planning ranked number two in importance to their companies, yet only number 11 in their board's effectivenessp]". So if CEOs place such importance on their boards' contributions to strategy development and directors express a desire to participate, why aren't more boards integrally involved in developing their companies' business strategies?
The reasons vary, but a primary one springs from CEOs' reluctance to involve their boards too heavily in running the company (management) and deflecting their attention from ensuring that the company is well run (governance). Similarly, many companies lack a clear process - the education, necessary steps, definition of roles and responsibilities, for example - that enables directors to constructively participate in strategy development. However, there are distinct benefits for companies that systematically and effectively involve their boards in setting strategic direction. Not the least of these is enhanced board-management collaboration,...