The various flavours of board charters
Last week I joined about 2000 beer aficionados at the Friday night session of Beervana held in Wellington’s ‘‘cake tin’’. Now in its 17th year, Beervana is established not only as New Zealand’s largest beer festival, but its most imaginative. This year it not only featured 350-odd beers from 66 craft breweries, there were Mexican Day of the Dead living sculptures and four marriages live onsite.
Now run as the opening event of the Wellington On A Plate programme, Beervana is a datapoint not just on how far beer has come in New Zealand but also how we’ve matured as a country. You’ll never see a better behaved and more gracious set of attendees, well certainly not when mixed with thousands of gallons of cerveza.
Every year the brews just get more and more exotic. Top picks this year included Behemoth’s Snow Mexican (a maple syrup imperial stout), Bayland’s bourbonaged Van da Tsar and Emerson’s Max Power IPA.
My personal favourites of the night were Garage Project’s deconstructed Verbotene Fruchte and Tuatara’s Spiced Pumpkin Ale.
Apart from the variety, the fascinating aspect to me is that virtually all beers present conformed to the same basic recipe for beer that’s been around since the German purity law of 1516.
Namely, all had four common ingredients – malted grains, hops, water and yeast – they’d all just been delivered in very different ways.
This concept of a core common recipe or structure, but a wide range of applications, has been on my mind lately as I work up a board charter for a company I’m involved in.
Board charters are the foundation document that sets out a board’s role and responsibilities in the governance of an organisation, and how the board exercises its powers in respect of that organisation.
A bit like the German purity law, every charter should have four main components, the Institute of Directors suggests.
First, the company’s goals and purpose. Second, the board’s governance processes. Third, the nature of the relationship between a board and the management of the company. And lastly, a section making clear definitions in the document.
It’s the second of these – the board’s governance processes – that really sets the rules of engagement for how a board works and its operating cadence.
For instance, setting ground rules around the power of the chair, how directors are appointed and limits on terms, and the operation of the specialist subcommittees.
And it’s here that the variation across different boards, and the resultant impact on the underlying company, can be most evident. Particularly in digital companies.
Earlier this year the board at e-commerce giant Amazon formally added the ‘‘Rooney Rule’’ into its charter
The initial list of candidates chosen for a director role at Amazon must include qualified women and ethnic minorities.
for selecting directors. Under this rule the initial list of candidates chosen for a director role must include qualified women and ethnic minorities.
In doing this not only did the Amazon board change the future directory of an old white male top table, they also modelled the behaviour they expect the executive to take.
Another digital company injecting innovation into board charters is online movie company Netflix.
In what the Harvard Business Review described as a watershed moment for boards, Netflix tore down the traditional information firewalls between executives and the directors, by re-engineering the process part of their board charter.
Netflix now requires its directors to attend monthly and quarterly senior management meetings in person (albeit only as an observer).
Rather than voluminous board papers, Netflix operates a Google docs style online memo which allows directors to ask questions or comment in a living document, where executives can respond in real time.
The Netflix ‘‘board papers’’ as such are put together as 30-page online memos in narrative form with hyperlinks to all the supporting and raw data on the company’s business intelligence platform.
Locally, Board Dynamics chief executive Henri Eliot reckons some New Zealand board charters have become outdated by focusing mainly on compliance and process.
Eliot believes boards need to be more ‘‘agile’’ and understand complex issues in the age of disruption, a requirement that should be contained in the board charter in addition to measurable objectives for directors.
According to Eliot, the charter should also cover gender diversity, director skills and experiences, composition refreshment, and the appointment of directors with enough time to dedicate to the company.
All of which seems timely advice at a time when directors are increasingly being found to be over-boarded or lacking the specialist skills to tackle a changing environment.
Once upon a time in New Zealand there was really just one beer which tasted pretty much the same – a slightly sweet off-bitter lager with too much carbonation – regardless of whether it had a Lion or DB label. Whereas today, at the likes of Beervana, there really is a beer for everyone, even if the underlying recipe is similar.
I think the same is increasingly true for board charters – the trick is ensuring your brew is the right one for the organisation and the time.
Mike ‘‘MOD’’ O’Donnell is a professional director, writer and adviser. His Twitter handle is @modsta and his favourite beer is Garage Project’s Pernicious Weed.