How Lead Independent Directors Drive Effective Boards

Want to make your board more effective? Look for a lead independent director with the fortitude and skillset to constructively navigate the relationship with bank management.

While the role is still evolving, bankers have identified some attributes of successful, effective and productive lead directors. These include undisputable independence, forthrightness and an ability to facilitate productive conversations, both in and outside the board room.

As the board’s representative with management, undisputable independence is crucial to a lead director’s ability to be an effective counterweight. It can empower the lead director to act as a conduit of constructive conversations for management and have direct, and sometimes uncomfortable, conversations on behalf of fellow board members.

When speaking with management, lead directors should include an accurate and timely summary of what is discussed in any executive sessions. These sessions allow directors to express concerns and articulate expectations for management in a transparent manner — something they may not be comfortable discussing directly with the CEO. An effective lead independent director can transform these discussions into palatable and productive feedback for executives.

During board meetings, directors — not management — should guide the conversation and focus on key issues. Lead directors can help facilitate consensus and alignment between the board and management, enabling both groups to have candid conversations and ultimately share the same strategic focus.

Building consensus also includes working to making board meetings more effective. A concise, timely meeting agenda representing key board matters can lead to strategic discussions and allow directors to thoughtfully prepare for a productive meeting. Start by surveying fellow directors about matters of importance and sharing discussion points and summaries with management. This can give the board time and space to focus on critical matters during a meeting and help avoid rushing through important topics.

A board of directors is filled with a variety of personalities, so a lead independent director’s demeanor and communication style can impact its success. Effective lead independent directors must be comfortable addressing awkward or sensitive topics and have the ability to lead discussions without becoming a dominant presence in the board room. Facilitating and eliciting perspectives from other directors can coalesce key information, so all the directors feel they have been heard and management understands what is expected of them.

The specificities of the role — and the tasks the lead independent director governs — caution against frequent rotation of this role, which could be viewed as lack of strength on the board, ineffective leadership, or even a lack of commitment to governance. Rotating this role too frequently could also lead to a reduction in the board’s overall productivity.

Assess current and potential board members for candidates who could effectively serve as lead independent director, and weigh the possibility of bringing in a new board member to provide the necessary skills.

For more information on the role of lead independent director, contact Susan Sabo at susan.sabo@CLAconnect.com or 704-816-8452 or Todd Sprang at todd.sprang@CLAconnect.com or 630-954-8175.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment, or tax advice or opinion provided by CliftonLarsonAllen LLP (CliftonLarsonAllen) to the reader. For more information, visit CLAconnect.com.

CLA exists to create opportunities for our clients, our people, and our communities through our industry-focused wealth advisory, outsourcing, audit, tax, and consulting services. Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor.