And the scrutiny doesn't always stop with public companies; private and nonprofit organizations also need to function like public companies in the eyes of consumers. If that isn't reason enough to carefully select and utilize your board of directors, it simply makes good business sense to do so, says Michael Petrecca, managing partner of PricewaterhouseCoopers' Columbus office.
"It's really in the best interests of the company to have a board that is knowledgeable, and above all, independent," says Petrecca.
That means the CEO should not nominate board members. Instead, use a nomination committee comprised of current board members and other company executives.
"The best names will rise to the top," Petrecca says.
Look for potential board members who have experience in your industry, but who are not currently competitors, and those who do not have a direct financial relationship with the company.
"Your company's CPA, lawyer or banker should not be on the board," says Petrecca.
Jim Bachman, managing partner of the Columbus office of Ernst & Young, says to look for prospective board members who are like-minded but independent in their advice.
"For example, they have a similar management style and chemistry to other board members and the CEO," says Bachman. "But they should also have varied backgrounds and points of view."
Once your board is in place, you need to ensure that it is performing according to your expectations. Bachman advises instituting annual evaluations of all board members and the CEO.
"And then set in place a formal plan for board member functions, forecast expected results and measure actual results against those," says Bachman.
Both Petrecca and Bachman advise companies to give a full orientation or training to board members.
"They have to understand all the nuances of the business in order to give you the best advice," says Petrecca.
And, he says, there must be trust.
"Some CEOs will hold back some information to see if the board is on its toes," he says. "This is not a good environment for a board to function."
Instead, he says, keep the board fully apprised at all times. How to reach: PricewaterhouseCoopers, (614) 225-8700; Ernst & Young, (614) 224-5678