Corporate Boards Lack Strategic Vision

A long-term view entails penetrating the clutter of information, and being farsighted and wise about emerging circumstances

- Nawshir Mirza

Well-intentioned boards and “promoters” of companies look for a variety of attributes in their directors. These include knowledge of the business and expertise in any of the key functions (such as finance and law) combined with a pleasant and optimistic nature. These may be useful or important attributes when dealing with the day-to-day matters that come up before boards: fund-raising and restructuring, HR policies, selection of key managers, M&A, divestitures, etc.

Some promoters take on individuals because of their contacts in Delhi or with the regulators. Hence the demand for retired bureaucrats to fill directorship positions. Others look for experts in the industry so that they can get advice on the cheap. Functional experts are expected to second-guess the functional managers. The finance expert of the board is expected to look over the shoulder of the CFO so that the company is protected from the mistakes of the latter.

However, these are the regular functions of a board that happen meeting after meeting. But the principal function of a board is to approve, after evaluation, the draft strategy developed by the management.

What sets apart strategy from almost all the other matters that a board considers? The single major difference is that strategy sets out what the organisation will be like several years in the future. It determines the path that the company should take to become that organisation. Much of the strategy, as approved by boards, is pedestrian. It involves “more of the same”: we shall have a top-line CAGR of 11 per cent and a bottomline CAGR of 15 per cent, or such like.