The Different Types of Boards (2/10)
You should know there is a large ecosystem of different kinds of boards of directors and corporate governance and I have been around all of them.
There are publicly traded companies, both large and small. Some publicly traded companies have one class of shares and so are widely held. There are other kinds of publicly traded companies that have dual class shares. Dual class share companies are common in the Canadian markets and increasingly preferred by high tech companies going public.
The fastest growing form of business combination is the Joint Venture and/or Business Alliance. Last year, there were something like 12,000 new joint ventures and alliances formed between large companies of one kind or another. These Boards have dramatically different characteristics than their publicly traded cousins.
Another variety of board is the Private Equity and/or Venture Capital company board. There are now something like 6,500 private equity firms in the world and each of them would have from 10 to 100 companies in which they have invested – each with a board of directors and each such board very different from that of a large publicly traded company Boards.
Then there are the not-for-profit charitable, not-for-profit administrative and family companies Boards – again all different. There are hundreds of thousands of them.
Finally, often forgotten but hugely important in Canada, there are the Agencies, Boards & Commissions (the so-called ABC’s) of governments. Linda Hohol, the current Chair off the Institute of Corporate Directors in Canada, led a study in 2007 of the ABCs in Province of Alberta for the then Premier Ed Stelmach. She was “amazed” to discover that some 50% of the goods and services delivered in the Province came via ABCs.
It's a wide, wide ecosystem of different kinds of boards and different kinds of governance.
But overall, my experience would tell me that there are a number of commonalities in all of these Boards of Directors. Understanding what makes any Board effective as a Board cuts across all these differences. We’re going to describe and discuss them in more detail in the following posts.
I want to thank you for reading this post, and I hope that together we really can build a future that includes the careful craftsmanship of your Board of Directors, so that it can truly add value to the trajectory of your company.
David Beatty is an adjunct professor and Conway chair of the Clarkson Centre for Business Ethics and Board Effectiveness at the Rotman School of Management. Over his career, he has served on more than 39 boards of directors and been chair of nine publicly traded companies. He was the founding managing director of the Canadian Coalition for Good Governance (2003 to 2008). A version of this article will also appear in the Winter 2017 edition of Rotman Management, published by the University of Toronto’s Rotman School of Management.