How Warren Buffett would improve boards 

Warren Buffett released his annual letter to shareholders of Berkshire Hathaway Feb. 22. 

Mr. Buffett's letter, which is widely read by investors, included some ideas on how to improve boards:

  1. Boards are getting stale. "Job security now? It's fabulous. Board members may get politely ignored, but they seldom get fired. Instead, generous age limits — usually 70 or higher — act as the standard method for the genteel ejection of directors." 
  2. Boards need more women. "This year, it should be noted, marks the 100th anniversary of the 19th Amendment, which guaranteed American women the right to have their voices heard in a voting booth. Their attaining similar status in a board room remains a work in progress." 
  3. Incentives don't line up for independent directors. Non-wealthy independent directors are more likely to be there for the money and less likely to challenge the status quo and do what's best for the company, according to Mr. Buffett. "When seeking directors, CEOs don't look for pit bulls. It's the cocker spaniel that gets taken home," he wrote.
  4. Compensation committees are overly reliant on consultants who create needlessly complex compensation plans. "The reading of proxy material has become a mind-numbing experience." 
  5. Boards should meet without the CEO on a regular basis. "Prior to that change, truly frank discussions of a CEO's skills, acquisition decisions and compensation were rare."

 

More articles on leadership and management:

How to make executive searches more equitable: 7 questions with a corporate recruiter
County files complaint against Ohio hospital board for 'plotting behind closed doors'
Washington hospital makes first update to CEO job description in 10 years

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