AMPLIFY VOL. 38, NO. 4
The board of directors is an important resource for executives, conveying experience from other industries along with valuable strategic and functional knowledge. Board meetings are the key mechanism for transferring this knowledge from the directors to the executive team. Unfortunately, infrequent board meetings (often with time restrictions) mean directors have become more of a sounding board for executives than a resource for deeper engagements.
Traditionally, directors were viewed as agents acting in the interest of shareholders. However, directors do not necessarily interact with shareholders, so a more realistic view of their role is as fiduciaries for an organization. Directors act in the best interests of an organization and its shareholders and are tasked with making discretionary decisions at times.1
Appointing a board is a crucial process for an organization. Directors are chosen in part for the resources, capabilities, and networks they bring. Although accessing these is part and parcel of engaging with directors, little attention has been placed on leveraging board knowledge and institutionalizing its knowledge base.
This negligence is a significant loss — and an opportunity. By making some relatively simple changes, board knowledge can be extracted and retained to enhance an organization.
Board Models
There are four primarily board governance models; other models are mainly adaptations of the following:
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Anglo-American boards — typically have eight to 12 members elected by shareholders. This model uses a one-tier system in which board members also sit on various subcommittees. It is commonly seen in the US and Commonwealth countries such as the UK, Canada, Australia, New Zealand, India, Malaysia, and Singapore.
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German boards — usually two-tiered, with a supervisory board and a management board. Shareholders appoint the supervisory board, which then appoints the management board. As a result, German boards tend to be much larger than Anglo-American ones. Organizations in the Netherlands typically use a two-tiered system; in other European countries, organizations use either a one- or two-tiered board structure.
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Nordic boards (largely adopted by Scandinavian countries) — similar to German boards in separating the board of directors and executives. However, Nordic boards are typically smaller, like Anglo-American boards. A special feature of the Nordic model is that the highest decision-making body is at the annual general meeting, where shareholders’ voting rights are exercised, followed by the board and then the executives.
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Japanese boards — typically consist of outside shareholders, government representatives, independent directors, executives, the bank, and keiretsu (a network of interconnected companies). Due to the number of groups involved, Japanese boards tend to be large. However, the introduction of the Stewardship Code in 2014 and the Corporate Governance Code in 2015 led to changes around corporate practices in Japan, helping boards become more manageable by allowing the nomination of more qualified board members that represent a wider group of stakeholders.
Some board structures affect the extent to which board knowledge can be institutionalized. For example, a one-tier system facilitates board knowledge exchange because board directors share their thoughts directly with the CEO and other leadership team members during meetings.
A two-tier system is slightly more complicated when it comes to knowledge exchange. Board knowledge is best tapped at the supervisory board level, and information flow between supervisory and management levels relies heavily on good communication channels and knowledge tracking at the supervisory level. Thus, successful institutionalization of board knowledge in a two-tier system requires extremely robust setup and coordination.
Knowledge Loss
Knowledge loss is unavoidable, but measuring that loss to demonstrate the need for more preventive measures is difficult. Knowledge loss can only be assessed post hoc — its magnitude is virtually unknown until it’s lost.2 In addition to the usual suspects (loss of organizational memory and having to recruit), studies suggest knowledge loss can lead to social depletion as a result of damage to organizational partnerships, customers, and even remaining employees.3
Recent studies show there are ways to mitigate knowledge loss. For example, organizations can use knowledge management systems to take stock of various knowledge bases across the organization. Cross-pollination across divisions is also possible if there are mechanisms that allow knowledge sharing. Such systems can include proper documentation on best practices and past experiences, provided it can be integrated through work processes and routines.
In circumstances where attrition is likely, early planning on networking and succession development ensures that some knowledge can be extracted and preserved within the organization. Succession planning is not commonly done at a lower level in a larger organization, but knowledge retention is not just an issue for larger organizations. In fact, improper succession planning has been shown to cause significant problems in small and medium-sized enterprises.4
Board Knowledge
Significant research has been done on how succession planning affects the ongoing concern of an organization and what processes are needed for a smooth transition, but that planning rarely includes the board.
Directors typically spend years on the board and thus are well-informed about what is going on in the organization and its ecosystem (essentially, everything short of daily operations). In fact, very few executives have a comprehensive view of the organization as board directors. So it’s not surprising that some organizations end up with a board member as their next CEO.5 If board members make such good CEOs, it follows that executives should deeply appreciate the institutional knowledge board directors possess and work to leverage it.
The board chair plays an essential role in guaranteeing the board functions well during its limited time with the management team. In the case when the CEO is also the board chair, it’s easier for the board and the management team to have seamless conversations.
However, in this scenario, it is important that the chair/CEO recognizes the governance role of the board and allows the board to do its job. In all cases, the chair of the board should refrain from dominating proceedings. Ideally, the board chair should take up about 10% of airtime in meetings.6
Director turnover is unavoidable, and refreshing the board is essential for bringing in new perspectives and innovation, as well as challenging the status quo. Recently, there have been concerns about a lack of turnover in boards, leading to subpar performance. BlackRock, the world’s largest asset manager, announced in its 2020 annual investment stewardship report that it cast more than 5,100 votes against company directors in the prior year for failing to hold company managers accountable for performance failures.7
Board Composition & Dynamics
Boards with diversity of experience can help organizations navigate increasingly challenging business environments, especially when it comes to cross-border engagements and international relations. Refreshing board composition to better deal with current issues is beneficial, but it is important that organizations not replace board directors “like-for-like” (i.e., with those of similar backgrounds and skill sets).8
For example, Admiral Group recently asked Paola Bonomo to join its board.9 Admiral is a large financial services company offering insurance and personal lending products. It is headquartered in the UK and has offices in Canada, France, Gibraltar, India, Italy, Spain, and the US. According to the chairperson of Admiral’s board, Bonomo was appointed because of her deep knowledge of the international financial services sector and extensive experience in digital transformation. Existing board members have some overlapping experience with Bonomo, but she brings new insights from current and previous management and board experience that are desirable for Admiral as it looks to expand internationally.
Director tenure is another important factor. Longer tenures generate familiarity with the organization that can foster deeper conversations. For example, David Deed retired from LCI Industries’s board after serving as its director for 22 years.10 However, as an organization’s circumstances and environments change, injection of new blood to the board is likely to be more productive. Research shows that organizations that replaced three or four directors over a three-year period outperformed those that had fewer or more board turnovers in the same period.11
There is a misperception that boards should only be highly involved in management matters when an organization is underperforming. Actually, this approach leads to a lower likelihood of previous board members staying in touch, resulting in institutional knowledge and network loss. One way to alleviate this is to stagger directors’ terms, so less than half of the board has tenure that expires at the same time.
It is important to note that increasing the size of the board does not necessarily add more knowledge, as board knowledge can only be accumulated when all directors are given adequate time to share their knowledge. Given limited time for board discussions, board composition must be well thought out to allow maximum utility of board advice and knowledge sharing.
For example, although most directors conduct work in just one industry, some are familiar with more than one due to previous work experience, directorships on other boards, or consultancy/advisory roles, and many directors possess multiple disciplinary skill sets.
It’s also important to consider the midterm future and beyond when selecting directors. A few years ago, knowledge about areas like AI, robotics, sustainable energy, blurring industry boundaries, geopolitical risks, and employee health and well-being might not have ranked high on a list of desired knowledge for directors.
Beyond addressing knowledge gaps, organizations should consider the soft skills board directors possess. Ideally, board directors will have (1) an ability to be objective, (2) an ability to comprehend the issues at hand, (3) an ability to devote the requisite time and attention, and (4) an eagerness to exert themselves on behalf of shareholders.12 These aspects of board wisdom cannot easily be institutionalized, but they can be ascertained by executives through proper due diligence.
Mechanisms to Institutionalize Board Knowledge
Board directors have traditionally been treated as a governance body formed to monitor operations and provide advice to management. A better approach involves tapping into the wealth of knowledge directors possess and — acknowledging that their tenure is often much shorter than that of a senior executive — working to capture their hard and soft skills in a way that permits long-term access.
For example, board directors and an organization’s management team often have little contact outside of board meetings. This is sometimes culturally driven and sometimes just reflects board directors’ busy schedules. As a result, most directors serve as agents rather than fiduciaries for an organization and its shareholders. To address this, the board chair and CEO (if not the same person) should meet before and after board meetings to work on agendas, discuss follow-ups, talk through issues, and consider opportunities. This process can be expanded to involve subcommittees within a board. Getting a board more involved is one simple way to get it to impart more knowledge (especially tacit knowledge) to the management team.
More frequent interactions may also be possible, depending on how close the board feels it is to the management team or the CEO. Recognizing the board’s fiduciary role, the management team should work to stay more connected, perhaps inviting the board to the organization’s business and social events and functions. This helps the board get to know the organization, management team, and stakeholders better to facilitate knowledge sharing.
Other than seeking advice and ensuring it meets the board’s expectations, the management team should seek connections through its boards. Board directors are business and (perhaps) government representatives in their own right, and many sit on multiple boards. Connecting to board directors’ networks can enhance the management team’s appreciation of the wider business environment and increase access to potential resources and partnerships. Building this type of connectivity widens the organization’s circle of influence and is a major step toward the institutionalization of board knowledge.
The hard skills (technical knowledge and abilities essential for performing a particular job or role) of board directors can often be institutionalized through a staggered approach to board succession. Staggered recruitment and replacement regimes ensure these institutionalized hard skills are retained.
Soft skills (abilities around teamwork, communication, problem-solving, adaptability, emotional intelligence, time management, and leadership) require a different approach. These abilities are embedded within individuals and only surface when board directors share their experiences during board discussions and decision-making processes. Extracting this knowledge relies on interactions with board directors. From an organization-level perspective, this means interacting as groups and documenting discussions to show how boards arrived at decisions.
Organizations should get their boards more involved in strategic discussions — this should not be confined to an annual strategy planning session. Business environments are constantly evolving, so it makes no sense for strategic discussions to take place only once a year. Instead, companies should seek more frequent and deeper conversations with the board about how the organization should look in the near term, the midterm, and further out, including not just challenges but opportunities.
These recommendations are not an exhaustive list of how to maximize and institutionalize board directors’ knowledge, but they are good starting points. Some will work better for your board structure and company culture than others.
Of course, organizations should seek other ways to institutionalize board knowledge that work for both the management team and board directors. Recognizing that board knowledge is a valuable resource that can be institutionalized through relatively simple mechanisms is critical.
References
1 Bower, Joseph L., and Lynn S. Paine. “The Error at the Heart of Corporate Leadership.” Harvard Business Review, May–June 2017.
2 Massingham, Peter Rex. “Measuring the Impact of Knowledge Loss: A Longitudinal Study.” Journal of Knowledge Management, Vol. 22, No. 1, February 2018.
3 Daghfous, Abdelkader, et al. “Managing Knowledge Loss: A Systematic Literature Review and Future Research Directions.” Journal of Enterprise Information Management, Vol. 36, No. 4, March 2023.
4 Durst, Susanne, and Stefan Wilhelm. “Knowledge Management and Succession Planning in SMEs.” Journal of Knowledge Management, Vol. 16, No. 4, July 2012.
5 Paul, Reshmi, et al. “Should Your Next CEO Come from Your Board?” Harvard Business Review, November–December 2024.
6 Stanislav, Shekshnia. “How to Be a Good Board Chair.” Harvard Business Review, March–April 2018.
7 Partridge, Joanna. “BlackRock Votes Against 49 Companies for Lack of Climate Crisis Progress.” The Guardian, 17 September 2020.
8 Clark, Cynthia E., and Jill E. Brown. “Meet the New Board — Same as the Old Board.” MIT Sloan Management Review, 15 August 2022.
9 Admiral Group PLC. “Appointment of New Non-Executive Director.” Press release, GlobeNewswire, 13 May 2025.
10 LCI Industries. “LCI Industries Announces Retirement of Director David Reed.” Press release, Businesswire, 15 May 2025.
11 Anderson, George M., and David Chun. “How Much Board Turnover Is Best?” Harvard Business Review, April 2014.
12 Hambrick, Donald C., Vilmos F. Misangyi, and Chuljin A. Park. “The Quad Model for Identifying a Corporate Director’s Potential for Effective Monitoring: Toward a New Theory of Board Sufficiency.” Academy of Management Review, Vol. 40, No. 3, October 2014.
