Best Boards Agree To Disagree

SEC Commissioner Troy A. Paredes, left, speaking to the Society of Corporate Secretaries & Governance Professionals last week, about what makes corporate boards effective:

[D]irectors should be willing to dissent, and disagreement from others should not be discouraged or suppressed. When it leads people to engage rigorously, disagreement helps ensure that the unknown is identified; that potential conflicts are spotted; that information is uncovered; that overconfidence and other biases are managed; that “outside the box” thinking is sparked; and that challenges and opportunities are assessed in a more balanced way. More to the point, directors cannot become complacent or too deferential to management just because the CEO has been making the right calls and the company has been on a good run. Whether the company is successful or struggling, the tough questions need to be asked to help ensure that the best decisions are made going forward. Indeed, a board may want to consider designating one or two directors, perhaps on a rotating basis, whose explicit charge it is to be skeptical and to press when needed.

Commissioner Paredes' full remarks are here.