Originally created 07/05/99

Board makeup key to success



A company's board of directors, can tell you a lot about the firm, experts say. But selecting one and keeping it current can be tough, especially in a dynamic marketplace.

Some boards have several members from a variety of professions.

Others have a limited number of members -- all with similar backgrounds.

An effective board, company executives say, has as many members as it needs to reflect the company's values and goals.

Local manufacturer Augusta Sash and Door Co., for example, has a three-member board. It includes the owner, his wife, and the vice president. It's a simple arrangement that makes annual meetings quick and limits policy debates.

G.W. Taylor is the chairman, chief executive officer and president. William Warick is the vice president, secretary and treasurer.

Unlike publicly traded companies, Augusta Sash and Door is privately held. There are no outside investors, no stockholders to look after.

At this company, the officers are the owners.

"I see no need for a big board of directors," Mr. Warick said.

Merry Land Properties, a real estate company headquartered in Augusta with holdings throughout the Southeast, has a five-member board.

It was formed last year, when Merry Land Properties was spun off from Merry Land & Investment Co., which merged with Chicago-based Equity Residential Properties Trust.

The Merry Land board includes two officers of the company, the former chairman of Merry Land & Investment Co., and two executives from other companies -- a real estate investment trust in Jackson, Miss., and a financial service company in Atlanta.

W. Tennet Houston, Merry Land's chief executive officer and board chairman, said the board selection process started by asking: "What sort of director could be helpful to the new company?"

The key characteristics of a good director is that he or she is active and successful in the industry, he said. A balance of directors who are working in the company and come from outside the company is important, too.

"We think it's best to have people knowledgeable about our business," Mr. Houston says. "A good strong board is helpful in providing perspective and ensuring that the shareholders are well cared for."

The company probably will add two more directors, Mr. Houston said.

One of the challenges of getting good directors is that they are legally liable for what happens to the corporation, and in an increasingly litigious society some candidates are reluctant to serve.

"Board members have to be willing to give up a significant amount of time for fairly nominal compensation," Mr. Houston said. "our duty is to earn a good value for out shareholders."

In contrast to Merry Land's board, Georgia Bank & Trust's board is much larger with 18 members. Half of those members also serve on the board of directors of the bank holding company.

A community bank, the company wanted the board to reflect that.

All of the members have connections to the Augusta area.

They come from a variety of backgrounds. They include several bankers, lawyers, business owners, an insurance agent, real estate agent, college president, and doctor.

"They are a tremendous asset to us," bank president Dan Blanton said. "I've got a wealth of knowledge that we use quite often."

The board members offer leads and advice.

"They are great ambassadors," Mr. Blanton said.

Board Fit

Spencer Stuart consultants Samuel H. Pettway and Dennis C. Carey offer tips for selecting and keeping a corporate board of directors current.

They say that the three critical concerns are fit, balance and competitiveness.

Does the board's talent mix match the company's needs?

The board of directors should understand the company's priorities. The two should match up well. A community-oriented company should probably have community-oriented board members. A company with a international focus may want to have board members with diverse backgrounds. The board also should know what's going on at the company. So, for example, if a new chief executive officer had to be selected, the board could help the designated successor.

Is the board balanced?

A good board should have a mix of wise and dynamic people. The average age of Standard & Poor's 500 directors is 60. Members should add to the board-level deliberations. Directors with a long history with the company will know what's been tried in the past. Directors from outside the company may add new insight.

Is the board a competitive asset?

Directors need to be in touch with where the company is headed. They need be qualified with years of experience. Board members often give the company an edge over the competition.

Frank Witsil can be reached at (706) 823-3352.