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Former CAMC CEO discusses importance of company board members

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Don Arnwine, the national director for McManis Consulting, says he uses the "media test" to find out the efficiency of a company's board of directors.

"If a board is often in the news, there's trouble in River City," said the former president/CEO of Charleston Area Medical Center. "If a board is functioning well in relationship with management, you usually don't know they exist."

However, there may be other, more subtle ways to test a board's efficiency.

Arnwine recently spoke to business leaders about the importance of companies' boards at the Center for Rural Health Development's West Virginia Governance Forum.

The main goal, Arnwine said, is to help rural hospitals and rural health centers, which can have insider boards or public boards but usually have boards appointed by other entities or are self-perpetuating.

However, it can get complicated if members do not have a governance background, Arnwine said.

"Even though they are not-for-profit, there is always a need for training and for education. Unfortunately, many people who don't really understand the rule of governance get too involved in management and there is a conflict between governance and management," he said.

Misunderstandings are prevalent, especially when it comes to the board's managerial control, Arnwine said. 

"I often find that they don't understand that the board has all the prerogative but only when they are in session," he said. "No individual board member has any prerogative unless it's been delegated to them by the board. Often, board members will assume that they can instruct management or people in the management structure, and that might create some internal chaos. One thing I want to make sure they understand is the board is only the board when they are in session. No individual member can try to coach or instruct management."

Recruiting can be another issue organizations face.

"They often complain that they can't find good board members or that they're not satisfied with the board members that they have," he said. "Many CEOs say, ‘The worst problem is my board, and there's nothing I can do about that.'"

However, Arnwine said CEOs can do something about it.

"Really, you only have to have one board member who understands what needs to be corrected and take the initiative. They avail themselves of outside consultation to see what needs to change," he said.

Another factor businesses can take into consideration is how long board committee meetings last and how many people are on the committees, Arnwine said.

"Sometimes, I will find a board meeting that goes on for four or five hours, and that's a strong assessment that committee meetings aren't working," Arnwine said. "I'm big on strong committees. These are people who studied these kinds of things. The ideal size group for good directed discussion is seven people. A board of 10, 12 or 15 doesn't have the same quality of discussion that you would have in a smaller group. You don't have as much participation."

"Sometimes, you can be meeting too often or too long," Arnwine added. "You can say, ‘Oh, there is too much work,' but maybe it's not work. Maybe what you're dealing with is you not trusting your committees." 

Arnwine said CEOs should spend about 15 percent of their time dealing with the governance structures or planning board meetings.

"I find that if a CEO has to often spend 30-35 percent of their time dealing with the board, that's a sure sign of trouble. It means the board is not working well."

Another problems companies must address is looking at potential conflicts of interest.

"There have been an awful lot of problems historically with board members rewarding themselves by virtue of their position on the board," Arnwine said. "There are two schools of thought with board members doing business with the organizations. Some say yes; some say absolutely none."

Arnwine said he doesn't put much merit in the latter because of his experience at CAMC.

"We had the largest bankers in the state on our board. We had the largest insurance agency CEOs on our board. If we had taken the position that you can't do business in the organization, it would not have been fair to CAMC. We made sure there was a process that protected those people from being involved when a decision was made and that it was out in the open."

Regardless of the type of board, Arnwine said companies must remember one thing — the board is a critical step to success.

"It's awfully easy, always talking about how organizations can compare themselves," he said. "We like to compare organizations to how we are doing to X, Y or Z hospital, but we need to see how our board compares. When you compare, and if you don't compare very well, there's a possibility for a change."