Does your board have "curb appeal"?

Chairmen always ask me for my recommendations for potential candidates for their board vacancies. Inevitably they’re after the best – a person with the skills that meet the organisation’s needs, who may already have board experience and has overall "fit" with the other directors.

But never has a chairman asked me "is the board is ready for a director of calibre to join us?".

To use American real-estate parlance, I’m never asked if I think the board has “curb appeal”? To continue the metaphor, and much like the first impression made at an open house, I’m never asked whether I think the board looks good on the inside, too.

There’s a popular saying in governance circles that the most difficult thing to do on a board is to “get rid of” a “bad” director – someone who is no longer making a contribution at board meetings, is being difficult, or who doesn’t always attend meetings, and when they do, it’s clear they haven’t prepared.

But no-one ever asks what it’s like for a newly-appointed director who suddenly realises the board they agreed to join doesn't resemble the board they're now a member of.

A professional director will always do proper due diligence before accepting a board seat. The investigation includes reviewing past board papers and agenda, meeting with the chairman and some, if not all, of the directors, as well as the CEO and maybe senior members of management. This process can take months, as the board and the candidate size one another up.

Once the appointment is formalised, the director will attend the first of many years of board meetings and sub-committee meetings, (in Australia it’s common for non-executive directors to serve three terms of three years).

But what if at that first meeting the new appointee wonders what kind of board they’ve joined? It’s a bit like the couple who transition from dating to living together. Each has to adjust to the unromantic conversations about housework and supermarket shopping that they didn’t bother with in the first flush of romance.

A new director and the board have likewise been on their best behaviour and while both parties can get a reasonable impression of what each person is like, it’s not until the first, second and third board meeting that the new director is exposed to the unique group dynamic and the communication styles of that particular board.

A new director has fresh eyes and ears and he or she sees and hears differently to people who have been on a board for longer time.  Obvious problems include whether the agenda is followed as expected, if the chairman runs the meeting well or badly, if some directors dominate the conversation, if the board papers are sent to directors in a timely manner.

Then there are the impressions that are difficult for the incumbents to acknowledge because they’ve been living with them for so long – those pesky personality traits and behaviours of the other directors that the board accommodates for no apparent reason other than tradition. Meanwhile the new director must deal with their frustration in silence, hoping things will change.

It’s often said, too, that the new director is the person who asks “why do we do it this way”? Most directors think this question is typical of the naïve newbie who will learn the board’s ways in due course.

Another way is to consider such a question as a moment of reflection – how do the board members relate to one another, and what, if anything, does the board “put up with” because it’s easier than addressing it in an otherwise busy calendar?

A typical example is the board papers. In my experience of running workshops for CEOs and their senior executive teams on how to communicate better with their boards - http://boardroomcg.com/page/consulting_services.html - the board pack is often a festering sore.

Boards “put up with” badly-composed, poorly-argued and over-written board papers that come with thick appendices; there might be requests for change made to the CEO but these are not always addressed in the way the board wants. The managers of the business don’t see such things as a priority (or as a KPI) in an otherwise busy schedule. Likewise the board hasn’t given a clear enough directive other than “make the papers shorter” or “the board pack is too big”.

But the new director is more likely to say something, and this is a perfect time for the board to revisit the content and style of the board papers and to ask, more broadly, what standard of communication it wants from management.

A new director is new for only a short time. It’s a wise chairman who takes advantage of this fresh perspective and asks for first impressions, without fear or favour. In fact, it would be better if the chairman alerted the new director before their first board meeting that in a few months’ time, he or she would appreciate their observations on the way the board operates.

The last thing a professional director needs is to feel they’ve made the wrong choice in joining the board; the last thing a board wants is to make the wrong choice in filling a vacancy.

Just as in the real estate game where rented designer furniture can turn an average house into a “lifestyle choice” so, too, do boards need to be sure their own house is in order before an advertising and sales period.

Top 10 Ways to Lead a Board with a Solo Female Director

Being the only woman in a well-established group of male directors can be tough, especially when the woman is also the first woman to join the board.

Here are some ideas for Chairman, CEOs and non-executive directors (male and female) to remember when the board is transitioning to a broader composition, appointing directors who represent various dimensions of diversity, and not just gender.

1. Be sure that a woman's comments are heard; if the conversation goes on as though the woman has not spoken, reinforce what she has said, and give her credit for it.

2. If you notice a women being ignored or slighted, let her know you see what is happening and then make it clear to others that this unacceptable behaviour.

3. Be aware of informal occasions (sporting events are a typical example) when women directors are not present and board business is discussed.

4. Find time and ways to get to know the women informally to the same extent that you get to know the other men.

5. Don't expect women to raise gender and diversity issues by themselves; be alert to those issues and take the initiative to raise them also.

6. Don't get suspicious that women are conspiring when women are seen talking together or sitting in groups.

7. Put women directors on the nominating committee.

8. Ask women, (and not only those on the nominating committee), to suggest women board candidates.

9. Remind the board that having one, or two women, isn't enough. Nor is having no-one else who represents of other dimensions of diversity, (age, cultural background, nationality, religion, sexuality).

10. Insist that executive search firms and nominating committees provide a shortlist of board candidates who represent multiple dimensions of diversity, and not only gender.

(Adapted from "Critical Mass: The Impact of Three or More Women on Corporate Boards", Alison Konrad, Vicki Kramer and Sumru Erkut, in Organisational Dynamics, Vol 37, No 2, pp145-164, 2008).

"A woman with Asian-experience" and other stereotypes of board diversity

As the debate continues about increasing the diversity of composition on boards, the Norwegian experience of introducing quotas to redress the gender balance of its boards is widely cited as a key example.

Norway was the first country to introduce a quota for increasing the number of women on company boards. The legislation, introduced in 2003, required that at least 40% of both genders be represented. Non-compliant companies were faced with sanctions including forced dissolution.

It is critical to note that Norway didn’t legislate for “the boards of all listed companies to be at least 40 percent female” as is widely quoted in global media.

Instead, it introduced laws to ensure that corporate boards be composed of 40% of the under-represented gender.

The distinction is critical for the debate on gender balance in the boardroom as it removes the focus on feminism and “women’s issues” and instead forces the argument to be about equality in leadership in business and in the boardroom.

The legislation, which was introduced 10 years after the first motion for its introduction was made, was passed in 2003 by a majority of the Norwegian Parliament. It amended ss6-11a of the Norwegian Companies Act to state that both genders should be represented on boards of public limited companies, state and municipality owned companies and co-operative companies (a business organisation owned and operated by a group of individuals for their mutual benefit).

In the boards of publicly-listed companies, both genders should be represented as follows: 

1.       Where there are two or three board members, both genders should be represented;

2.       Where there are four or five board members, both genders should be represented with at least two members each;

3.       Where there are six to eight board members, both genders should be represented with at least members each;

4.       Where there are nine or more members of the board, each gender should be represented with at least 40 per cent each.[i]

The balancing of gender composition on Norwegian boards was initially slow but by 2005 momentum was evident. The proportion of women in 2002 was six per cent, rising to nine per cent in 2004 and 12 per cent in 2005. Then real progress was made with 18 per cent of board seats occupied by women in 2006, 25 per cent in 2007, 36 per cent in 2008 and 40 per cent in 2009[ii].

The Norwegian experience has caused other European countries, such as Holland, Spain and Iceland, to also introduce legislation to achieve gender balance on boards.

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[i] Storkvik, A., and Teigen, M., (2010) “Women on Board: The Norwegian Experience”, Friedrich Ebert Stiftung, International Policy Analysis.

[ii] Teigen, M., (2008) Norwegian quota policies, paper presented at the Nineteeth Meeting of the Helsinki group on Women and Science, 4-5 November, ISF paper, 2008:12

Tokenism: The Hidden Enemy of Board Diversity

Ever since Derek Higgs[i] proposed that non-executive directors be sought from a broader range of potential candidates, including those which would capture likely female appointees, diversifying board composition has become a world-wide trend.

At one end of the spectrum, voluntary codes of governance have been revised to include “diversity” guidelines for increasing the number of women on boards, and in senior executive ranks.[ii] At the other extreme, in 2003 Norway legislated for corporate boards to increase the number of directors in the “under-represented gender”[iii] on the board or else face de-listing by the Norwegian Stock Exchange.[iv]

While statistics show that the number of women represented on Australian corporate boards has increased significantly between 2009 and 2013, the figures come off a very low base. For example, in Australia, the number of female directors on the ASX100 boards increased from 8.7 per cent in 2010[v] to 15.7 per cent in June 2013.[vi] But as of June 2013, 48 boards on the ASX200 do not have any female directors.

A greater number of women are represented on boards in other sectors namely mutual and community banks[vii], governing councils of universities[viii], and government entities[ix]. Medibank Private, which is one of the largest and most influential of government boards in which a federal Minister has final approval of the directors, has reversed the trend: five of the seven members of the board are female, including the chairman, Elizabeth Alexander. (The two men on the board are non-executive director, Paul Vamos, and the Managing Director, George Savvides).[x]

As governments, professional associations and boards continue to redress the gender imbalance on (mainly corporate) boards, two themes recur: 1) that “gender” and “women” are used as a synonyms for “diversity” (as opposed being only one example of the many dimensions of diversity), and; 2) the consequences of diversity of board composition is little understood.[xi]

One of the hurdles to overcome is the habit of “diversity” continuing to be defined as the number of men, versus the number of women, who compose a board of directors. While this misconception continues to be perpetuated, the opportunity to broaden the interest, and subsequently the discussion and academic research, on the impact of diversity on boardroom decision-making remains stymied.

Diversity means having many different characteristics represented (on a board) such as gender, age, cultural background, professional expertise, sexuality and religious affiliations. Diversity does not mean having one or two female directors on a board composed otherwise of men who all share the same characteristics – typically age, gender and professional background.

By limiting the definition of “diversity” as it relates to board composition to women, the opportunity for further discussion and research is likewise restricted. One area of research in which I am engaged currently is considering what it means to “lead for diversity”, meaning what additional skills does a chairman, experienced only in leading a board composed of men similar to him, need in order to accommodate a greater range of people on the board?[xii]

When there is only one person who represents the minority in a group, the spotlight of attention shines brightly. The other group members, shrouded in comfortable familiarity, are suspicious of this person, who looks different, speaks differently, and most confronting of all, thinks differently. Group dynamics theory attests to the practice of groups striving to conform in order to survive; a member who is different to the majority usually has limited choices: conform, or act independently and authentically and risk being rejected by the group.

Minorities in groups, even if this means one woman in a group of male directors, is often called a “token”, and the practice of admitting a person different from the group norm is called “tokenism”. Senior female executives and directors want to avoid being the “token woman” at all costs. Yet in this period of reforming the way boards recruit new directors and plan for succession, “tokenism” is a pertinent issue.

Women directors on ASX200 boards are most likely to find themselves as the lone woman, and occasionally as one of only two female directors. One woman finds the spotlight of attention very bright; but this is shared more easily with two women. Once three women are appointed a “critical mass” occurs and the group sees the women as “members” rather than “our female director”.[xiii]

The problem of tokenism on boards is greater when other dimensions of diversity, such as cultural representation, are sought on a board. In Australia, the Federal Government’s Asian Century White Paper has called for all ASX200 boards to have 33% of directors with “deep Asian experience” by 2025.[xiv]

The definition of “Asian experience” is fraught with misinterpretation,[xv]  and so far, only three per cent of directors of the ASX100 boards were born in an Asian country, namely China, Hong Kong and Singapore.[xvi] There is also a spattering of directors with experience of working in Asia, such as a former ambassador to China. If number of boards surveyed is increased to the ASX200, the number of boards with directors with “deep Asian experience” increases to six per cent.

With this push to increase the number of women and the number of people with “Asian experience”, on corporate boards, it is timely to consider what it means to place a person who represents a minority group into a well-established group.

Whether that person is a woman, a younger person, an indigenous director or a director born in an Asian country – further examination is needed of the impact of introducing a person of “difference” into a group whose membership that has a long tradition of “refreshing” its membership from a similar group of people. Questions to consider include adapting leadership styles for the chairman, training the whole board to better understand different perspectives, and revising induction programs for new directors.

These are areas of deep interest and relevance to my doctoral research and to my work as a board advisor. For further information, please contact me: ann-mareeATboardroomcg.com

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[i] Higgs, D, (2003) Review of the role and effectiveness of non-executive directors

[ii] One example is the Corporate Governance Principles and Recommendations with 2010 Amendments produced by the ASX Corporate Governance Council.

http://www.asxgroup.com.au/media/PDFs/cg_principles_recommendations_with_2010_amendments.pdf

[iii] It is critical to note that Norway didn’t legislate for “the boards of all listed companies to be at least 40 percent female” as is widely quoted in global media. Instead, it introduced laws to ensure that corporate boards be composed of 40% of the under-represented gender. The distinction is critical for the debate on gender balance in the boardroom as it takes away the focus on feminism and “women’s issues” and instead forces the argument to be about equality in leadership in business and in the boardroom.

[iv] Storvick, Aagoth and Teigen, Mari, “Women on Board: The Norwegian Experience”, Friedrich Ebert Stiftung, http://library.fes.de/pdf-files/id/ipa/07309.pdf

[v] http://www.womenonboards.org.au/pubs/bdi/2012/index.htm

[vi] http://www.companydirectors.com.au/Director-Resource-Centre/Governance-and-Director-Issues/Board-Diversity/Statistics

[vii] http://www.womenonboards.org.au/pubs/bdi/2012/creditunions.htm

[viii] Of the governing councils of the Group of Eight (Go8) universities in Australia, 33% of members are female. http://www.go8.edu.au/

[ix] As at 30 June 2012, women held 38.4% of Government board appointments (up from 35.3% in 2011). Over the 2011-2012 financial year, 41% of the 1633 new board appointments were awarded to women. http://www.fahcsia.gov.au/our-responsibilities/women/publications-articles/gender-balance-on-australian-government-boards-report-2011-2012

[x] http://www.medibank.com.au/About-Us/Corporate-Information/Our-Board-and-Governance/Board-member-profiles.aspx

[xi] Adams, R, “Women in the boardroom and their impact on governance and performance,” forthcoming, Journal of Financial Economics.

[xii] Moodie, A., (2011) “The Chairman of the Future: Leading for Diversity in the Boardroom”, Keeping Good Companies, August.

[xiii] Torchia, M., Calabro, A., & Huse, M., (2011) “Women Directors on Corporate Boards: From Tokenism to Critical Mass”, Journal of Business Ethics, Vol 102 No 2, pp299-317

[xiv] The Asian Century White Paper, Prime Minister and Cabinet, Federal Government of Australia, 2013. http://asiancentury.dpmc.gov.au/white-paper

[xv] Interview with Ann-Maree Moodie, ABC News Radio, on the Federal Government's Asian Century White Paper which recommends the composition of ASX 200 boards include a third of directors with deep Asian experience" by 2025. October 29, 2012. www.abc.net.au/newsradio/listen/daily.htm

[xvi] Durkin, P., “Top boards fail Asia test”, The Australian Financial Review, 14 June 2013.

Treading the Boards: Governing Arts Organisations

Arts boards exist across the spectrum of artistic endeavours, overseeing organisations which represent dance, digital, new media and film, indigenous arts, interdisciplinary arts, literature, music, performing arts, theatre and visual arts.

Traditionally, boards of directors are formed to represent the interests of the shareholders. Arts companies, being generally not-for-profit organisations, have a multiplicity of stakeholders - owners (such as gallery owners), government, the artists whom they employ, their audience and the public at large – to which the board is responsible.

The role is similar to the stewardship of a for-profit organisation in that an arts board is responsible for governance, strategy and financial management. The key difference is that arts organisations cannot raise capital by selling or issuing shares and therefore rely on government funding to ensure their sustainability.

The priority of the board of an arts organisation, then, is to balance financial risk with artistic programming; artistic vision with box office reality.

The composition of an arts board increasingly reflects both the business and artistic imprimatur of the organisation. It is common for an arts board to be chaired by a prominent business person, and to be populated with other well-known people from business and professional services circles. Depending on the organisation, these boards often also comprise members with a background in the arts; others look more like the board of a listed company.

One characteristic which is common to all these boards is that the directors have the ability to “open doors”. While the organisation is no doubt served admirably by a skilled and experienced philanthropic management team, an introduction from a well-known member of the Board will make all the difference to the success of a proposal for corporate funding or philanthropic engagement.

The Holy Trinity: Chairman, Chief Executive and Artistic Director 

                                        
One role in which arts organisations are similar to public and private companies is that the boards are primarily responsible for the recruitment – and perhaps also the dismissal – of the chief executive officer. And while the artistic director doesn’t always report to the board, he or she is at least equally integral to the organisation’s purpose, mission and often, its success. It is little wonder that artistic directors, rather than general managers, feel the greater weight of their boards.

One of the key differences between a corporate board and the board of an arts organisation is the need to manage the inevitable tension between artistic vision and financial sustainability. This frisson is never better illustrated than in the nexus of power that lies at the top of an arts organisation between the chairman, the chief executive or general manager and the artistic director.

Arts companies each manage this triumvirate differently. In most cases the artistic director reports to the chief executive who in turn reports to the Board; the chief executive may also be a director of the board. In other cases the general manager is also the artistic director. Asked whether the chairman of an arts company might occasionally feel like a “third wheel” in the triad of power between the chairman, general manager and artistic director, one chairman replied candidly: “I’m pretty clear about where I sit in the firmament. The artistic director is responsible for programming and the board and general manager work out how to fund it. As chairman, I get involved in the financial security of the company and high level strategy. I have a say in the areas where I think I should have a say, and everywhere else I try and facilitate the best result.”

The artistic director (or equivalent) can be especially powerful due to their reputation for visionary excellence and the respect they build through their audiences and the public at large. 

Managing the artistic director’s programming ambitions is a matter of balancing the purpose of the organisation, (do the performances, exhibitions or repertoire challenge audiences?), the mix of “crowd pleasers” combined with new work, and the ability to fund the program and perhaps even to make a profit.

If the artistic director has a falling out with the board it is usually over the same issue: their artistic vision is too expensive to produce.

Media coverage is rarely congenial to the arts board that executes the dismissal of a popular artistic director, and public condemnation swiftly follows. Such a reaction is never desired by an arts organisation; it is seen as poor governance to have let it come to that. Somehow the board lost touch with the dramas of personal ambition that can play out within arts organisations like a Wagnerian opera and the chairman is often blamed for the very public assault on the board’s reputation.

This article is reflects preliminary findings from an ongoing research project by this author into the governance of arts organisations in Australia. It is in part based on a continuing series of interviews with chairmen, board members, chief executives, artistic directors, artists, arts administrators and bureaucrats, corporate sponsors and private donors who participated in off-the-record interviews between March and August this year.

It is an extract of a article that was first published in the September issue of Keeping Good Companies, the journal of Chartered Secretaries Australia.

Another extract, discussing how arts organisations define and mange risk, will be published shortly.

 

iPads in the Boardroom (2)

Delivering board papers via an iPad or other tablet device is a growing trend among companies seeking cost-effectiveness and convenience. But electronic delivery of board packs is fraught with legal, risk and security challenges.

Until recently, most companies printed and bound board papers and couriered the pack to the directors prior to the next board meeting. The board packs were cumbersome, heavy and there was always the risk of the papers being lost in transit or unable to be delivered because no-one was home to receive them. There were also security issues if the packs were left the front door unattended.

Over the past 12 months, a number of companies have launched products which deliver board papers securely via an app, and company secretaries are presenting shiny new iPads to their directors. Other directors who are already veterans of using tablets to read and annotate their board papers choose to use their private iPads for all the boards on which they serve.

Where once the board table was strewn with folders, papers, stick-it notes and pens, now the mantra is BYOD:  Bring Your Own Device.

Board members believe that receiving their board papers via a tablet device is inevitable. But in the rush to embrace new technologies in the boardroom, directors must be cognisant of the potential legal ramifications of digital delivery.

In this article I illustrate this by discussing hyperlinks, annotations and passwords.

Hyperlinks

Ironically, one of the common complaints directors make about reading board papers on their tablet device is the size of the board pack. When the board pack was prepared in hard copy its thickness was obvious. The size of digitally-delivered board pack is much harder to determine and directors only learn what’s ahead for their weekend reading by the length of time it takes for the pack to download.

The download time can be related to the speed of the internet connection.  But the more common reason is the size of the pack and whether the papers feature complicated graphics. One way to overcome the download time is to use hyperlinks.

For an IT expert, a hyperlink the obvious solution to complaints about the size of the board pack and the length of time it takes to download.  The problem with hyperlinks from a legal perspective is that a hyperlink is easy to miss when a director is reading and annotating the papers.

Legally, if a hyperlink is part of the board pack the directors have an obligation to read its contents just as if it were a board paper. It’s a flimsy strategy in the event of a court case that a director will use the defence: "but it was in a hyperlink and I didn’t click on it".

Annotations

Another tricky legal area for director is annotations. There are a number of apps which allow directors to annotate their board papers easily and conveniently. The issue is less about how to make annotations than it is what to do with the mark-ups after the board meeting.

If the papers were to become material to a court case in years to come, would a director remember why he circled a word on page 43, wrote an exclamation mark on page 126 or doodled a smiley face at the bottom left-hard corner of page 152?

The ANZ Bank last year announced that under legal advice it had deferred introducing iPads to the boardroom, citing concerns about data security. “Under Australian law the annotation is a problem,” ANZ Bank’s chief information officer Anne Weatherston told The Australian Financial Review at the time. “While we can secure the board paper, any annotations you make sit outside of the network and we cannot capture them or store them as a corporate-owned document.”

The Board of the ANZ Bank now uses iPads with the papers contained in a secure app. “However there are legal risks regarding annotations,” Ms Weatherston told Boards and Governance. “As such we do not allow board paper annotations on the iPad.” 

Boards are addressing the issue in different ways. In some cases, the board papers and the annotations are deleted manually from the iPads either by the directors or the company secretary at the end of each board meeting. In other companies, this is done remotely.

Some directors who are especially concerned about electronic annotations use a small notebook in which to write their annotations the old-fashioned way, and shred the notebook after the board meeting.

Passwords

Remembering passwords is the bane of life in the digital age. From internet banking and bill paying to the websites of professional  associations, regular online shopping websites and social networking sites, remembering each and every password is very difficult and tiresome.

Board papers delivered on iPads or other tablet devices are protected to a larger or lesser degree by the level of security provided by the company and/or the app the company secretary uses. However, if the director allows the four-digit password on the iPad to be easily visible when it’s entered, the device can be easily stolen and the information extracted. Public places including airport lounges and the business class cabin of an aircraft where directors often fly are common areas of potential risk.

Two factor passwords are one way to address easily deciphered security codes. One factor is something known to the user and is a password. The other factor could be a token, a fingerprint or facial recognition.

Complicated passwords that contain a mix of numerals and letters in upper and lower case are another option to increase security - but they are much more difficult to remember.

Conclusion

When board papers were delivered in hard copy there were just as many legal, risk and security issues facing the company and its board.

The packs could be stolen, photocopied, emailed to competitors, left behind in airport lounges and taxis. The digital age has not eliminated these risks but in some ways it has made security more difficult to ensure.

As directors become more familiar with using iPads or tablets as just another business tool, downloading board papers, reading and annotating them and keeping them secure will become a matter of course.

In the meantime, creating a board protocol or policy on how papers can be kept secure is a worthwhile board agenda item for discussion.

Should company directors tweet?

He’s 63, well-educated, a former accountant-turned-bureaucrat, who has a portfolio of company, government and not-for-profit boards. We’re not meeting in a public place because the topics we’re discussing are sensitive. As a chairman, he’s seeking independent counsel; it’s understood the conversation is confidential.

As we conclude our business, we joke about what would happen if we tweeted about the meeting. It’s immediately apparent that there is nothing that we could say even if we were remotely serious.

“I’ve always thought of Twitter as a waste of time,” he says. “Now I realise that even if I simply tweeted, ‘having a coffee with Ann-Maree Moodie’, there would be a number of people who may surmise the reason for the meeting. So even for company directors just tweeting that you’re meeting with someone could be market-sensitive or could become material. It’s a game-changer.”

In the conservative world of company boardrooms, the notion of directors signing up to Twitter and having followers is incongruous. But as I’ve argued in a previous post, (“Should Company Directors be on Facebook?”), I believe it is important for board members to be active in social media in order to understand firsthand how it works.

Businesses are changing rapidly to take advantage of this new consumer-led transactional world and company directors need to have the right language in order to participate in discussions and decision-making at the board table. And they need the experience to back up what they say.

But do they need to tweet about it?                            

Twitter was created by Jack Dorsey as a free micro-blogging website. It was launched in August 2006 and became incorporated in May 2007. Since then the number of people who have signed to the site has grown exponentially.

The statistics about social media usage vary. The Pew Research Center in the United States, which is monitoring Internet usage by Americans, believes Twitter is used by 15% of adults who are already online, with eight per cent of these people using the site on a “typical” day. This figure compares with 13% of “online adults” using Twitter in May 2011 indicating that Twitter usage is steady. The small spike is attributed to the increase use of smart phones.

The word “twitter” was chosen as the name of the site quite deliberately – but it’s a word that has also given rise to the most common criticism levelled at it. The first name in contention was “twitch” because it is similar to sound a mobile phone makes when it vibrates. But it wasn’t quite the right choice. In the dictionary the word “twitch” lies not too far away from the word “twitter” which is defined as “short bursts of inconsequential information”. “And that’s exactly what the product was,” Dorsey, now the company’s executive chairman, wrote in a diary he kept during the website’s creation.[i]

For many critics, “inconsequential information” such as tweeting that you’ve just had a shower, called your girlfriend, or heated tomato soup in the microwave are all very good reasons not to sign up, to follow or to tweet.

Yet a small percentage of company directors and CEOs are signing on to Twitter, building a following and following others. Why?

Celebrities are the most successful members of Twitter – Lady Gaga, Justin Bieber, Britney Spears and Ashton Kutcher. But Twitter isn’t just for popular and successful musicians, singers and actors. Political leaders such as US President Barack Obama and recently deposed French President Nicholas Sarkozy are on Twitter; religious leaders who tweet include the Dalai Lama. Some of the world’s biggest brands – Chanel, Rio Tinto, the NFL, the Ford Motor Company - use Twitter as a way to contact their customers directly.

Yet in the US, only 19 of the CEOs of the Fortune 500 companies are on Twitter and only four per cent are believed to have a Facebook page or a Linked In profile. A staggering 64% are not involved in social media at all.[ii] Among the few internationally-known CEOs who tweet are Bill Gates, Donald Trump, Rupert Murdoch, Richard Branson and Meg Whitman. The statistics are extraordinary when compared with the number of people who use Facebook – 800 million active users.

I spoke with the few chairmen and company directors I know who use social media. The majority of these do very little: they have a Linked In account which they check irregularly. At the other extreme are the company directors who use Facebook and Linked In several times a week if not daily and have also signed to Twitter.

Said one chairman: “I only use Facebook for family and close friends in order to share photos and send personal messages. I use Linked In to develop a range of business and professional contacts and align with groups of common interest. I use Twitter to follow regular messages from people, companies or the organisations that I follow. Only about 30% of my colleagues use Twitter or social media generally.”

I mention my conversation with the chairman who couldn’t see any benefit from using Twitter. She replies:“Twitter is a way to get a flow of information on areas of interest. It can be used in a one off way to refer the user to more detailed information or it can be used for a free flowing conversation. As a company director you might be referred to something you might not otherwise know about or you can observe how conversations twist and turn and get a feel for how that could impact on your companies.”

Is it negligent of company directors not to tweet, then?

In the world of Twitter there are those who tweet and those who follow. By far the majority of people are followers, using the service to “listen in” to “conversations”. But for those who tweet, or who wonder what they might tweet, examples abound.

Rupert Murdoch tweets on topics ranging from local and international politics to business. “Bigger problem than Afghanistan is Pakistan - broken state with lots of nuclear bombs. No- one knows future,” Murdoch tweeted on July 11. The same week Bill Gates was collecting book recommendations. Australian Prime Minister Julia Gillard regularly tweets when she’s on the road although every word is countered by her array of “fake Julias”.

What to tweet and when to tweet it is a matter of common sense for a company director. There is a happy compromise to be achieved by participating in Twitter in order to learn and to experience how so much of the world chooses to communicate today while still maintaining an appropriate level of decorum, discretion, grace and confidentiality.

Tweeting from a board meeting is an obvious example of what a company director shouldn’t and wouldn’t do. In short, any piece of information that should remain confidential shouldn’t be tweeted.

But Twitter could be used to comment on a company’s new product, the appointment of a new CEO or to cheer on a cause that the company supports.

A board charter could be written outlining what directors and the company believe are appropriate ways that directors may choose to participate on Twitter. This document should make clear the purpose of directors using social media, outline the risks associated with such activity and the ways in which these risks can be corralled.

Said a chairman I interviewed: “All companies I am involved with have a risk strategy and a wide range of risks are discussed. But it is evolving just like the media itself. The biggest issue is keeping watch on what is being said and reacting quickly.”

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[i] Bloggerati, Twitterati: How Blogs and Twitter are Transforming Popular Culture by Mary Cross, (Praeger: 2011).

[ii] http://www.ceo.com/social-ceo-report/