Across boards at organizations of every size, ownership structure, and stage of development, two design flaws occur with striking consistency. First, boards are often designed to reinforce the instincts and preferences of the people who control a company — typically founders or CEOs. Second, even when boards are effective, over time they fail to evolve with the company's needs.
The remedy lies in understanding that good governance is about creating a counterbalance to the forces that shape decision-making in a company, which are specific to a firm's ownership structure and context. In this article we'll describe the four kinds of contexts in which boards — regardless of industry — most frequently operate and provide a framework for building boards that fit each one.
Our categorization and framework are based on a collective five decades of research and teaching on boards and governance. In particular, we've drawn on the cases discovered and documented through our Leading from the Chair and International Directors programs at INSEAD — and on the experiences that the more than 3,500 directors and executives from over 2,000 companies that have participated in those programs have shared. In the discussion that follows, we'll focus on four of those companies, using them to illustrate the risks and opportunities of each context.
How Context Shapes a Board's Challenges
Most firms fall into one of four ownership categories, each of which presents distinctive strategic advantages and disadvantages.
Entrepreneurial ventures have genuine strengths: concentrated decision-making, a long-term ownership mindset, and the kind of conviction that drives bold strategic bets. But they often suffer from an unchecked appetite for risk, a narrow strategic perspective, and the inability to distinguish what's good for the company from what's good for the founder.
With these ventures, the board's counterbalancing role is to ensure that founders' convictions are tested against independent judgment from people with broader experience and perspectives. This is especially critical for companies approaching an initial public offering. In 2019, for example, WeWork's IPO collapsed largely because its board wasn't designed to challenge the company's cofounder. Adam Neumann held super-voting shares, was his own board chair, and had surrounded himself with directors who were personally close to him or had a professional affiliation with the company. As a result, they were more likely to ratify than to question his decisions.
Established family firms face governance challenges that are in some respects the most complicated. Family members may simultaneously sit on the board, be major shareholders, and hold management positions. But a family shareholder who's also a director and runs a business unit faces an almost impossible task in separating those roles cleanly, and the board as a whole must oversee an entity in which the distinctions that make governance work — between owners who set the direction, directors who oversee, and managers who execute — are blurred. Sibling rivalries, succession tensions, and disagreements about the balance between family employment and professional management add further complexity.
The counterbalancing role of a family company's board is to set boundaries firmly: to separate family governance from enterprise governance, to ensure that shareholder interests are represented with a coherent and unified voice rather than fractured by competing family agendas, and to maintain strategic focus when family dynamics threaten to pull the agenda toward questions about the distribution of profits and assets to the family rather than external competitive threats.
Large, mature public firms face a governance environment characterized by dispersed ownership, intense regulatory scrutiny, and the relentless pressure of quarterly performance cycles. This creates a complex counterbalancing task: The board must buffer the company against short-term market expectations and oversee the compliance machinery of public governance while making sure it doesn't crowd out genuine strategic oversight. In too many public company boardrooms, the directors spend the majority of their time on audit, regulatory, and disclosure matters at the expense of the decisions that most directly determine long-term value.
Private-equity-owned firms engineer their governance to provide disciplined oversight of a defined value-creation plan within a specific investment horizon. Their boards tend to be more structured, more performance-oriented, and more focused on execution metrics. Though these are improvements over the informal governance that often precedes a PE acquisition, the tools of oversight — the hundred-day plan, the bonuses linked to key performance indicators, the quarterly performance cadence — can leave little room for the coaching relationships, candid conversations, and longer-range strategic thinking that leadership development requires. More fundamentally, there's an inherent tension between the board's duty to the company and its duty to the fund: Decisions that optimize exit timing and returns to existing investors may not optimize long-term enterprise value for future investors.
The Need to Evolve
Over time, many good boards lose their ability to serve as an effective counterbalance. This is partly because the things that make a board stable and functional — trust among directors, settled processes, shared assumptions about roles and responsibilities — also make it resistant to change. The gap between what a board was designed for and what the organization needs usually widens gradually, and the board may be unaware that this is happening until a crisis strikes.
Few examples illustrate this dynamic more vividly than Eastman Kodak. Although some say the company was taken by surprise by digital photography, that's not entirely true: In fact, its engineers developed the first functional digital camera in 1975, giving it an early and commanding technological lead. But in the 1990s Kodak's board was constructed for the company it had been: a dominant, vertically integrated manufacturer of chemical film products, competing on precision engineering and production scale. Its external directors came from heavy manufacturing, traditional financial services, and consumer packaged goods. They were accomplished leaders, but their collective experience mapped to industries that competed on engineering capabilities, capital intensity, and brand loyalty in mature markets. The trouble was that the digital photography market would be won by whoever built the most compelling ecosystem of devices, software, and sharing platforms — a competitive logic foreign to the board's frame of reference.
Two structural features made it difficult for Kodak's board to expand that frame. The persistent combination of the chairman and CEO roles — held by successive leaders — eliminated the very counterbalance a board is meant to provide. To craft strong strategies in moments of disruption, boards require friction and genuine challenges; a chairman who is also the CEO has an inherent interest in defending the current strategy rather than interrogating it. Kodak's board lacked the most important mechanism for testing whether the instinct to protect the film business should yield to the harder choice of cannibalizing it. The second feature was a structure that divided directors into three staggered classes with three-year terms. Although this arrangement was intended to ensure turnover of board members, it imposed a rate of change in board composition that was too slow for a rapidly shifting competitive environment.
To be sure, Kodak's board, like many others, engaged in systematic board and director evaluations, which can surface characteristics misaligned with current needs. But in our experience, traditional evaluations are limited. Even when they ask forward-looking questions, the answers are filtered through the existing board's assumptions, relationships, and collective frame of reference. What remain outside the frame are the broader possibilities: whether strategy is governed by the right logic, whether the board's size and structure are suited to the actual complexity of current challenges, and whether standing committees map to priorities that still matter.
To put together a board that's effective over the long term, you need to focus on four key interconnected elements: purpose, people, process, and the chair. These are interdependent variables — changing one affects all the others. We'll now walk you through them in more detail, using four disguised company examples.
Purpose: Define the Board's Mandate
Purpose is about why the board exists and whom it owes its duty to. At a founder-led company its purpose might be "to provide independent oversight and check concentrated founder control." At a PE-backed company it might be "to maximize enterprise value through disciplined capital allocation while building company capabilities beyond the investment horizon."
At Wright Technologies, a midsize industrial company with revenues of €100 million, George, the founder and sole shareholder, worked with a newly appointed chair to formulate the board's purpose: "ensuring the long-term sustainable development of the company and value creation for the shareholder by creating an effective framework for executive action." The phrasing made it clear that the board would serve both the founder and the company — not one or the other. It would create frameworks, not make operational decisions. And it would focus on sustainability and value creation, not just growth and revenues. That clarity shaped everything downstream: The board would concentrate on leadership oversight and development and long-term strategy — and especially on risk management and corporate governance. It explicitly chose not to involve itself in quarterly performance management or product development decisions.
When Hanz became the nonexecutive chair of the board of Empire Group, a 200-year-old family-owned company, it had more than 500 shareholders (all family members), who didn't always think about the future of the business. Hanz (a seventh-generation family owner) recognized that protecting senior executives from their intervention was essential for the long-term stability of the family and the business. Together with other family members who were also directors, he defined two main roles for the board. First, it should ensure that shareholders wouldn't interfere with the management of the business. Second, it would define a long-term vision and determine the sectors and businesses the company should be in. For example, the board decided that the company would avoid capital- and technology-intensive industries and businesses outside Europe.
Getting purpose right is critical in the context of an IPO, which requires transforming a private company into one for the public market. The board members will have to counterbalance three forces — the existing management's control over the information they receive, the existing owners' immediate interests, and the public market's short-term performance pressure — all while managing a radically larger compliance burden. When Xama, a $10 billion company, was spun off from its parent company and started preparing for an IPO, the new board defined its purpose as "supporting the executive team through the transition and establishing governance practices without disrupting operations." That meant creating a governance structure appropriate for the stock market environment and strengthening management's ability to operate in that environment through oversight and mentoring.
In contrast to the other firms, PE-owned GeoTech never explicitly defined a purpose for its board. A PE fund had acquired the lead position in the company with the aim of getting a return through a sale in less than four years — and that timetable shaped what the board focused on. But when the owner's exit is the goal, a board will generally reflect the owner's priorities more than the company's needs. Of course, the two often align, since disciplined growth serves both. They can diverge, however, when a board decides to trade a near-term financial gain favoring the owner's exit value for a longer-term and uncertain strategic opportunity. GeoTech may face that dilemma in a pending move into a new sales vertical, the largest market for its product, where establishing an early foothold could make the company the category standard. But the move would require pricing GeoTech's products aggressively, complicating the story of steady growth and strong margins that would make the company a safe bet for a trade buyer. A carefully defined purpose would have named both duties, to the fund and to the enterprise, giving the board more room to weigh them against each other.
People: Create a Capability Map
People is the element that most board designers invest their energy in — and where their instincts fall short. The common mistake is assembling a team of star directors rather than a star team.
The skills a board needs most vary with a company's ownership structure: A founder-led firm needs directors who offer independent judgment and strategic and financial discipline. A family-owned company needs board members with strong strategic management skills, deep knowledge of governance, and the ability to withstand emotional pressure. A PE-backed company needs directors who can provide mentoring and a longer-term strategic perspective. A publicly traded company needs directors with deep compliance and governance discipline. The point is not that these capabilities are unimportant elsewhere — it is that each context has a primary requirement.
To rein in his entrepreneurial exuberance and instill strategic discipline at Wright Technologies, George recruited an experienced independent board chair who would moderate discussions and challenge him, not give him advice. Together they added a director who was a former senior international executive at one of the company's largest potential customers. That director strengthened the board's independence and global perspective and could help mentor the management team. Two additional independent directors supplied financial, risk management, and compliance expertise. Domain knowledge was deliberately left where it was strongest: With the founder himself on the board and in management with an incoming CEO, a 20-year industry veteran, who sat outside the board. The result was a board designed not to mirror the founder's strengths but to provide knowledge he lacked and counterbalance his power.
At family-owned Empire, the board's nomination committee defines profiles of directors in collaboration with the chair and external advisers. Directors must be credible business leaders with strong strategic skills, the ability to provide oversight across functions, and a deep understanding of global politics. The most important qualities, however, are the capacity to form independent views, the courage to back those views, and the ability to work collaboratively.
Xama needed a board that could guide management through the spin-off while meeting the regulatory demands of public markets. The newly appointed chair and parent company executives translated those requirements into detailed profiles: industry understanding; deep experience with finance, audits, and risk management; legal and governance expertise; international leadership experience; and supply chain and technology security expertise. In terms of personal characteristics, they looked for collaborative ability and the willingness to engage in debate and find solutions to challenges. Every candidate was told the required commitment up front — 12 days a year for in-person committee and board meetings plus travel, and a further 25 days for online meetings and preparation — and candidates holding more than three board positions were excluded from consideration. The result was a board composed not for the company Xama had been as a subsidiary but for the standalone public entity it needed to become.
In contrast, GeoTech's board was shaped less by a map of the capabilities the PE-backed company needed than by ownership stakes and shareholder agreements. The lead investor's partner and several investors from early rounds of financing made up the majority of its seven directors, with the CEO also on the board. That gave the board genuine strengths: close alignment with the investors, strong financial oversight, and valuable network connections across relevant industries. The directors were fluent in talent reviews, pricing, sales pipelines, and the allocation of resources across sales verticals. But the board was generally reluctant to spend time debating complex strategic choices requiring in-depth discussions. A board designed around the company's needs as well as the owners' might also have included directors who had expanded a product offering into a competitor-dominated market and could help guide the board, not just management, through uncertain bets.
Process: Set Up an Operating System
Purpose defines the board's focus and goals. People define its capabilities. Process determines how those capabilities are organized and directed to achieve the purpose — how directors access information, interact, make decisions, and assess whether the board is fulfilling its mandate.
Information flow. In every ownership context, this is controlled by the company's management, but boards that rely solely on the materials management has curated are poorly positioned to form independent views. Effective boards deliberately cultivate other sources of information: direct access to customers, independent market intelligence, site visits, external advisers, and conversations with employees below the executive team. This isn't a sign of distrust; it's the best way to support management and fulfill the board's counterbalancing role.
At Wright Technologies, the board meets with customers and vendors and receives regular market updates from an independent consulting firm. At Empire, Hanz invites the directors to workshops with experts in sustainability, risk management, cybersecurity, digitalization, and global affairs, and strategy consultants and investment bankers regularly speak to them at informal dinners. Xama's chair brings analysts into the boardroom to share their perspectives and takes board members to production sites and industry conferences.
Careful process design takes into account what the information architecture risks crowding out. In public companies approaching or following an IPO, for instance, compliance activities often leave little room for strategic information. The priority is to protect space for forward-looking intelligence — on competitive dynamics, technology shifts, and emerging risks.
The following tools help boards stay on the right track:
Meeting design and decision protocols. Effective boards structure their agendas to prioritize the most consequential issues rather than the most urgent ones, give directors sufficient time to review meeting preparation materials, surface and welcome dissent, and clearly record what they've decided and what authority has been delegated.
At Empire, the board follows a three-stage process for major decisions. At the information stage the management shares initial ideas and gathers questions; gaps in information are perfectly acceptable. At the discussion stage the management answers most questions and presents clear solutions. At the third stage the board makes the decision in private sessions. The CEO, who is not a board member, attends most meetings as an observer.
At Xama the chair receives preparation materials two weeks before a board meeting, reviews them, and provides feedback to management on what to improve before sending them to the directors at least seven calendar days before a meeting. Presentations are limited to no more than 20 slides, include a one-page executive summary, and specify whether they're meant to inform the directors, prompt a discussion, or generate a decision. During the meetings, the CEO makes only short introductory presentations to emphasize key points, and 70% to 80% of the time is devoted to Q&A and deliberation. The chair also discourages private meetings between the CEO and the directors immediately ahead of the meeting, invites senior executives only if they need to cover a specific subject, and constantly reminds the directors of the need for independent judgment.
GeoTech's board process closely reflected its lead investor's priorities — speed, control, and execution. Meetings were dominated by management presentations; directors' questions went mostly to the CEO, and when differences of opinion arose, the lead investor would sometimes suggest taking them offline — so some decisions were shaped outside the meeting. The board has been moving to correct this, however. A strategy discussion now opens every meeting, presentation time has been reduced, and outside experts present to the full board rather than to management alone — changes that came about to some extent because directors wanted to be an active part of the process rather than passively absorb information. The pending decision on the new vertical will test how much that shift has taken hold: whether it is worked through by the full board or settled mainly between the lead investor, the CEO, and the outside expert the investor has offered to bring in.
All three boards hold what are confusingly called executive sessions, in which directors meet without management (including the CEO) to allow the directors to consolidate their views and surface sensitive issues. This is one way to create space for independent directors to speak early and often — something that's especially important at founder-led and family-controlled companies, where a single voice often dominates the room. At Wright Technologies independent directors meet for dinner before every board meeting to exchange views without George present, and in meetings the chair gives the floor to George only after other directors have spoken.
Board evaluation. The value of this standard practice depends on what it measures. The most common mistake here is evaluating the board against generic governance checklists rather than the purpose it should serve. The question should always be: Are we still an effective counterbalance — or have we drifted?
At the end of each board meeting at Xama the chair conducts evaluations by asking: "How effective was our discussion today? Have we made decisions that will strengthen our company? Have we provided guidance to management? How should we improve next time?" Often directors agree on one change to be tested at the next session, such as "Nobody should speak for more than 10 minutes" or "Committee chairs should send their reports in advance rather than present them in the boardroom." The chair calls every director after each meeting to get additional feedback about the discussions and his performance. Every 12 months the board does a comprehensive self-evaluation, using 360-degree surveys about the board process, interactions with the CEO, and the committees, and the results guide how the board evolves.
At Wright Technologies the directors also conduct similar evaluations at the end of each meeting and do an annual 360-degree survey-based review. Their focus, however, is different: They specifically examine whether they're counterbalancing the founder; bringing in financial, risk, and compliance discipline; and helping management build a foundation for long-term sustainable development.
The Chair: Fill the Biggest Needs
As with board composition, the choice of chair should be driven by the specific counterbalancing need. In founder-led companies, the most important consideration is separation between the founder and the chair. At Wright Technologies, George recognized this issue and deliberately recruited a chair with experience in a different industry. This reduced the likelihood that the chair would try to compete with him on industry strategy issues instead of focusing on board processes. In family enterprises like Empire, the chair must be able to set boundaries between family agendas and enterprise governance and command the trust of multiple family factions without favoring any one of them.
In companies approaching an IPO, the chair appointment carries additional weight because it must signal credibility externally and set the right tone internally. Xama selected a chair with nearly four decades of experience who had been a CEO of both public and private companies and had chaired several boards. That depth of experience would reassure investors while providing the governance expertise the company needed as a public entity.
GeoTech also illustrates how much rests on the way the chair's role is defined. Until recently, the CEO, who is also the chair, dominated board meetings — setting the agenda and leading the discussion — while much of the informal authority sat with the lead investor. This meant that the board had no counterbalancing voice on it at all, given how close the lead investor and the CEO were. This is evolving: The CEO now sees that meeting agendas incorporate input from the other directors, a step toward broader engagement.
Once appointed, the first challenge for any new chair is to establish the right relationship with the company's CEO. But the best way to approach it will vary with the company's context. At Xama the new chair was aligned from the get-go with the CEO on how their relationship would work: The chair would be the link between the board and the CEO, not the CEO's boss. Because the family that had founded its parent company still controlled more than 50% of Xama's stock, this separation of the two roles was critical. To ensure the firm's readiness for the IPO during the most intense spin-off months, the chair kept board involvement high — with prospectus reviews, risk oversight, and investor messaging — but not so high it disrupted the business.
At Wright Technologies the chair became a coach and mentor to the new CEO, who had never held the top job before, helping him learn the job and master relationships within a governance structure he had never experienced. At GeoTech the focus has been more on tempering the lead investor's influence. The CEO has often settled questions directly with the lead investor but now is trying to bring more issues into the boardroom for collective deliberation.
The skills that chairs require are largely universal. But because the role of the chair is fundamentally different from every other leadership position, the qualities that make other leaders effective are often precisely what make chairs ineffective. Chairs' power comes from restraint, not action, because their job is to create the conditions for the board to counterbalance effectively. A decisive, execution-focused chair, for instance, could close off critical board deliberation and discussion.
We've identified three essential skills of good chairs. They must be able to:
Enable people. Effective chairs understand the directors well enough to draw each one out productively. They know who must be encouraged to speak up, who dominates too much and needs gentle redirection, and who brings relevant expertise to each agenda item. This requires building relationships outside board meetings. At Wright Technologies, after the directors receive materials for an upcoming board meeting, the chair reaches out to each one to discuss them, solicit questions and concerns, and provide advice and reassurance. She also organizes developmental events for both the whole board and individual directors to upgrade their skills. Xama's chair meets once or twice a year with every board member to exchange feedback, provide encouragement, and surface individual concerns. He gives the floor first to directors who don't have expertise in the subject matter, asks experts to be brief and speak in simple terms, rephrases the comments of directors who don't express themselves clearly, and uses humor and self-deprecation when tensions rise.
Establish structure. This means designing processes that make counterbalancing likely. How the agenda is organized, how discussions are opened, how dissent is received — all are the chair's responsibilities. The chair reserves time for genuine deliberation, ensures that alternatives get heard, strives for real consensus rather than apparent agreement, and makes certain that decisions are clear before moving on.
At Empire's board meetings, Hanz always opens by asking all the directors to share something relevant that they've learned since the last meeting. He gets them each to share what they know about an issue before exploring solutions, carefully frames the discussion questions, and always speaks last. The chair of Wright Technologies always writes the resolution adopted by the board on a whiteboard and asks each director to read it carefully and confirm agreement with it. At GeoTech, whose meetings were designed for speed and efficiency, the structural task is now to set aside deliberate space for open discussion, so that a streamlined process still leaves room for genuine debate.
Encourage dissent. Effective chairs establish norms that promote healthy, productive debate. Directors who fear that pointing out problems will damage relationships simply stop raising concerns, and the result is boards where everyone is cordial and few decisions get genuinely examined. Good chairs prevent this by inviting challenge openly, asking, "What are we missing?" and "Who sees this differently?" They respond with curiosity rather than defensiveness, acknowledge uncertainty openly, and make it clear that if directors are in the room when a decision is made and don't voice concerns about it, they own the decision. They follow up after meetings to express appreciation to directors who've asked hard questions.
Hanz has a rule: Every major board decision at Empire should have at least three alternatives. Likewise, if consensus emerges after only two directors' remarks at a Wright Technologies board meeting, the chair starts asking for alternatives. Before a decision is finalized at Xama, the chair always asks, "What needs to happen for this to fail?" And GeoTech is learning that a board can add real value by introducing more debate among diverse viewpoints, which often surfaces new ideas and spurs innovation.
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The question facing all founders, owners, CEOs, and board chairs is not whether their boards are good enough. The real issue is whether their boards are designed to counterbalance the distinctive structural forces that shape their company's decisions today and to evolve when those forces change tomorrow. The answer lies not in recruiting impressive individuals and hoping chemistry develops among them. It emerges from defining a clear purpose specifying what the board exists to counterbalance, selecting members who'll provide capabilities the organization lacks, creating processes that enable genuine deliberation, and establishing the conditions for collective challenge through the chair's leadership. Do all that, and you'll build a board that helps your company thrive. Defer it, and you'll build a board for an organization that no longer exists.
Copyright 2026 Harvard Business School Publishing Corporation. Distributed by The New York Times Syndicate.
