Boards may be key to AEC corporate governance, report finds
- In a time of robust growth for the engineering and construction industries, there is a role for corporate governance in the form of a board of directors, a new report from FMI Corp. and the Construction Industry Round Table suggests. A board can contribute to stability and long-term health — especially if the chair has strong leadership skills.
- The study focused on current engineering and construction industry corporate governance practices and how effective boards of directors are, and FMI found that board chairs are important drivers in the quest to create and maintain a "healthy" board culture. Ways that a chair can show strong leadership is by keeping board member conversations focused on the big picture, confronting management when necessary and not being afraid to fire an underperforming executive, managing board sessions with a sense of balance and regard for all opinions, and not allowing conversations to get stuck.
- Trouble can arise, FMI found, when the board chair is also a company executive, even though 52% of the board chairmen surveyed hold the role of CEO as well. Other board members who are also employees might find it hard to raise management issues in the board environment and then work with the CEO, and there is a risk of the board agenda being weighed down by management issues. Outside of not allowing one person to hold both positions, FMI's report suggests that the role of the chair versus that of CEO be carefully outlined and followed.
General contractor Tutor Perini is an example of a construction company that has the same person, Ron Tutor, in both chair and CEO positions. Under his leadership, the company most recently recorded a work backlog of $8.7 billion and $13 billion in new project awards, including the $410 million Purple Line Extension Section 3 Tunnels in Los Angeles, the $93 million Broadway Bridge Rehabilitation project in New York City and the $121 million Los Angeles Department of Water and Power tunnel, a project that was won by Tutor Perini subsidiary Frontier-Kemper.
Some small and medium-size contractors might wonder if a board of directors is overkill for their businesses. Although a full board might not meet their needs, all companies can benefit from a trusted adviser. This person might be a former company executive who remains available to provide guidance in all aspects of the business, an individual with a more targeted focus, such as a financial expert, or a consultant that can offer strategies for growth. These people can not only offer their expertise but can provide an objective opinion when needed.
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