IMHO: Can a board be an intangible asset?

OPINION: A well-chosen board of directors can boost the value of a company's intangible assets, but it’s important to remember that people aren’t intangible assets in themselves.

Put it this way, if Warren Buffett agreed to be on your board, you’d jump at the opportunity. His brand power, industry expertise and deep relationships would all contribute significant value to your own company’s intangible assets. Surely Buffett would transform your company into a world-beating enterprise, right?

Not necessarily. Buffett follows an investment model by which he only invests in companies and sectors he fully understands. He would be the first to say that it is a waste of everyone’s time for him to join a board of a company he doesn’t understand deeply enough.

Of course, Buffett probably won’t volunteer to help govern your company anyway. But that doesn’t put you in the clear. The alternative to getting a superstar like Buffett isn’t to then fill your board with accountants or white-shoe lawyers just because you read somewhere that companies should have a few directors with legal and financial experience.

Don’t get me wrong, accountants and lawyers bring excellent value to the table. But the most effective boards have a diversity of thought and offer skill sets that are directly relevant to the specific needs of the business. Buffett would say the same thing.

The proper approach is to ask: what are the most valuable intangible assets within our organisation and what skill sets do we need on our board to maximise the value of these assets and mitigate any risk to them?

If this way of thinking is too abstract, then try starting from the other end. What kind of company do you hope to create? What doors need to be opened? What ideas need to be generated? Where are the blind spots?

If you understand what gives your company its edge, and have a strong intangible asset strategy to maximise the value of these assets, then appointing the right people onto a board who can help guide that plan should be a simple case of working backwards.

A clever company will appoint a board that is united behind what makes that company special. Its directors will bring a diversity of thought that allows them to govern with wisdom and add value through the personal intangible assets they bring.

Such intangibles might include their excellent network connections, industry expertise, branding experience, strong relationships, reputation and – most importantly – the ability to constructively challenge the C-suite to push the company further.

But even personal intangible assets can turn into liabilities if they aren’t used correctly or if circumstances change. If a director’s experience makes them a great candidate, what happens to your company if that individual’s brand is tarnished in some way?

This isn’t a hypothetical, either. Examples of a board member’s personal brand turning sour and hurting a company are unfortunately common.

Les Moonves was appointed to the board of CBS in 2003. He brought a rich portfolio of intangible assets including industry experience (he had produced successful television shows at Warner Bros.), strong relationships (Moonves was known for his ability to build relationships) and excellent leadership skills (his style fostered a culture of creativity and collaboration at CBS).

Then in 2018, multiple women emerged with allegations of sexual misconduct against Moonves, prompting an investigation by external counsel and the media. The allegations ranged from harassment to assault.

Moonves, once highly regarded in the industry, became associated with misconduct and abuse of power. The negative publicity of his case led to a loss of public trust in CBS, damaged the company's image and had serious financial implications. Moonves eventually resigned from his board position.

Although his expertise as chairman of the board of CBS was integral to the company’s growth and success, his brand as a director nevertheless became a liability for CBS.

Ultimately, picking the right board shouldn’t be a complicated process when the company has a good strategy to leverage its valuable intangible assets and mitigate the risks to these assets.

The lesson here is to avoid making board selection a tick-box exercise. Done right, a great group of directors will add significant value to your company’s intangible assets, so choose them with care. 

About the author

Joel Hanrahan is managing director of global markets at EverEdge, a global Intangible Asset advisory, corporate finance and investment firm.

The views expressed in this article do not reflect the position of the IoD unless explicitly stated.

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