‘Building
Better Boards’
Prof. Niamh Brennan
Phillip Matthews
Michael MacCormac
Director, Executive Education
Professor of Management,
UCD Smurfit School
University College Dublin
‘BUILDING BETTER
BOARDS’
Thursday 4th March 2010
Presenter:
Moderator:
Prof. Niamh Brennan
Phillip Matthews
AGENDA
•
What is Corporate Governance?
•
What makes great Boards great?
•
Lessons from the Banking Crisis
25 minutes
•
Questions and Answers
15 minutes
Centre for Corporate Governance at UCD
(www.corporategovernance.ie)
 Established February 2002
1. Training for company directors
a. Director Development Programme – 10
half day courses on various aspects of
corporate governance
b. In-house, customised courses for
individual company boards
c. Diploma in Corporate Governance
2. Promote research in corporate governance
Purpose of Companies
 What is the purpose of companies?
 Limitation of liability
 Encourage entrepreneurial activities
 Risk management
Risk Management
Requirements of Company Law
 Bar is low!
 Why?
Challenges to non-executive directors adding value
An independent director is like a
bidet.
“Nice to have, adds a touch of
class, but nobody knows what
it’s there for”
Michael Grade, Chairman BBC
Corporate Governance Definitions
 System by which companies are directed and
controlled (Cadbury Report: paragraph 2.5)
 Process that “deals with the ways in which
suppliers of finance to corporations assure
themselves of getting a return on their
investment”. Shleifer and Vishny (1997: 737)
Corporate Governance Definitions
 “ …the set of mechanisms – both institutional
and market-based - that induce the selfinterested controllers of a company (those that
made the decisions on how the company will be
operated) to make decisions that maximise the
value of the company to its owners (the suppliers
of capital)” (Denis and McConnell 2003: 1)
 “the effectiveness of mechanisms that minimise
agency conflicts involving managers…” Johnson
et al. (2000: 142)
Corporate Governance Definitions
 “…a set of relationships between a
company’s board, its shareholders and
other stakeholders. It also provides the
structure through which the objectives
of the company are set, and the
means of attaining those objectives,
and monitoring performance, are
determined.” (OECD, 1999)
Corporate Governance Definitions
 Do the thing right – Do the right thing
 If a thing is worth doing, it is worth
doing badly (get the ball over the line,
we’ll clean the blood up later!)
What makes great boards great?
The human element
What distinguishes exemplary boards is that
they are robust, effective, social systems
(Source: Sonnenfeld, Harvard Business Review, 2002)
What makes great boards great?
 Not enough to have appropriate structures in place
 Not a formulaic corporate ritual!
 More important is the social system that is the board
• Strong, high-functioning work groups
• Members trust each other
• Members challenge each other
• Members engage with senior managers on
critical issues facing company
What makes great boards great?
1. Create a climate
of trust and
candour
2. Foster a
culture of
open dissent
3. Engage in
constructive
conflict
4. Avoid
destructive conflict
10. Evaluate
board’s
performance
9. Address
decisions
comprehensively
What makes great
boards great?
8. Know
appropriate level
of strategic
involvement
7. Utilise a
liquid
portfolio of
roles
5. Work together
as a team
6. Ensure
individual
accountability
Source: Sonnenfeld (2003) and Finkelstein and Mooney (2003)
Personal Lessons from the Banking Crisis
 Business judgement rule
 Herd effect
 In the bush, the price of being caught out of
the herd is certain death
 Be engaged
 Interfere in day-to-day management???
Questions and Answers
The Diploma in Corporate Governance, a one-year,
part-time accredited programme leading to a UCD
qualification in corporate governance is now in its sixth
year. The next intake on the diploma programme will
be in September 2010.
Please contact Liz Knight,
Programme Manager
liz.knight@ucd.ie
Tel (01) 7168801
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