board efficiency

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BOARD EFFICIENCY:
The Agenda Setting Role
and Information Needs of
the Supervisory Board
Holly J. Gregory
Weil, Gotshal & Manges LLP
Board Challenge:
Direct the affairs of the corporation in
assembling capital, human resources and
other necessary inputs to produce goods
and services efficiently
While holding managers accountable for the
use of assets provided by others
2

Predicates for Board Efficiency

Composition - Independence, Expertise

Committee Structure

Board Agenda

Board Access to Information

Board Self-Evaluation
3
Board Functions

Select, monitor, evaluate, compensate and -- when
necessary -- replace senior management

Review and approve strategic and long-term plans

Monitor corporate performance against plans

Review and approve material capital allocations,
financial standards and policies

Ensure financial control and reporting integrity,
ethical standards and legal compliance

Monitor constituent relations

Organize the board
4
Information

Relevant
and timely
information is
an essential
predicate for
satisfying the
board’s role
6
Common Information Needs

Corporate Performance

Background & Analysis of Major
Issues/Transactions

Related Party Transactions & Potential
Conflicts of Interest
7
Integrity of information depends on :

Financial information and reporting systems

Legal compliance and risk assessment
systems
8
Board & Management Interaction
When does the board expect to be informed by
management of potential problems?
When does the board meet without members of
management present?
When does the board conduct independent
investigations and hire its own experts?
9
Issues for Board Reflection & Evaluation








Division of authority between the board and
management
Matters for the board agenda
Number and composition of committees
Information required by the board and its committees
Performance of CEO and board evaluation
Qualifications for director nominees
Form of independent leadership
Limitations on director service
-- etc.
10
Seven Practices
to Assist Board Function
Chief Justice Norman E. Veasey
Delaware Supreme Court

A “heavy majority of purely independent directors”

Board involvement in “actual governance”

Regular face-to-face, comprehensive meetings of directors

Regular evaluation of CEO and regular “executive” sessions of
independent directors

Limits on number of boards directors serve on

“Careful review of disclosure documents”

Effective law compliance programs monitored by the board
11
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