Towards More Effective Board
Functioning
Fall 2013 - Lausanne
Confidential to CEO-CF and CEO-CF members
Today’s Flow
1. Board Functioning & Performance
2. Readings (why did I provide them)
3. The Workings of an Effective Board
4. The results from your recent survey
5. Key Discoveries and Milestone Commitments
Confidential to CEO-CF and CEO-CF members
1
Basic Board Functions & Performance
•
Provide Superior Strategic Guidance
• Guide & approve company strategy
• Review & approve strategic plan and operating budgets
• Approve strategic financial decisions/transactions
• Set up external relations’ policy
•
Ensure Accountability
• Supervise & monitor company progress & performance
• Supervise on behalf of the shareholders
• Monitor the main enterprise risks
• Evaluate the corporate governance’s effectiveness
•
Build & Maintain Senior Management Team (SMT)
• Advise & evaluate CEO & SMT
• Nominate & remunerate CEO/SMT and plan succession
Confidential to CEO-CF and CEO-CF members
2
Determinants of Functioning & Performance
Board
Composition
Board Systems
& Structure
Inputs
• Independence (and complimentary)
• Diligence (commitment and preparation)
• Competence (changes with time)
• Flexibility (in schedule and topics)
• Ethics...
Processes
• Board structure (leadership, size, & committees)
• Productive meetings (agenda and culture of
challenge to the CEO & members of Board)
• Succession planning (CEO/SMT growth and
replacement)
• Financial reporting/risk management
(independent audit committee)
• Performance evaluation
• Overall corporation (strategic & financial)
• CEO (the rigor of KPIs)
• Board & member (refer to CEO-CF)
Confidential to CEO-CF and CEO-CF members
Board
Performance
3
Determinants of Functioning & Performance
Result
• Long run financial success
Board
Composition
Board
Performance
Board Systems
& Structure
Confidential to CEO-CF and CEO-CF members
Corporate
Performance
Results
• Superior strategic guidance
• Ensure accountability to all
stakeholders
• Ensure highly qualified executive
team in place
4
For the next slides, please refer to
Nadler
Building Better Boards
Confidential to CEO-CF and CEO-CF members
5
Level of Engagement
• The Passive Board
• The Certifying Board
• The Engaged Board
• The Intervening Board
• The Operating Board
Confidential to CEO-CF and CEO-CF members
6
7 Habits of an Effective Board
1.
2.
3.
4.
5.
6.
7.
Own the Strategy
Creates ownership and facilitates better/quicker decisions
Build the Top Team
Continuum to select, build, and grow their skills
Match Reward to Performance
Process to define the KPI
Process to review attainment (or not)
Ensure Financial Viability
Value of a concise 1-2 page “Dashboard/Flash Report”
Match Risk with Return
70% of major acquisitions fail to create value
Manage Corporate Reputation
Drive Effective Board Processes
Value of sub-committees
Confidential to CEO-CF and CEO-CF members
7
Does Your BoD Really Work?
• Do BoD members individually and collectively understand the changing external
picture of the industry?
• Are BoD members individually and collectively clear about the company’s strategic
direction?
• Is the process in place for frequently reviewing the CEO and providing unmistakable
and clear feedback?
• Is the BoD comfortable that the company has the right CEO? If not, is the BoD actively
dealing with the issue?
• Does the BoD have a robust process for self-evaluation/improvement?
• Does the BoD construction have value in diversity (global diversity, age balance,
experience mix (financial, industry, etc.) and perspective?
Confidential to CEO-CF and CEO-CF members
8
Management Will…
• Lead the BoD in understanding the changing external environment (industry,
competition, etc.)
• Tell the BoD what it is trying to accomplish in the near and long term
• Provide sufficient and efficient information to allow the BoD to assess whether
goals are being achieved
• Put good and bad news on the table
• Create and support an atmosphere conducive to critical discussion
• Listen to and learn from the BoD
Confidential to CEO-CF and CEO-CF members
9
Board Members Will…
• Engage in dialogue on substantive issues to add value
• Maintain independent judgment at all times about issues/management
• Put forth, without hesitation, any potential conflict of interest
• Take initiative to counsel other directors and CEO, as appropriate, inside and outside
the Boardroom
• Help make BoD dynamics positive and effective
• Constructively participate in reaching concurrence on strategy
• Use judgment in navigating through the ‘grey’ area of active
involvement/micromanaging
• Passive role is not welcome
• Seek to improve their own performance
Confidential to CEO-CF and CEO-CF members
11
Improving BoD Functioning & Effectiveness
FROM
TO
• Reactive Boards
• Proactive Boards
• Rectifying the past
• Building the future
• Unilateral agendas
• Agreed agendas
• Trying to deal with too many mustaccomplish items
• Focus
• Constantly dealing with the same
issues
• Directors with long terms
• Too little/much information
• Subjective evaluation
Confidential to CEO-CF and CEO-CF members
• Adjusting Board to company & ownership’s
challenges/priorities
• Directors with shorter terms & selected
according to company/ownership’s
challenges
• The right information
• Planning, doing, measuring, & evaluating
objectively
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Key Discoveries & Milestone Commitments
• What are your Key Discoveries from this session (3-5)?
• As a result of those Discoveries, what will you do differently with your
Board for in 2013?
Confidential to CEO-CF and CEO-CF members
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