Category Archives: Boards and Committees

The “Glass ceiling” is cracked but not yet broken!

Posted on by

Maile Carnegie, Google Australia Director, Amy Hood, CFO at Microsoft, Marissa Mayer, President and CEO of Yahoo, Sheryl Sandberg, CEO of Facebook… Progress has been achieved in corporate governance diversity practices and we can notice cracks in the glass ceiling but still, in 2013, women only account for 10.5% of board seats in the world(1).

gender diversity

Gender equality is a worldwide issue and is now becoming a priority for companies and their Boards. Recent research has shown that companies with more women in charge survived the 2008 financial crisis better: concerning French companies with a highly feminized management, at least 38%, declined less than the CAC 40… Hermès was the only large company whose share price rose and it has the second largest feminized management (55%). On the contrary, companies with mainly male management recorded the highest declines…(2)

Having more women on Boards seems to in a way protect companies from the crisis mostly because women behave differently to men, according to gender studies, women tend to take fewer risks and focus on long term priorities. The presence of just one woman as director can reduce the risks of going bankrupt by 20%!

Greater female representation on Boards also leads to increase the company’s performance. Boards with high female representation experience a 53% higher return on equity, a 66% higher return on invested capital and a 42% higher return on sales(3).

The close relationship between corporate performance and female directors proves that having “women on the Board is no longer just the right thing but also the smart thing to do” as said by Chris Bart, McMaster University business professor.

Women take decisions differently than men by reviewing more factors and competing interests to make the decisions fairer whereas men base their decisions on rules and traditions. Women directors will also answer in a better way to the needs and expectations of their female customers. This is significant since women account for 85% of purchasing decisions. They also bring value to the boardroom by expanding the content of discussions, raising new perspectives, asking more questions and promoting collaboration.

Studies show that one woman alone can make important contributions and bring value to Boards, adding a second woman to a Board helps but it takes the presence of at least three women to change boardroom dynamics and enhances everyday governance(4).

(1) GMI Ratings’ Women on Boards Survey
(2) Michel Ferrary : financial times
(3) Joy et al., 2007
(4) Critical Mass on Corporate Boards: Why Three or More Women Enhance Governance


A good agenda leads to a successful meeting

Posted on by

An agenda is a one page document which sets the purpose of the board meeting. It is essential to prepare an agenda to lead a successful and high quality meeting.

Agenda sur iPad

The Chairman of the board is responsible for creating the agenda and must focus on the vision, mission and goals of the company. This agenda must be specific to each meeting and different from one meeting to another.

In this document must figure a useful and informative name explaining the purpose of the meeting, its details (date, start and end time, place) and all attendees expected.

All topics to discuss must be identified, the length of time expected for each topic and the person responsible for leading the discussion. The agenda must also include the appropriate documents for the board members to carry out a diligent examination of each issue.

The chairman must advise all members of the agenda in advance to get their feedback and so they can prepare the meeting and ask to include new topics they feel should be discussed.

Some tips to run a great meeting:

  • Beforehand, solicit ideas and topics from other members to get them involved and make sure all necessary documents are available.
  • Start in the morning by the most important topics to allocate enough time to them and have the full attention of the participants.
  • Don’t surprise the board: all issues even bad news should be shared before the meeting.
  • Set deadlines for the vote of each topic.
  • Focus on the future of the company not the past.
  • Allow sufficient time for discussion and opposing points of view.
  • End the meeting with a unifying issue and keep time for questions for the next meeting.

Having a good meeting agenda will allow an easier meeting and lead to effective everyday governance.

Note that the Leading Boards board portal allows you to submit and share your agenda including all documents with other members.

CEO turnover and succession planning

Posted on by

HandShake

Selecting a new CEO is one of the board’s most important responsibilities and represents a critical moment in a company’s history. A smooth transition is necessary to maintain the confidence of stakeholders. This is why a well defined succession plan is needed.

The annual study, by Booz & Company, on CEO turnover among the largest 2 500 public companies revealed that in 2012, 15% of CEOs left office. This is the second-highest rate of CEO turnover since 2000. With this rate rising, companies are becoming more proactive about the CEO succession process. The amount of planned successions reached 72% in 2012, the highest in the 13 years history of the study and forced turnovers represented 19%, their second-lowest share ever. This indicates that companies take a more thoughtful approach to transitions and to ensure they put in place new leaders who will best serve the company for years to come. These new CEOs are for the most part familiar faces. Indeed, 71% were people already working in the company when they became CEO. This represents a significant decrease from previous years with an average share of insiders of 80%.

Interestingly, in planned successions, the share of insiders has dropped from an average of 82% between 2009 and 2011 to 70% in 2012. With careful and thoughtful plans, it seems that companies feel stable enough to take a bit of a risk on an unknown leader. Moreover, these risks were reduced since 56% of the outsiders came from the same industry as their new company.

Also, 81% of the new CEOs were from the same country as the company’s headquarters and 95% were men. The proportion of women reaching a CEO position has risen from an average of 3 % over the last 3 years to 5% in 2012, but still remains a tiny share.

Regarding the apprenticeship model, (the outgoing CEO remains or becomes chairman of the board and can “apprentice” the incoming CEO), this happened in 29% of turnovers in 2012. In this case, the share of an insider named CEO reached 92%. Companies in Brazil, Russia, and India had the highest increase in turnover rates between 2007 and 2012 (15.4% to 23.9%) and the highest increase in share of planned turnovers (8.8% to 15.5%). The telecom and utilities industries had the highest turnover rates in 2012 (both at 24%), closely followed by energy (21%). The lowest turnover rate was in the consumer discretionary industry with 9%.

> Read the full study by Booz & Company

Everyday Governance: “in-camera sessions”

When a board decides to discuss private matters like management, employee negotiations, law enforcement matters, reviewing the functioning of the Board… They have an “in-camera session”, this refers to a closed meeting of the board where only board members and possibly specifically chosen others may attend. All non board members and management such as the CEO, are “recused”, this means removed from participation in a decision on a matter because of a conflict of interest or a position.

This allows the board to discuss freely about some topics which could be difficult if the people concerned were present, especially when it concerns their performance. This provides an opportunity for the board to share their views, discuss results and develop recommendations for the future of the company. Except for the absence of some individuals, the session unfolds like an open session. There is an agenda and the same decision making process.

Note that in-camera sessions should be held regularly, for instance 15 minutes at the end of each board meeting; otherwise it may put a lot of stress on the management since they will suspect that a special request for a private session is to talk about them.

10 important topics for board of directors in 2013

Posted on by

The havard law school forum gave ten good topics that board of directors should consider for the next years 2013.

“A fog of uncertainty hangs over U.S. public companies as 2013 approaches. The looming fiscal cliff, increased regulatory burdens, the ongoing European debt crisis, growing Middle East unrest and slowing global growth are just a few of the uncertainties companies will have to navigate as they chart a course for the coming year. Here is our list of hot topics for the boardroom in 2013:

1.Oversee strategic planning amid fiscal and economic uncertainty as America approaches the fiscal cliff

2. Assess the impact of mobile technology and social media on the company’s business plans

3. Address cybersecurity

4. Oversee the management of reputational risk

5. Set appropriate executive compensation as shareholders increasingly voice dissatisfaction with pay practices

6. Assess the impact of health care reform on the company’s benefit plans and cost structure

7. Ensure appropriate board composition in light of changing marketplace dynamics and increasing calls for diversity

8. Monitor the company’s need for, and ability to retain, key talent

9. Prepare for more government regulation

10. Manage information overload “

 

Read more: Top 10 Topics for Directors in 2013

Several keys questions for board members and their comittees.

Posted on by

The PwC (refer to Price water house Coopers) has published a report about the keys questions that a board should consider in order to carry out their governance duty.

 

Here you have the questions and a link to read the Pwc answer to this thematic.

 

1/ how is management evaluating and executing its strategic plan and risk management practices to address today’s competitive global marketplace?

 

2/What is the company doing to comply with anti-corruption laws and regulations?

 

3/How is management addressing contemporary accounting hot topics, including asset impairments, income taxes, and segment reporting, and ensuring the transparency and appropriateness of the company’s disclosures?

 

4/Does the audit committee engage in sufficient discussions and interactions with the external auditor in response to the current dialogue relative to audit quality and the reliability of financial reporting?

 

5/Has management considered the financial and business implications of the new tax law, and what is it doing with respect to the impact of potential corporate tax reform?

 

6/is the company effectively addressing the key opportunities and risks of IT?

 

7/Does management have processes in place to address cybersecurity risks?

 

8/what is the board’s approach to communications with shareholders and other stakeholders, and should it be reconsidered?

9/As regulatory bodies and lawmakers continue to discuss, propose, and enact laws and regulations, and shareholders continue to be active, is management analyzing possible effects and considering “no regrets” moves?

 

Here read the all report and answers: Key questions for board and audit committee members

 

E-Governance: Boards of directors now turn to board portal to work smarter, safer and… greener !

Posted on by 

Published in 20/20, the Canadian Manufacturers and Exporters (CME) magazine.

A recent Deloitte study indicates technology is getting more and more popular in boardrooms. For a long time, directors were resistant to changes

If, nowadays, laptops and tablets are commonly used by directors in many companies, the major change is really the emergence of board portals. It’s more than a “tech trend’’ — it’s about governance.

Among the tough new regulations that have appeared in recent years, the Sarbanes-Oxley regulation started a new era for companies (public or private), governmental agencies, and even non-profit organizations. Their directors now all face the same challenge and have to perform their duties in a productive and safe environment. Forget time and distance, they have to be available and up-to-date with the organization’s documentation to make accurate decisions when needed, and sometimes — most of the time — fast. They are advisors and also decision-makers.

To address this new paradigm, board portals have ­recently appeared in the boardrooms of companies among the Fortune 500. A few American competitors actually share their same “sweet-pot’’ — the international financial centers like New York, London and Singapore — but ignore the balance of the market.

Leading Boards, a Canadian company based in Montreal, provides a powerful, easy-to-use and secure board portal to meet the needs of an untapped market in Canada and abroad, especially in emerging countries. Leading Boards realized that not only the Fortune 500 but also medium-sized companies and junior public companies were in need of tools like board portals to better equip their boards and committees.

Leading Boards designed a priced multi-language unique board portal to address that market. And the demand is growing with companies always looking to be one step ahead.

“It’s more an investment than a cost,” says CEO Jean-Marc Felio. “With the introduction of the iPad version, directors are browsing in archives with the keyword search tool. They are a lot more efficient for the benefit of all.”

Argex Titanium has recently decided to have their audit committee and board of directors work with a board portal, and chose Leading Boards.

“At Argex, we have directors and committee members in different cities and even different countries,” explains Robert Guilbault, chairman of Argex Titanium. “Leading Boards helps them work, collaborate, and prepare their meetings wherever they are, anytime they want. It’s easy-to-use, available on iPad, and bilingual. Leading Boards was a natural answer to our needs, and comes with great training and support service.’’

The board portal also makes life easier to newly ­appointed directors who can, at their leisure, have access to the “memory” of the company and become familiar with past issues, decisions, and documents, and be well prepared to take decisions on current situations.

Last but not least, Leading Boards brings a “paperless’’ solution to boards and committees which helps control their financial impact as well as their ecological impact. A green ­solution turns out to be an investment that will carry its own returns.

After a year of commercialization and several hundred users later, Leading Boards entered into a partnership with Canadian Manufacturers & Exporters (CME) and now equips the CME board of directors and its audit committee as well.

“This partnership enables CME to provide our members ­preferred prices with Canada’s best software for the ­management of boards and committees,” says CME President & CEO, Jayson Myers.

To learn more about Leading Boards or to ask for a live demo, call 1-855-404 5377
or visit its website: www.leadingboards.com

Source: 2020magazine

How Build Your Advisory Board

Posted on by

In every business, there are some areas where they could use some strategic guidance and assembling an advisory board is a great way to fill in some of those holes.

Stephanie Burns is the founder and co-owner of Chic CEO wrote an article about elements you should consider when you choose your Advisory Board and try to answer to the question: How Build Your Advisory Board?

Here, you are a summary of the 5 elements that you should consider when you choose your Advisory Board.

 

1. Compensation

The most common way to get an advisor on board is to offer a percentage of equity. That percentage can be anywhere from .5% – 2% typically, but it’s entirely up to you. If you have an advisor that is extremely involved in your business, consider giving more – it’s worth it.

 

2. Credibility

Bringing on a well-respected advisor can establish credibility much faster and easier than you building it on your own. Getting this instant clout helps you attract key talent, investors, partners and customers.

 

3. Connection

Obviously, you want them to be synergistic to your mission and purpose, but their sole role could be to introduce you to top investors, key clients, new markets and customers. CEOs, celebrities and well-respected founders can help you spread the word, make introductions and share experience.

 

4. Establish Your Needs

Get crystal clear on your short and long term goals and then be honest with a potential advisor about what you need to get there. Before you bring on an advisor, be honest with them about where your strengths and weaknesses lie and how they can help. Advisors know that your business isn’t perfect, so be as honest as you can so they can be effective.

5. Involvement

Before approaching an advisor, establish levels of involvement and assign an equity percentage. The more they want to be involved, the more equity you exchange. Some advisors are too busy to really dig in, but one connection can be worth thousands even millions to you.  Create a tiered involvement schedule and assign an appropriate equity percentage for each tier. Give them some options of how much they can be involved and let them choose which tier they can handle.

 

This article is extract from: Build Your Advisory Board by Stephanie Burns

Five principles for getting the most out of a board assessment

Posted on by

Corporate boards today are expected to be more engaged, more knowledgeable and more effective than in the past. One tool that a growing number of boards are using to examine and improve their effectiveness is the board evaluation.

How can boards make sure that they get the most out of the assessments, so that they really improve board effectiveness?

 

1. The board agrees on clear objectives for the assessment.

One of the most common mistakes boards can make when embarking on an assessment is failing to agree at the outset on the purpose and objectives of the process. While it may seem obvious, coming to a shared agreement about what directors collectively want to accomplish through the assessment encourages board members to commit time to the process and to provide the candid feedback that is essential to identifying and addressing potential roadblocks to board effectiveness. Without the commitment from the board as a whole and directors individually, an assessment is unlikely to yield the desired results. Clarifying objectives and defining the scope of the assessment also helps to avoid a situation in which the board is using the process as a way to put off dealing more directly with non-performing directors.

 

Among the questions boards should consider at the outset:

What is the scope of the assessment?

What’s the most appropriate assessment approach for the board?

Should board leaders be assessed?

What areas does the board want to delve into more deeply?

What gaps exist in the current assessment process?

 

2. A board leader is responsible for driving the process.

 

Essential to a successful evaluation is having an independent board leader champion the assessment process. The independent board chair, chair of the governance committee or the lead independent director is in a position to drive the process — involve the right people, ask for directors’ time, schedule time on the agenda to discuss the results and ensure that the board follows up on the issues that emerge. And while the CEO should be an integral part of the process, he or she should not be leading it.

 

3. The process incorporates perspectives beyond the board directors themselves, including those from senior management and best practices from outside the company¸

 

Another way the board can limit the value of a board assessment is to look only inwardly at its own effectiveness. An emerging best practice among U.S. boards, although still less common in European boards, is to seek input about the board’s effectiveness from the key senior management team members who interface with the board.

 

4. The assessment process should go beyond compliance issues to examine board effectiveness.

 

Many boards have relied on director questionnaires to conduct their assessments. This paper-and-pencil approach can provide a sense of how directors are feeling about compliance issues — whether or not the board is involved in strategy discussions or CEO evaluations, for example — but they are less valuable in revealing issues or concerns that are affecting the board’s effectiveness.

 

5.  Directors commit to reviewing the results of the assessment and prepare an action plan for addressing issues that emerged.

 

Another way assessments can fall short is when boards do not commit the time to review the results and address the issues that are raised. Some boards, for compliance reasons, begin an assessment process, but then spend little or no time on discussing the findings.

 

Conclusion

 

Done properly, a board assessment is not a report card for the board as a whole or for individual directors. Furthermore, a board portal should help administrators to set up assessment with some tools as pool or debates…  Instead, it should be viewed as a tool for continuous improvement and learning. Successful assessment processes:

Þ     Reflect the culture of the organization and its board

Þ     Are championed by a chairman or other board leader who participates actively in the process

Þ     Have shared support among all directors

Þ     Begin with clearly stated objectives for the board assessment process

Þ     Include adequate time on the board’s agenda to discuss the results and establish a clear approach for acting on the findings, including developing an action plan with a timeline and milestones

Þ     Are characterized by confidentiality throughout the process

 

This article is an extract from: Improving board effectiveness: Five principles for getting the most out of a board assessment

9 keys issues for board of administrators in 2013

Posted on by

Here you have a list of the key issues that are newly emerging or will be especially important in the coming year. Each year, the legal rules and aspirational best practices for corporate governance, as well as the demands of activist shareholders seeking to influence boards of directors, have increased. So too have the demands of the public with respect to health, safety, environmental and other socio-political issues.
Looking forward to 2013, it is clear that in addition to satisfying these expectations, the key issues that boards will need to address include:

1. Working with management to encourage entrepreneurship, appropriate risk taking, and investment to promote the long-term success of the company, despite the constant pressures for short-term performance, and to navigate the dramatic changes in domestic and world-wide economic, social and political conditions.

2. Working with management and advisors to review the company’s business and strategy, with a view toward minimizing vulnerability to attacks by activist hedge funds.

3. Resisting the escalating demands of corporate governance activists, which this year will continue the efforts to increase shareholder power and dismantle takeover protections and include proposals to separate the positions of Chairman and CEO and to lower the percentage of outstanding shares necessary for shareholders to call a shareholder meeting.

4. Organizing the business, and maintaining the collegiality, of the board and its committees so that each of the increasingly time-consuming matters that the board and board committees are expected to oversee receives the appropriate attention of the directors.

5. Developing an understanding of shareholder perspectives on the company and fostering long-term relationships with shareholders, as well as coping with the escalating requests of union and public pension funds and other activist shareholders for meetings to discuss governance and business proposals.

6. Developing an understanding of how the company and the board will function in the event of a crisis. Many crises are handled less than optimally because management and the board have not been proactive in planning to deal with crises, and because the board cedes control to outside counsel and consultants.

7. Retaining and recruiting directors who meet the requirements for experience, expertise, diversity, independence, leadership ability and character, and providing compensation for directors that fairly reflects the significantly increased time and energy that they must now spend in serving as board and board committee members.

8. Working with management to cope with the proliferation of new regulations and changes in the general perception of business that have followed the financial crisis.

9. Dealing with populist demands, such as criticism of executive compensation and risk management, in a manner that will pre-empt increased regulation and avoid escalation of activist’s demands while at the same time furthering the best interests of the company.

This article is extract from:  Key Issues for Directors in 2013

Ten things for boards of directors to avoid

Posted on by

Here we will see ten things that a boards of directors can avoid to improve their performance.

 

 1. Avoid presentation overload

Presentations should not dominate board meetings. If your board meetings consist of a scripted agenda packed with one presentation after another, there may not be sufficient time for substantive discussions. The majority of board meetings should be focused on candid dialogue about the critical strategic issues facing the company. Management should feel confident that the board will read these pre-meeting materials, and the board must commit an adequate amount of time in advance of the meeting to do so. Board portal can help administrators to be prepared before the meeting.

2. Avoid understating the importance of compliance

There is no room for a culture of complacency when it comes to compliance with laws and regulations.

3. Avoid postponing the CEO succession discussion

CEO succession planning is one of the primary roles of the board. During this time of rebuilding and prior to the implementation of new regulations, boards should assess where time is being spent and perhaps redirect focus on succession.

It is important to note that the succession planning process is continual and doesn’t end when a new CEO is selected.

4. Avoid the trap of homogeneity

The topic of board composition and having the “right” people on the board continues to receive much attention. The board needs to assess whether this new mix translates into a positive and productive board dynamic. Boards should take a closer look at the expertise, experience and other qualities of each member to ensure the board that can provide the right expertise. Diversity of thought provides the perspectives needed to effectively address critical topics, which can contribute to greater productivity and ultimately a stronger board.

5. Avoid excessive short-term focus

Recent history offers many examples of modern corporate entities managing to reach short-term results at the expense of long-term prosperity. The board can demonstrate its leadership by being the voice of reason and openly discussing the sustainability of strategic initiatives. This can result in a well-governed company with a greater chance of achieving long-term, sustainable success.

6. Avoid approvals if you don’t understand the issue

Complex issues can have significant implications for the survival of an organization. It is up to directors to make sure that they understand issues that can alter the future of an enterprise before a vote is taken. If you don’t adequately understand the issue, ask for more education from management or external experts. True consensus results from a thorough debate and airing of the issues before the board, resulting in a more informed vote by directors.

7. Avoid discounting the value of experience

As a director, it is important to recognize the value that your experience can bring to the issues at hand. It is bringing together the diverse skills and experiences of each director to lead the company through challenges. Directors can provide greater insight by being ‘situationally aware’ when evaluating events and courses of action to take.

8. Avoid stepping over the line into management’s role

A board that makes management decisions will find it difficult to hold the CEO accountable for the outcome. A director’s role is to oversee the efforts of management rather than stepping into management’s shoes. Directors must make a concentrated effort to ensure that they have clarity on management’s role, which is to operate the company.

9. Avoid ignoring shareholders

A company’s shareholders are among the most important and potentially vocal constituents of the enterprise. Concerns can sometimes be addressed by providing shareholders an audience with the board to air their concerns.

10. Avoid a bias to risk aversion

With the recent focus on excessive risk-taking and its impact on the credit crisis, there is concern that companies and boards may become risk-averse.

 

This article is extract from: Ten things for boards of directors to avoid by Deloitte