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What should Frank do?

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Here, this is a good study case about a current problematic on a boardroom… a Powerful CEO and useless board. Published by Julie Garland McLellan in www.mclellan.com.au

The case studies are based upon real life; they focus on complex and challenging boardroom issues which can be resolved in a variety of ways. There is often no single ‘correct’ answer; just an answer that is more likely to work given the circumstances and personalities of the case.

 

Although these are real cases the names and some circumstances have been altered to ensure anonymity. Each potential solution to the case study has different pros and cons for the individuals and companies concerned. Every month this newsletter presents an issue and several responses.

 

Consider: Which response would you choose and why?

 

Frank has been recently elected to a board position with a NFP, which is quite large with 500 employees and $70m in assets. The board has a strong CEO, who seems to do what she wants. In the past the board was relatively weak and the CEO needed to use her expertise without relying on theirs. The board could have been described as ‘light weight’ in regard to governance and corporate knowledge. One board member, for example, is a microbiologist with great critical thinking but no understanding of how to run a company. This led to a culture where the CEO would respond to board queries by asserting that the matter of interest was “an operational issue” and for board members to rationalise her response by accepting that the CEO “has it under control”.

 

The board recognised its weakness and sought out some new company directors with governance training and corporate understanding; hence Frank’s invitation to stand for election. Frank is encountering opposition in asking critical questions of the CEO and trying to probe for information, because the board says the business is under the CEO’s control.

 

He is concerned the board has a weak Chairman who does not support the board in taking effective control or oversight. He is seriously considering if he should stay and try to improve matters slowly or if he should leave as he truly feels the board is dangerously negligent. However, he likes a challenge, believes in the objectives of the NFP, and feels that his fellow directors are honest and well intentioned.

 

What should Frank do?

 

Here, you have three different expert answers: click here

Drag your corporate boards into the digital age

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The Globe And Mail published the Monday, Feb. 25 2013 a new article about Leading Boards !!! By Ivor Tossell.

ipad-user

When corporate directors need to read up on company affairs in the run up to a board meeting, they can find themselves sitting on telephone books’ worth of paperwork. Never mind reading it – it also needs to be delivered and securely disposed of afterwards. Enter Leading Boards – content management software tailored to help boards of directors and built for the age of the iPad.

The goal is better governance, says Jean-Marc Félio, the company’s president: A more-informed board will make better decisions, and the sooner new directors can be brought up to speed on a board’s decision-making history, the sooner they’ll step up and offer effective guidance.

“Directors don’t have access to information. You have a new director coming in, it will take three to six months before they’re up to date,” he says. “Giving them access to their archives is already a big change.”

Leading Boards acts as both a security-minded information repository and a decision-making hub. Many of its features, which include access to old minutes and files, the ability to search documents by content and collaborative document-editing, are available through its regular web interface. But Mr. Félio puts his firm’s emphasis on its iPad app, which takes advantage of the touch interface to offer document-management tricks such as highlights and annotations. (In the interests of security, annotations are purged after a meeting has run its course, and documents returned to their original state.)

In addition to offering full access for board members, the software can act as a venue to create a virtual meeting space that puts specific users together with just the documents they need to see; anxious stakeholders, for instance, can be invited to a session with two or three directors, and just the relevant documents from the archives. Alternately, a suitor interested in buying a stake in the company could be given an account on the system allowing access for due diligence.

It also tackles the decision-making process itself, letting boards create structured debates, in which a question is mooted and members can add arguments into ‘pro’ and ‘con’ lists. After the meeting, the decision-making process is expunged, leaving only its result for the record.

The six-person startup’s software is used by about 60 companies in Canada and beyond. Mr. Félio says its touch-based capabilities are important in speeding adoption among board members – not always the youngest members of an organization, nor the most eager to embrace technology. The company experimented with buying small computers for clients, but found that, regardless of the training Leading Boards offers, the iPad was far more intuitive.

“There is one old board member who called and said ‘I don’t need your training any more. My five-year old granddaughter taught me.’”

See the article: Montreal startup drags corporate boards into the digital age

Major Differences Between Roles of Direction and Management

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In this article, we will remind the principal differences between the boards of directors and the management of the company.

Source: Guide Pratique de Médiatisation du Gouvernement D’Entreprise

DIRECTORS

MANAGERS
Decision-Making Required to determine the future of the organization and protect its assets and reputation. They also need to consider how their decisions relate to stakeholders and the regulatory framework. More concerned with implementing board decisions and policies.
Duties,Responsibilities They have the ultimate responsibility for the company’s long-term prosperity. Directors are normally required by law to apply skill and care in exercising their duty to the company and are subject to fiduciary duties. They can be personally liable if they are in breach of their duties or act improperly. They can be held responsible sometimes for the company’s acts. Not usually bound by directional responsibilities.
Relationship withShareholders Shareholders can remove them from office. In addition, a company’s directors are accountable to the shareholders. Appointed and dismissed usually by directors or management; they seldom have any legal requirement to be held to account.
Leadership Provide the intrinsic leadership and direction at the top of the organization. Day-to-day leadership is in the hands of the CEO; managers act on the director’s behalf.
Ethics, Values Play a key role in determing the company’s values and ethical positions. Must carry out the ethos, taking direction from the board.
CompanyAdministration Responsible for the company’s administration. Related duties associated with the company’s administration can be delegated to management, but this does not relieve the directors of their ultimate responsibility.
Statutory Provisions In many countries, there are numerous statutory provisions that can create offenses of strict liability under which directors may face penalties if the company fails to comply. These statutory provisions do not usually affect managers.

What is the purpose of a board?

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Board_table

“The purpose of the board is to do governance, the process carried out by a group of people to ensure the health and effectiveness of the corporation.

 

It doesn’t matter what type or size of organization. It doesn’t matter if you’re young or emerging or highly sophisticated. The board does governance at its meetings. In fact, the only time that governance happens is when the board convenes at its meetings.

 

What are the elements of governance, the processes of ensuring the health and effectiveness of the corporation? These are things like defining values, mission, vision, and overall direction – and adhering to same. These are things like defining the rules of governance, e.g., bylaws, policies, recruitment and election of board members. Defining the performance expectations of board members. Hiring, appraising, and setting compensation for the executive director. So what do you talk about at your board meetings? (…)

 

The board may talk about information provided by staff. And it’s up to the staff to put together the right information, to explain trends and their potential implications. (…)

 

Board meetings require intentional design and good facilitation. Board meetings should be a gathering of wise and experienced people who talk about important things. Sometimes the board makes decisions. Sometimes the board learns and explores through conversation, preparing to make decisions in the future. Definitely, board members ask strategic questions, even cage-rattling questions. Board members probe to ensure that they are drawing on information that is accurate, insightful, and useful. (…)

 

How about these questions for periodic board meeting agendas?

1.            How is our adaptive capacity?

2.            How are we foreseeing the unforeseeable?

3.            How effectively do we recognize, anticipate, prepare for and respond to different       situations?

4.            How effectively do we anticipate unintended consequences?

5.            What might have once been inconceivable – but now seems as if it might become       inevitable?

6.            What is of concern that, if we don’t address it, can become alarming?”

 

This article is extract from: What Do You Talk about at Your Board Meetings?

Say On Pay = New tool of Social Responsibility?

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“If it makes good sense to tie compensation of top executives to the financial performance of their firms, it is also wise to gauge that compensation in relation to other corporate performance factors,” says Peter Madsen.

But, what is «Say on pay»? Is it an answer to the compensation issue? Or just another practice to pay more the CEO?

 

As an example, in 1991, President Clinton wanted to permit companies to write off executive compensation amounts of more than $1 million only if executives hit specified performance goals.

In a 2011 paper titled Killing Conscience: The Unintended Behavioral Consequences of ‘Pay for Performance,’ Stout offers three reasons to explain why the Clinton administration’s revisions to the Internal Revenue Code (I.R.C. Section 162(m)) didn’t work.

First, incentive schemes frame social context in a fashion that encourages people to conclude purely selfish behaviour is both appropriate and expected. As a result, pay-for-performance rules “crowd out” concern for others’ welfare and for ethical rules, making the assumption of selfish opportunism a self-fulfilling prophecy.

Second, the possibility of reaping large personal rewards from incentive schemes tempts people to cut ethical and legal corners, and for a variety of reasons, once an individual succumbs to temptation, future lapses become more likely.  The result can be a downward spiral into opportunistic and unlawful behaviour.

Third, industries and firms that emphasize incentive pay tend to attract individuals who, even if they are not « psychopathic », nevertheless are more inclined to selfish behaviour than the average.

It isn’t easy, however, to find companies that specifically state that the compensation of their executives is tied to more than financial performance. PepsiCo, for example, has established Performance with Purpose, a global initiative that makes an effort to deliver sustainable growth by investing in a healthier future for people and our planet. However, the company is cautious about linking executive compensation to the results of this program.

Aron Cramer, President and CEO of BSR, a CSR consulting firm that works with a global network of nearly 300 member companies, believes that financial performance is inevitably linked to social and environmental performance.

Cramer’s emphasis on rewards rather than incentives is consistent with Professor Stout’s point of view. “We should set financial compensation ex post, on the basis of the employers’ subjective satisfaction with the employees’ performance,” writes Stout.

 

Ironically, the new imperative for corporations to be socially responsible could be jeopardized by attempts to tie executive compensation more closely to corporate responsibility through pay for performance incentives. »

 

This article is an extract from: Can Say On Pay Increase Social Responsibility?

Read more: Executive compensation: Shareholders have their say

Is executive compensation fair or flawed?

Say-on-pay voting process ‘highly successful tool’, according to survey of institutional investors

Board Governance Structure

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You may find this structure interesting as a template for your future governance manual or to compare it to your actual material.

 Each category may have one or more documents, for example the Role & responsibility  should have:
- role of the Chair
- role of the other officers (Vice, Secretary, trasurer)

- role of director
and also
- role of the CEO (no voting, etc.)
- corporate secretary.

If you have suggestions, we will update this template based on your comments.

The strategic planning process

Strategy

The board and strategic planning

VISION

MISSION

STRATEGIC PLANS

 VALUE CREATION

 

Board Effectiveness

Roles and responsibilities

Transparency

Important Board policies

Delegation of Authority

Conflict of Interest

Code of Conduct

Meetings of the governing body

Board orientation, development and retreat

Board structures

Important Board Processes

Board Orientation

Board Development

Board Assessment

Board Works Plans

Evaluation of performance

Reporting on Resources (Financial, Human)

Reporting on Quality

Quality Plans

Quality Report Cards

Board Composition and the Nominating Process

Membership of the governing body

 

The Board and the CEO

CEO Position Description

Accountability Agreements

Delegation of Authority Policy

CEO Performance and Development Process

Steps in the process

CEO Evaluation Form

Compensation Policy

 

Leadership development

Succession planning/talent management

Compensation policies and practices

Objective setting and performance reviews

Recruiting and selection

 

Board Structure (Committees)

Board Committee Mandates

Resources Committee (Finance)

Quality Committee

Governance and Nominations Committee

Management Resources and Compensation Committee

Audit Committee

Executive Committee

 

The Board and its Stakeholders

The board’s advocacy role

The annual report

Communicating with stakeholders

Stakeholder engagement in meeting needs

Stakeholder analysis

 

The Board’s Accountability

Risk Management

Accountability agreements

Accountability frameworks

 

The Annual Business Plan

The board’s role in monitoring performance

The board’s role in developing the annual business plan

 

Accountability for Resources

The external audit function

Resource utilization management

Financial goals and objectives

Financial policies and controls

Human resources

Information technology

New technology

Capital planning

 

Accountability-Quality of Service

The board’s role

The quality annual plan

Monitoring quality performance

The Governance Manual

The governance manual