Adopting a board portal for improved governance – An infographic of directors’ experience in 5 steps.
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Adopting a board portal for improved governance – An infographic of directors’ experience in 5 steps.
Access the portal
Inform and update
“The primary reason to undertake any governance assessment
is to improve and develop, not to judge or evaluate…”
To improve overall governance, everyday practices and the dynamics in the boardroom, it is necessary to invest in an assessment process of the board of directors deeper than compliance requirements. Evaluation processes have become common in the boardroom; it appears that 94% of S&P 500 companies regularly conduct an evaluation as found in the PwC’s 2011 Annual Corporate Directors Study.
An evaluation can turn a good board into a great board!
Leading an assessment gives an opportunity to think about the boards’s strengths to enhance and its weaknesses to confront. It will allow to identify what is successful and what needs to be changed to improve the board’s performance as a collegial body. The evaluation is also the time for each director to give his/her opinion on the organisation of the board and to review their own performance.
An article published on the blog “The Harvard Law School Forum on Corporate Governance” explains the process of board assessment. Below, is an extract of the post:
“Board behavior and effectiveness are becoming increasingly visible to investors and other stakeholders. In the past few years, the European Commission has reinforced its focus on the corporate governance matters, issuing several rules and guidelines in this regard. Most of these raise, among other aspects, the issue of increased board responsibility in the corporate governance framework through better functioning and more appropriate structures.
In accordance with most best practice requirements laid out in corporate governance codes, the majority of European listed companies are now conducting board performance evaluations. Board evaluation is increasingly acknowledged as a vital process for improving board performance and dynamics, whatever the size, status or type of organization. If thoroughly conducted, a board evaluation (also called “board assessment”, “board review”) has the potential to significantly enhance board effectiveness, maximize strengths and tackle weaknesses.
Companies have various approaches to board evaluation, in terms of methodology and objectives. In setting up the framework, a company should ask itself whether the exercise is the result of regulation or a commitment to good governance thus merely a compliance exercise, or rather one aimed at sustaining the performance of the board. While meeting regulatory requirements may be part of the motivation behind this exercise, the primary driver should be a desire to build a high-performing board, well-suited to anticipate, meet and overcome the challenges ahead. Increasingly, boards are moving away from the “check-the-box” mentality towards utilizing evaluations as a tool to ensure they are aligned with the company’s long-term strategy. […]
Aside from the need for compliance with standard regulation, a firm’s approach should be subject to its board’s strategy, past or upcoming circumstances and the objectives of the assessment process. In-house processes may have the advantage of causing less concerns to boards that are reluctant to conduct a board evaluation. However, adopting only an internal mechanism throughout a board lifecycle may refrain board members from revealing some aspects that could be problematic, thus eroding the real picture. In line with general best practice an external evaluation should take place at least every three years within the board cycle. Several companies engage an external consultant more often, either annually or once every two years. Companies do not generally maintain a standard rule for such a schedule, which would not even be compelling as boards may experience interesting dynamics from one year to the next.
Specialization and independence of the external evaluator are key. Regular use of an external specialized consultant can improve board performance assessments by bringing an objective view and by providing a ‘best practice’ perspective. Given the potential conflicts, the external facilitator should neither have an ongoing nor recent relationship with the company, i.e. not engaging in other consulting services for the company or management […]
A thorough and accurate board evaluation process can identify issues and enact reforms to improve performance.
The board should agree in advance to the following:
• Scope and purpose of the evaluation: Board directors should have a shared commitment to the scope and purpose of the evaluation.
• Designated party : If done internally, the board should agree on a board member or committee to oversee the evaluation; alternatively, boards must appoint an independent, specialized external consultant to conduct the evaluation.
• Methodology and subjects included in the process: This should include how the evaluation is conducted (e.g. questionnaire, individual interviews or both) and whether the evaluation extends from board to committees and to individual directors.
• Areas of valuation : The board should agree in advance on the main areas to be examined. These include board agendas, information flow, the effectiveness of board meetings, the performance of individual committees, the relationship between the board and senior management, board’s approach to strategy, board’s approach to governance.
• A post-evaluation review should identify issues or threats, should embrace opportunities and adopt reforms which may be required.
Particularly if conducted by an external consultant, the evaluation process includes a review of board documentation, governance documents, charters, minutes, agendas and observations of board meetings. This part of the assessment is very important both as a preparation ahead of the discussions with the board members, and for enabling a complete assessment of the board functioning. Major facts happen during the year at the level of the board. These are to be acknowledged by the external advisor and brought back to board members’ analysis during the interviews.
The methodologies used to determine the evaluation output vary. The primary tool used in both jurisdictions is the questionnaire, although a tendency towards increasing use of interviews has emerged. Whether combined with questionnaires or not, confidential interviews have been recently emphasized as the most effective technique in drawing out board performance issues. While questionnaires address questions related to past performance, interviews allow for more space to approach the future plans and strategy of the board. Interviews also enable open discussions and diversity of interpretations, expanding the more closed questions that questionnaires are based upon.
The evaluation covers a wide range of issues, including competency of board members, information flow, board meeting dynamics, relationship with senior management, quality of board supervision and decision-making. While in the past boards used to be primarily internally focused, today they have to proactively scan the external environment for things that might impact the company…”
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Since the Sarbanes-Oxley Act in 2002 and the raise of awareness on good governance practices, enhancing the organization and the communication of Boards of Directors has become a necessary challenge. Structuration and transparency are the current keywords and new tools have been created in response to these needs: board portals.
Bringing technology into the boardroom can be a real challenge and before implementing a board portal, we suggest you take into account some considerations. This advice can be helpful for a successful transition to a paperless board and a fulfilling experience for all directors.
What is exactly a Board portal?
A board portal is a high tech, easy to use solution for managing boards. It is a web-based workspace which allows:
Therefore a board portal isn’t only a online workspace; it is a new solution for the management of one’s company’s governance thanks to sophisticated tools. A digital board allows better access and control of the information and leads to a better decision-taking process on strategic issues.
Define your board’s needs
Before selecting a partner and convincing fellow board members, it is important to state on what your specific board needs to find the perfect solution. Some questions to ask:
Security should be your top priority!
Most of the information exchanged on your board and between members is highly sensitive and confidential. Often information leaks are made from a lack of awareness on Internet security such as the risks of emails that can be intercepted or lost.
One of the most important requirements to take into account for selecting a board portal over another is the level of protection offered. It should be at least as high as credit cards and banking standards and certified by international norms. Investigate where your data will be stored and if you maintain a full control;
Threats online are very present and can have terrible consequences on confidential data. Making sure the board portal provider respects high security standards is essential for the safety of your information and for your company.
Tools and simplicity
A board portal isn’t only replacing paper data by electronic storage. Portals can offer many new features for enhancing boardroom dynamics. If you wish to favour communication and interaction between members for faster decisions at meetings for instance, tools such as debates and polls can be used.
Board portals have been developed following the needs and demands of directors. Therefore the portal shall be easy to use for all directors, even for those who are not used to technology. The portal allows a user-friendly and logical work experience.
The first investment in a board portal may be an argument of objection for some members. It is important to underline the fast return on investment a board portal offers. Savings can amount to 70% of direct and indirect costs related to board and committee management.
Think of all the paper that will no longer need printing and distributing, travel costs can be reduced and the time dedicated to prepare meetings will be optimized and reduced. Again, prices alter from one portal to another… so take a good look at the services and support offered by different providers.
The transition to a paperless and digital board needs to be planned step by step. All directors must understand the usefulness of the portal and accept working on it. For this to happen, it is important to convince first, a lead member of the board such as the Chair or the CEO and present all the advantages for improving everyday governance.
While choosing a portal provider, it is necessary to look into the company behind the portal to establish a relationship based on trust:
The provider must become a partner who will help lead the transition on the board and offer support to all members to make the most of such a tool for enhancing governance and board work.
Illustration: PlaceIt by Breezi
The structure of the Board of directors is a key issue for good everyday governance. This involves the establishment of committees for managing the work load especially for large Boards. An important part of the decision making process and of the Boards work is done through these committees. Often committees are formed when the issues treated by the Board are too numerous or require special skills such as supervision on financial statements or compensation plans.
What is a committee supposed to do?
A Board committee can deal with a specific matter or general issues and make recommendations to the Board for diligent decision making. Active committees meet regularly and make better Boards. Reporting necessary information and recommendations to the Board allows the Board to spend more time on strategic discussions.
How to establish a committee?
The decision of forming a committee should be part of the agenda of a Board meeting. Discussed by the members, they must define a clear purpose and goals for each committee.
There are two sorts of Board committees:
The Board must define the committee’s term of reference with the following information: the purpose of the committee, a work calendar, the members and main responsibilities.
The committee and its purpose must be discussed at least every year by the Board to check that its goals and still clear, that it is still relevant and following the changing environment.
Who serves on a committee?
Generally committees account 3 to 5 members, some only have Board members but others involve external experts of advisors to have more expertise or different points of view. The members are selected for their skills and personal qualifications depending on the purpose of the committee.
Involving Board members allows them to get more closely into the organizations activities but to be effective, members should not be dispatched on too many committees so they can keep focus and develop an expertise on a subject.
Each committee has a chair who will report the recommendations to the Board. The chair can be chosen by the Board or elected by the other members of the committee.
Focus on presenting committee reports
At the Board meeting, the chair of the committee must present the report on the work done and its recommendations to the Board for strategic decision making.
This report must be short, one page, and easy to read. For this it can be divided into three simple parts:
1- Introduction: rapid presentation of the issue, the members of the committee and a brief background presentation.
2- Research: the report presents an overview of the work done (specific searches and considered options)
3- Recommendations: the report should include specific recommendations made by the committee about the studied issue, the reasons for these recommendations, the next steps and estimated costs.
It is very useful to send the report to board members at least one week before the meeting to give them time to read the report and consider recommendations that require a decision. This can be done through the board portal to save time and costs.
A Board portal for your committee management
Some may be reluctant to creating committees and mention that it will require more administrative work and more paper. Indeed a committee involves documents, meetings, discussions and minutes. This is a pity because committees being a smaller group allow work to be done more efficiently and better decisions taken by the Board. The leading Board portal manages the Board but also includes the Boards committees. The Board portal has different levels of access. This allows the director, through one portal to have access to all the Board information and also the information of a specific committee he/she sits on. The portal also allows independent members to have access to the management of the committee but not to the Boards information.
Members of a committee can share their ideas, organize the meetings and store their documents on the portal. The Board portal lightens the work load and reinforces collaboration and communication.
To ensure effective everyday governance, the Board must define its expectations of its directors and the rules to follow. These rules are gathered in a Code of conduct and ethics and should promote the integrity of directors, prevent errors and ensure its implementation. This Code also helps to guide directors in performing their role for good governance.
Companies whatever the size or the purpose will often be confronted with ethical or legal problems that involves values, obligations and responsibilities. The rules specified in a Code of conduct and ethics establish the company’s values, principles and practices. It guides all Board members by requiring the separation personal needs from those of the company and prevents misconduct.
Other topics may be included such as confidentiality, honesty and fairness to stakeholders (customers, suppliers, shareholders…) but also the respect of various legal standards and technologies such as a board portal.
Finally, the code provides control mechanisms of its rules such as the creation of a committee to oversee the implementation of the rules of the Code.
Establishing a Code of conduct isn’t just a bunch of rules to discourage directors from ambiguities that they might encounter in exercising their responsibilities. The Code should contribute to create value to the company and its governance. For this to happen, all directors and employees must be aware about the Code and respect it in all times and places. The Code can also by useful for a company in times of change when the law may be vague or uncertain.
Creating a code starts by understanding the roles and responsibilities of the Board members and implementing the company’s core values at the Boards level. The Code must be the outcome of active board participation where the roles, responsibilities, expectations and values are discussed and voted. For such discussions and debates, why not use a Board portal where all members can participate, share their arguments and information, by a secure way online.
To conclude, each Code is unique to each company but they all include core values such as honesty, fairness and confidentiality. The Code must also evolve following the changes of the company and its environment. The Board must regularly review and adjust it.
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
The Conference Board, NASDAQ OMX and NYSE Euronext jointly released the 2013 edition of Director Compensation and Board Practices, a benchmarking study with more than 150 corporate governance data points searchable by company size (measurable by revenue and asset value) and 20 industrial sectors.
The report is based on a survey of public companies registered with the U.S. Securities and Exchange Commission. The Harvard Law School Forum on Corporate Governance and Financial Regulation, Stanford University’s Rock Center for Corporate Governance, the National Investor Relations Institute (NIRI), the Shareholder Forum and Compliance Week also endorsed the survey by distributing it to their members and readers.
The following are the major findings from the 2013 edition of the study:
Test your knowledge about governance and rules on boardroom !
1. Why should a board have independent directors?
A. They can take over for executives if necessary.
B. They are able to make decisions free of conflict of interest
C. They do not hold large share positions in the company
2. Who has primary responsibility for risk management in a company?
A. The CEO
B. Board of directors
3. Scorecards are useful ways to:
A. Determine whether companies are following good corporate governance practices
B. Figure out which companies’ shares are likely to go up
C. Find out which directors serve on multiple boards
4. What is the difference between an executive director and a non-executive director?
A. The executive director heads a board committee; the non-executive director does not
B. The executive director is also a member of management, while the non-executive director is not
C. There is no difference
5. Which characteristic would disqualify a director from being independent?
A. A member of the company’s management
B. An expert in the company’s industry
C. An executive at another company
6. One of the following committees is most common for a board of directors. The others are optional. Which one is most common?
A. Mergers and acquisitions
B. Audit committee
7. Tag-along rights means:
A. Public citizens may attend a company’s annual meetings
B. Minority shareholders can join in if a majority shareholder sells a stake
C. A method of voting on director nominations
8. Succession planning is the responsibility of:
B. Current managers
C. The board of directors
9. “Say on Pay” means:
A. Board chairman decides CEO compensation
B. Compensation committee makes a decision
C. Shareholders have an advisory voice in compensation issues
10. What is tunneling?
A. Separating management roles by function
B. Directing profits to company activities rather than dividends
C. Transferring the company’s assets to deprive shareholders of value
1. B, 4. B, 7. B, 10. C
2. B, 5. A, 8. C,
3. A, 6. B 9. C,
Source: Who’s running the company ?
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
This article come from Thegazette, write by Peter Hadekel
MONTREAL — Better corporate governance has become a top objective of just about every publicly traded company. Boards of directors are more scrutinized than ever before by analysts, shareholders and regulators.
Amid an outbreak of corporate fraud over the last decade, legislative changes have placed a lot more responsibility and accountability on the shoulders of directors.
Now, a small Montreal startup has identified a way to help boards work more efficiently and with greater transparency
The business, known as Leading Boards, started four years ago under entrepreneur Jean-Marc Félio after he had served as director of a non-profit organization.
At the time, the organization needed to distribute a number of documents to directors and Félio realized that a digital system for sharing and archiving documents would make sense.
He spent a couple of years developing a software program with an information-technology specialist and then took eight months testing the product with a range of small, medium and large enterprises.
At the end of 2010, Leading Boards began to commercialize the system and has signed 60 clients so far — many of them either publicly traded firms or non-profit institutions.
The system is a secure “board portal” that reduces or eliminates printouts and multiple copies of documents. It can eliminate courier service costs and reduce meeting preparation time, Félio says.
“Just look at the amount of paper that is sent to the board of a large company — it’s the equivalent of about two telephone books every month.”
Directors often find they need to consult a corporate document of some kind only to find that it’s not at hand and they need to have it sent. They get another set of the same binders when they come to a board meeting.
That wastes even more money. Document costs can run to more than $15,000 a year for a single committee of seven directors.
Leading Boards puts together a complete archive of documents ranging from agendas and minutes of meetings to financial statements, directors’ committee reports and corporate policy statements.
The system has been developed with the practical needs of directors in mind. “You get powerful search engines, information sharing, quick, easy access,” Félio says. Agendas are interactive and directors can write personal or shared notes in a “Post-it” style.
Perhaps the biggest gain is increased transparency. The system can be set up to allow different levels of access, whether by shareholders, regulators or fellow directors.
It’s best suited for iPads and tablets, he says.
Félio worked in film and television and taught communications at the university level before taking the entrepreneurial plunge. He financed the startup out of his own pocket but recently got an additional investment from an angel investor to help him develop the market.
But Félio hopes to capitalize on the market in Canada for smaller, listed companies that need to save time and money on governance and compliance.
Among clients that have recently signed up are two publicly traded mining companies in Quebec: Argex Titane Inc. and St-Georges Platinum & Base Metal Ltd. Both companies said they expect the software package will wind up improving board governance.
The trilingual nature of the software package, offering English, French and Spanish capabilities, will open up new avenues of growth in Europe and Latin America, as well the Middle East and North Africa, Félio believes. He is already in discussions with a firm about a joint venture to sell the product in France.
The company hosts the web-based system for clients who pay an annual service fee. It has about half a million dollars in annual revenue so far and six employees, expecting to double in size every year.
Among the non-profit or public organizations using the system is Montreal’s Palais des congrès, he said. Expressions of interest have come from a number of other provincial agencies.