Tag Archives: boardbook

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

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

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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

Five principles for getting the most out of a board assessment

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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

5 elements which can disturb the progression of boards

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The definition of board effectiveness has shifted dramatically over the past decade. In the aftermath of the global financial crisis and numerous corporate scandals, a director now confronts not only complex oversight accountability, but also personal risk and liability.

To be truly effective, a board needs directors who can work as a group to clearly define their role and mission, and in specialized individual roles, such as succession planning, acquisitions and capital allocation.

 

Here, we will see five elements that tend to hinder the progression of boards toward self-actualization and high performance.

If your board present some disrupters, see on the list if you recognize some symptom enumerate.

 

 

  • Lack of clarity on the roles of individual directors and the board as a whole. Role ambiguity slows decision-making and causes unnecessary director conflicts.

 

  • Poor process management hinders effective board preparation, meeting management, and communications. This results in indecisiveness and a lack of urgency on critical challenges facing the organization.

 

  • Lack of alignment and agreement on company strategy causes disinterest among board members, who then simply default to tackling regulatory and compliance issues. Poor strategic alignment also hampers a board’s ability to prioritize issues and set their near-term agendas. This often causes board disruption and sends damaging signals to financial markets.

 

  • Poor team dynamics fracture boards and lead to power struggles. Like any effective working group, a board should be comprised of professional peers who respect and work well with each other.

 

  • Board composition is a serious impediment, if not done right. Today’s challenges require new perspectives and skills. But boards often lack the ability to objectively evaluate their makeup to determine if they have the right people and skills at the table.

 

You must be careful with this element, because they can affect your board if you don’t take them in account and if you don’t take the good measure.

 

This article is extract from A More Effective Board of Directors

Four areas of inquiry in the compliance function.

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The compliance function is an independent function that identifies, evaluates and controls the risk of non-compliance of the establishment.

How to make the board compliant? What are the areas which can help you to fulfill this function   ? What is the impact for a board portal ?

Here, there are four areas of inquiry that a board should take up with the company’s chief compliance officer.

Structure questions

This area consists of questions which will help determine the fundamental sense of a company’s overall compliance program. The questions should begin with the basics of the program through how it operates in practice. Such inquiries should allow each board member to communicate the main elements of a compliance program.

Culture questions

This area should focus on the culture of the organization regarding compliance. Board members should have an understanding of what message is being communicated not only by senior management but also by middle management. Equally important, the board needs to understand what message is being heard at the lowest levels of the company.

Areas of risk

Board members ‘need to know what process is being used to identify emerging risks’. Such risk analysis would be broader than simply a legal or compliance risk assessment; it should be tied to other matters, such as ‘business continuity planning and crisis response plans’.

Forecast

A truly effective and informed board knows where the company stands at the present moment, but it also has a strategic plan for how the compliance and ethics program can continue to excel. This could be encapsulated in a one-three-five year compliance game plan. However, the compliance program should be nimble enough to effectively respond to new information or actions, such as mergers or acquisitions, divestitures or other external events. If the dynamic changes, ‘you want to get your board’s attention on the changes which may need to happen with the [compliance] program’. This is best accomplished by obtaining buy-in from a board that understands the role of forecasting the compliance program going forward.

 

This article is extract from : Board of directors and compliance: four areas of inquiry

Caution – PATRIOT Act …

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Browsing the web looking for information about the Patriot Act (the law that generates a constant buzz in the web community), I came across the blog of Cloud Magazine, which analyzes its effects OUTSIDE of the US territory.

Remember that the legislation resulting from the implementation of the USA Patriot Act (Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and obstruct Terrorism Act) extended until June 2015 requires companies under U.S. law to allow U.S. security services to access their data.

Caution.
Even if a U.S. company uses servers abroad, the Patriot Act also applies outside the US since they are considered an extension of the company. This part of the Patriot Act is not well known, but it raised many issues in Europe. Treasury Board of Canada post this notice: «If a company located in the United States or with U.S. connections is hired, then the USA PATRIOT Act may be applicable »  http://bit.ly/Jee6TS..

It is imperative in this case to consider the impact of this law in Canada and around the world because confidentiality and data protection are Board strategic business risks. Data protection is particularly relevant for Boards currently using a Board Portal. American companies offering Board Portals like Diligent Boardbooks and Boardvantage are under Patriot Act. and Canadian Boards should be aware of that fact.

The confession…
Microsoft’s managing director in the UK, Gordon Frazer, made that admission in June at the Office 365 launching London. After researching the PATRIOT act, Microsoft found that regardless of where data was stored, it could not ensure that data would not be turned over to the US government as the result of a National Security Letter or other government request, because the company is governed by US law. (from Tech law and policy in the digital age : Microsoft admission)

Can a U.S. hosting company that opens a division in Europe no longer subject to the Patriot Act?
The answer is no …

On the website of Cloud Magazine, we are told that the Patriot Act also applies to data stored in Europe by American companies. The experts at Silicon.fr are more specifics:
”It forces companies under U.S. law, their subsidiaries worldwide and their servers hosted in the territory of the United States or abroad, regardless of the nationality of the companies operating them abroad, to comply with the US agencies to access personal data “.

In other words, all American companies dealing with information on servers in Europe can be accessed by the U.S. government by invoking the Patriot Act.. Google also confessed to being in this situation. See zdnet.com


Fortunately for Canadian businesses, the regulation is quite different thanks to the PIPEDA Act.  All data hosted by Canadian companies is safe and no access to servers can be authorized without a court order.

The Board of Directors & Compliance: 4 Ideas for Improving the Effectiveness of & Reducing the Risk to Directors

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By Stuart M. ALTMAN for www.corporatecomplianceinsights.com

“A number of high profile corporate scandals at some large and supposedly sophisticated companies have, if nothing else, driven home the fact that no matter how strong you think your corporate compliance and ethics program is, the risk of failure is still there. This month I want to look at this issue from the standpoint of the board of directors.

Right now, there are a number of very concerned directors asking themselves whether they have done all they could, or should, have to prevent this and what are the ongoing risks, not only to the company, but to them personally. True, directors should always be thinking about the institutional risk to the company, but nothing motivates effectiveness like the risk of personal liability.

Ordinarily directors are protected by the business judgment rule which provides that well informed decisions of directors taken after due consideration and in good faith will not be attacked by a court because the decisions turned out wrong. In cases of compliance failures – whether issues of foreign bribery, cartel activity or environmental hazards, to name a few – the issue for a board is usually one of omission. Rarely has a board approved such activity. Rather, the issue is whether it has done everything possible to avoid such conduct. Here are four ideas that can help strengthen the effectiveness of the board in these situations and thus, limit risk.

Training

Interestingly, in many companies directors do not necessarily receive the same compliance training that employees do. Directors may claim they are too constrained by time, or that they, of course, know this material already. Perhaps they do, but even if the directors are compliance experts shouldn’t they know how the employees are trained? How do you measure the effectiveness of a program you have opted out of? In short, directors should go through, at a minimum, the same training employees receive.

But that is not enough. Directors need specialized training, not just in the nuts and bolts that line employees receive but also in the issues at the center of compliance and ethics. Directors need to be focused on the big picture of why a company has a compliance program. They need to know what questions their compliance professionals should be asking, and if directors don’t see this happening, they need to act quickly.

Moreover, at least some of this training should be external to the company. Even if management is well intentioned, it is vital that directors get an occasional different perspective on compliance from that which prevails in the company.

Structure

A long discourse of the various pros and cons of possible compliance structures would fill several of these columns. There is an active professional debate out there as to whether or not the chief compliance officer should be separate from the general counsel? Should both ethics and compliance roles be rolled into one position? Where does internal audit fit in? I won’t attempt to evaluate these debates here. Indeed, there may be no one right answer. But the way in which your company structures these roles is vital to your governance and your ability to address compliance and ethics.

Boards of directors should be intimately involved in planning for these issues. Directors should regularly review the existing structure and make sure they are comfortable with it and it is serving the company’s interests. Whatever the specific structure chosen, those primarily responsible for compliance must have direct access to the board or a compliance committee. Given this dictate, you can decide what works for your company. Is your organization hierarchical in nature? Are managers expected to closely follow superiors with little questioning? If so, asking a GC who reports directly to the CEO to also serve as CCO and report to the board may place him or her in an unworkable position. If the CFO uses internal audit as a personal resource how comfortable can the board be that the head of IA would bypass that CFO if the situation called for it? On the other hand, where a company operates in a matrix environment with multiple reporting lines standard, such dual roles and reporting may come naturally.

Seek Advice

Most boards of directors do not have separate counsel from the entity they serve. Directors typically rely on the general counsel and regular outside counsel to do their job except in the rare situation such as the need for a special committee and counsel thereto. In general, most boards do not need regular and continuing counsel involved in every decision they make. But that does not mean such outside advice may not be useful some of the time…”

To read the complete article : www.corporatecomplianceinsights.com

Apple shareholders face California conundrum

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This article is an extract from The Wall Street Journal:

“Call it the California conundrum.

It’s the reason Apple’s board of directors did not act on a straightforward and nonbinding proposal favored last year by about 74% of the company’s shareholders.

Now, the same issue will be back in front of Apple shareholders at the company’s Feb. 23 annual meeting. And the conundrum, unfortunately, is still around.

Here’s the story. The big public pension fund and influential investor known as CalPERS (the California Public Employees’ Retirement System) wants Apple to adopt what it says more than 80% of S&P 500 companies already have adopted: majority voting for directors in uncontested elections.

This is a key governance issue. It used to be that most companies (as Apple still does) used what’s called a “plurality” system for choosing directors when there’s only one candidate. In reality, plurality means one “for” vote gets a director re-elected, no matter how many unhappy shareholders “withhold” their votes.

“Majority” voting pretty much delivers what it implies and should make sense to anyone with an understanding of what the word election means. With various caveats, it means directors at many U.S. public companies need to garner more “for” votes than “withhold” votes to keep their seats at boardroom  tables…”

To read the full article: The Wall Street Journal