Tag Archives: committees

CEO turnover and succession planning

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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.

How Build Your Advisory Board

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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

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



Toward Effective Governance of Financial Institutions

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“Drawing lessons from the financial crisis, the G30 calls on boards of directors of financial institutions to do far more to strengthen governance. The report stresses that values influence the behavior of those with governance responsibilities and the key to reform is to promote changes in the ways in which these individuals think about their responsibilities.”

Toward effective governance of financial institutions

The Board Members and their mission in the organization

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By Adina Genn from the netplace.com website

The article deals with the role of administrator :

Foster the role  in board members  and to encourage the creation within the (supervisory) board of committees responsible respectively for remuneration.

To resume, the author derives four core principles of governance system in order to contribute funds like “ Help identify and contact contributors” or “Offer knowledge and guidance based on their background in the organization or in the for-profit business community.

Of course, these roles may be different according to company size, sector …

For the full review check out this link : The Board Members

Canadian Manufacturers & Exporters announced an alliance with Leading Boards Inc ” Canada’s best software for the management of boards and committees”

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OTTAWA (April 12, 2012) – Canadian Manufacturers & Exporters (CME) announced today a strategic business alliance with Leading Boards Inc., a Montreal-based board management software company.“This partnership enables CME to provide our members with Canada’s best software for the management of boards and committees,” says CME President & CEO, Jayson Myers.“The partnership between CME and Leading Boards will improve the board management of all CME members.”

Leading Boards Portal is a new service offered by CME to the association’s membership, who will benefit from preferred rates and a significant reduction in their costs of board management, in addition to improved corporate governance. For Leading Boards, this partnership is an opportunity to increase its visibility among CME members and to help those organizations drive efficient board meetings with a secure and user-friendly solution.

“This partnership with CME is an exciting opportunity for us,” says Jean-Marc Félio, CEO of Leading Boards. “With our unique e-governance solution, we can really make a difference in the life of many organizations – especially help them work smarter, safer and be more productive.” (Board Book)

About CME

Canadian Manufacturers & Exporters (CME) is Canada’s largest trade and industry association, and the voice of manufacturing and global business in Canada. The association represents more than 10,000 leading companies nationwide. More than 85 per cent of CME’s members are small and medium-sized enterprises. As Canada’s leading business network, CME –  through various initiatives including the establishment of the Canadian Manufacturing Coalition – touches more than 100,000 companies from coast to coast, engaged in manufacturing, global business and service-related industries.

CME’s membership network accounts for an estimated 82 per cent of Canadian manufacturing production and 90 per cent of goods and services exports.

About Leading Boards

Leading Boards provides a unique bilingual, highly secured board portal, also available on the iPad. With streamlined communications, efficient paperless meeting preparation, collaboration between meetings, Leading Boards leads organizations towards effective governance. Based in Montreal, Quebec, with a growing presence in Canada, in Latin America, North Africa and Middle East, Leading Boards is the international standard for boards and committees. (www.leadingboards.com)

2011 Board Practices Report – Deloitte

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This report by the Deloitte Center for Corporate Governance and the Society of Corporate Secretaries and Governance Professionals provides results from a survey of over 200 corporate secretaries on topical governance questions, including shareholder engagement, board committees, strategy, and sustainability. New to this eighth edition is an analysis of director qualifications, which includes insight on board composition related to gender, age, and ethnicity…

2011 Board Pracices Report by Deloitte


Corporate secretary role – Preparing for high-impact events

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The risks related to low-probability, high-impact events such as oil spills and product recalls cannot be overlooked.

These events, although rare, bring with them the possibility of severely hampering or even crippling a company’s operations.A company’s management is not only required to identify these risks, but also to determine whether the controls currently in place are adequate to mitigate them. In order for the audit committee to aid in the identification and mitigation of these risks, it has to fully understand the complexities of the company and of the environment within which it operates. Some of these risks are admittedly not new, but the landscape within which they are to be navigated has been significantly altered, and this may warrant a rethinking or refining of the way in which the audit committee operates.

Corporate secretary can strengthen committee
The corporate secretary can help to alleviate the burden of dealing with added regulations placed on the audit committee by advising the audit committee on the implications of all the changes taking place in the industry. Auditors can provide a periodic summary highlighting the changes in financial reporting requirements, and the related risks. This would be useful in light of new accounting pronouncements and the proposed convergence with International Financial Reporting Standards.The corporate secretary could also spearhead an initiative to create and manage a secure online information portal for the audit committee. This would provide a central repository for reports, research and communication that can be accessed on demand, allowing the audit committee to keep abreast of issues as they unfold. Corporate secretaries have to make sure that the board and its committees are dealing with topics of interest, and that proceedings are appropriately documented. Corporate secretaries should ensure that the agenda is current and topical, and can also help in carrying out action steps such as reassessing the functionality of the whistleblower hotline.

New tools
Board portals can certainly help with the extra load required to better inform and support the board and their committee. As an example, uploading a document is a very simple task. Then the system takes over by sending a automatic notice to all members, archiving the document where needed, giving the possibility to members to take private notes attached to it and/or share notes and comments. All those actions by just adding a document, compared to write a “dear members” letter, print it along with the document, print the adresses of all your board members on the large envelop, and… hope someone will be at home to open the door to the Fedex guy or the package will have a second life.


Corporate Governance and Corporate Social Responsibility (CSR)

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From corporate governance… 

The corporate governance concept was born just after the economic crash of 1929.  However corporate governance as we know today only appeared at the mid-1990.
The corporate governance is a set of processes, regulations, laws, and institutions that have an important influence on the way that the company is managed, administered and controlled. It involves a set of links between the different stakeholders of the organization. Furthermore the whole decision-making process (shareholders, board members and the CEO) is influenced by governance.
To summarize, corporate governance is about how companies make decisions, how they organize themselves and how they communicate with shareholders and the rest of the world.

…To corporate governance and CSR

The corporate governance has changed. Now, it is not enough to control how companies make decisions, how they organize themselves and how they communicate with shareholders and the rest of the world. For many companies the corporate social responsibility is a way to better engage with many of their stakeholders, including investors and consumers. Corporate governance and CSR are resulting into formalization and definition of ethical policy, a better oversight of safety principles, setting up risk management program, and many other policies.
The Corporate Social Responsibility is a way for organizations to improve clearly corporate governance processes.