Tag Archives: responsability

CEO turnover and succession planning

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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.

What is the purpose of a board?

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“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?

Smaller boards for better governance

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How small boards can be more efficient than bigger? What is the impact on the daily governance?

Robert Pozen, a Harvard Business School lecturer and former general counsel for Fidelity Mutual Funds, try to give an answer.

 

 

Mr. Pozen says « its high-functioning boards, not legislation, which leads to better governance. He went on to note there do too many “social loafers” on boards who are investing too little time understand the issues of the company they are supposed to be serving. »

 

« The problem with 14 or 18 directors is social loafing. If you’re part of that big of a board the thinking of many is, ‘well, someone else will take care of it.’ If you don’t feel that responsibility it is a very bad dynamic, » says Mr. Pozen.

Some board portal accessories as pool and debates can allows you to create a better dynamic on your board.

 

He thinks they should be no more than six directors on a board, along with the CEO, and that they should meet more than six times a year spending two to three days a month on board business. They should also be paid more for the extra work.

 

They should also be no mandatory retirement age for board directors as many are retired executives who still have a lot to contribute after they leave their companies.

 

“When you have executive sessions, people actually talk about what the problems of the company are. I think it’s a good idea to have executive sessions before every meeting. On a larger scale it suggests what is really important in governance is not so much all of these rules, but what you have as the culture of the board and how the peers view themselves,” says Mr. Pozen.

 

The average for financial services boards around the world is 14 members of which only three have financial experience.

 

This article is extract from: Why good governance can come from smaller boards

Why boards need “fresh eyes” to carry through their mission?

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The “fresh eyes” can be defined as being able to see things that others do not. Boards acquire fresh eyes when they add outsider directors to their board.

They are called outside directors because they are not employees or stakeholders in the company. They are especially beneficial when a board has become static in composition (same people, all internal board members, etc.), and, therefore, have been addressing problems in the same way.

There is the board principle I’ve always subscribed to: “eyes in, fingers out.” This means the board function is not to run the company, but to pick the management and set policy.

 

The board’s job is to govern and management’s job is to manage. Here are the right ways outside directors can use their fresh eyes to a board’s advantage.

6 Reasons ‘Fresh Eyes’ Can Help Your Company

  • They have different perspective on issues. They aren’t tainted by the existing board’s view on issues and haven’t been part of the politics that have created the issues.

 

  • They have experiences and views from other industries that may have already experienced and solved the problems or issues being discussed. Many times more established industries have already dealt with the challenges faced by newer industries. Outside directors can bring that knowledge to the board to help expedite the creation of effective solutions.

 

  • They have a new network of resources for the board to consult. Outside directors bring a whole new set of contacts and connections that can be leveraged.

 

  • They will ask new and different questions to stimulate the board’s decision-making process. An outside director will ask questions as a way to gain perspective, which will force the existing company to think about its own responses and possibly have “ah-ha” moments related to the situation.

 

  • You need to bring in someone who is not a specialist, but someone who has been involved in all areas of running a business. A board member needs to be able to see all sides of a problem and all the implications it can have. Outside directors are usually highly qualified generalists who know a lot about all aspects of running a business.

 

  • They can bring a new understanding of a subject that the board does not have. Outside directors usually have a specialty (i.e. industry knowledge or skill set) they leverage to educate the boards they join. For example, one of my specialties is data storage and disaster recovery. I help boards understand their responsibilities and their exposure when they do not have a proper plan in place for the company they are guiding with respect to data backup and recovery.

 

This article is extract from 6 Reasons Why Every Board Needs ‘Fresh Eyes’ by Larry Putterman.

Why not set up board’s police?

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Imagine a new law enforcement bureau is formed to investigate and bring to justice the perpetrators of crimes on Nonprofits’ Boards?

 This elite force, known as The Board Police, works mostly undercover, passing themselves off as ordinary citizens serving on unsuspecting boards looking to identify boards or individual board members guilty of governance crimes or misdemeanours.

Here are the top crimes we want you to be on the lookout for!

Loitering - You know what it means to loiter, it’s to stand idly about or linger aimlessly. It is reported that a high percentage of nonprofits’ board members are accused of this crime!

Impersonating a board officer - In many meetings, you may have difficulty spotting the board officers.

Dereliction of Duty - This one may require some detective work as the most flagrant violators rarely show up at meetings.

Þ    Be careful: However, exercise care here, as taking too much interest may certainly out you as an undercover operative!

Harassment – includes any kind of behaviour that is intended to annoy, disturb, alarm, torment, upset, or terrorize another.

Disorderly conduct - Reports exist of instances where a few board members get so worked up that they become verbally abusive and begin shouting at others in the room.

Misappropriation of focus – We know you’re familiar with misappropriation of funds — which itself is a serious crime. However, misappropriation of focus is also serious, but often undetected.

Conspiracy - You may not witness this at first as it takes time to earn the trust of the conspirators and be taken into their confidence. Conspiracy occurs when two or more people get together to plot and plan a course of action.

Þ    You’ll know you’re in when you get invited to the “special meeting” of the select board members.

Obstruction of governance – any act or action that distracts the board from having substantive discussions or decisions about important issues or policies to move the organization forward in a strategic manner.

Þ    They are all ploys to prevent real governance from occurring.

 

We need you to be diligent in your work!

This article is an extract from: Crimes and Misdemeanours of Nonprofits Boards

 

 

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