Category: Board Effectiveness

Elevating Team Performance
Elevating Team Performance

Foresight – BoardOps blog category “Board Effectiveness”

Discussing the use of Foresight BoardOps and  Agile methodoligies to increase board effectiveness.

Categories
Board Effectiveness

Preparing the Board for Crisis

Preparing the Board for Crisis

The unpredictable nature of crises has the potential to shake up any organization. From cybersecurity breaches to proxy fights, and from natural disasters to reputational scandals, crises can impact your company’s operations, finances, and reputation. A well-prepared Board of Directors is crucial for managing these situations effectively. This blog post offers insights on how to prepare your Board of Directors for crisis management and provide guidance on how to create a proactive and resilient approach to potential threats.

Establish a Crisis Management Working Group

Designate a dedicated crisis management team to work with your Board of Directors. This working group should be comprised of members with diverse skill sets and backgrounds, including legal, finance, communications, and operations. Their primary responsibility is to anticipate potential crises, develop response plans, and ensure that the entire Board is informed and prepared to take action when needed. Don’t wait. You can’t build the Red Cross during the hurricane.

Develop a Crisis Management Plan

Developing a comprehensive crisis management plan is a crucial step in preparing your Board of Directors for crisis situations. This plan should include:

  • A clear definition of what constitutes a crisis for your organization
  • An outline of the roles and responsibilities of Board members during a crisis
  • A communication strategy to ensure accurate and timely information sharing
  • A process for evaluating the effectiveness of the response and adapting the plan as needed

Provide Enough Agenda Time to Prepare

In order to effectively manage a crisis, Board members must be well-informed about the various types of crises that may affect the organization. Provide regular training sessions and educational materials to keep them up-to-date on industry trends, potential threats, and best practices for crisis management. This will help them make informed decisions and respond effectively in high-pressure situations.

Encourage Open Communication and Collaboration

Encourage open communication and collaboration among Board members, especially during crisis situations. This includes:

  • Regularly updating each other on potential risks and emerging threats
  • Sharing information and resources to address potential crises
  • Establishing clear channels of communication for urgent decision-making

Conduct Regular Crisis Simulation Exercises

Conduct regular crisis simulation exercises to test your Board’s readiness for crisis management. These simulations will help identify areas for improvement, increase familiarity with the crisis management plan, and build confidence in your Board’s ability to navigate challenging situations. Be sure to debrief after each exercise to assess performance and make necessary adjustments.

Monitor and Assess Risk

Continuously monitor the risk landscape for new or evolving threats. This includes staying informed about industry trends, technological advancements, and regulatory changes that may impact your organization. Conduct regular risk assessments to identify potential vulnerabilities and make necessary adjustments to your crisis management plan.

The Art of Deviating from a Meeting’s Planned Agenda

Rigid adherence to an agenda in the face of a crisis – or even a significant development – is simply wrong-headed. But deviations should be purposeful and proportional. Many examples readily come to mind – including a significant product or facility incident, a credible offer for the company (or a large segment of the company), a sudden change in leadership forced by a resignation or a need for the board to act regarding an executive’s bad behavior.

When faced with whether an issue is worthy of board agenda deviation from plan, here are three questions that can help you frame the best approach:

  • What information is available now that can be shared with the board? 
  • Is the board simply being informed or being asked to make a decision?
  • How to gain alignment between the board and CEO on the cadence for updates and more information? 

Dealing with a Crisis That Isn’t Company-Specific

When 9/11 occurred and when the 2008 financial crisis hit, boards had to quickly and effectively deviate from their planned agenda to address the immediate impacts of these challenges while still keeping their eyes on the long-term. Healthcare companies added the impact of SAR impact to their agenda when that outbreak occurred. The results of the Brexit vote found its way onto quite a few agendas – and evolved into an ongoing business planning topic. Unfortunately, coronavirus was and still is on the agenda for most boards today. The list goes on and on.

Dealing with a Crisis That Is Company-Specific

Recognizing a board-level crisis in the moment is the critical first step.  The crisis team should assemble and then follow these steps:

  1. When a crisis emerges, first “stop the bleeding.”  Don’t do more harm.
  2. Second, under attorney direction, seek to find the root cause.
  3. Third, under attorney direction, learn more about who may have been harmed already, and if warranted, make reparations.
  4. Fourth, make changes to guard against this kind of crisis in the future.  Think broadly about this stage, not narrowly.

The crisis team should meet frequently until the scope of the problem is clear, then decide how often to pool information. 

A major cyberbreach certainly warrants a change in agenda – and depending on how well the board has been educated about the company’s protocols and the impact, that item may be the focus of that next meeting and others that follow. 

A key executive’s health crisis can also prompt a board to consider whether to implement interim succession plans, revisit longer-terms plans or even replace an ailing executive. One of the trickiest disclosure issues is when to disclose an executive’s health issue – and how to balance that with the executive’s right to privacy.

When the board makes a change in agenda to take up something quite unexpected, it should also consider the possible disclosure implications that arise from it. Hopefully, the company’s management team – and lawyers – already have been thinking about that.

Preparing your Board of Directors for crisis management is a proactive and essential step in ensuring your organization’s resilience. By establishing a dedicated working group, developing a comprehensive plan, providing enough agenda time, encouraging open communication, conducting simulations, and monitoring risk, your Board will be better equipped to navigate any crisis that may arise. This preparation will not only minimize the impact of potential crises but also help maintain the trust and confidence of stakeholders, employees, and customers.

Enjoyed this post? We’d love to hear from you. Email us at [email protected].

Get your agenda priorities straight!:

Categories
Board Effectiveness

Get your board’s priorities right.

Focus your board on what matters. Use Foresight’s Agenda Hierarchy and Analytics to achieve the right balance among your Board’s 3 top priorities.

  1. Company’s Leadership. It is the Board’s most important function. Leadership is critical to an enterprise’s success, as Leadership runs the enterprise and executes strategy and tactics.
    • Choosing people to lead the Company: Selecting and evaluating the CEO and C-Suite
    • Choosing the Board’s leadership and leadership structure: Also, evaluating its performance and choosing its successors
    • Workforce and Culture. Setting the tone and expectations through policies, compensation, leading by example
  2. Company’s Strategy. It’s about setting the Company’s direction, the aim and trajectory of its products and services, its capital allocation, and its contribution to society.
    • Planning and Risk: Including these in the board’s review and approval of the strategic plan (3 to 5-year timeframe) and annual budget
    • Innovation: Overseeing new product/service initiatives, improvements in current products/services, new production and service delivery methods
    • Capital Planning and Shareholders: Optimizing capital allocation and weighing investor expectations
  3. Execution. A Board reviews and discusses results, evaluates proposed transactions, and pursues “red flags.”
    • Profitability and Disclosure: Balancing short-term profits and long-term growth/gain. Ensuring integrity and accuracy in disclosures
    • Compliance, Quality & Integrity: Leveraging these to create a competitive advantage
    • Transactions: Evaluating and approving transactions consistent with the company’s strategy

Foresight transforms how boards and corporate governance professional work – with advanced technology that speeds and elevates their work.

Agile Board. Agile Organization.

Categories
Board Effectiveness

Reg FD Reminder

Our Advisory Board member, Doug Chia, recently posted “When Disclosure Is The Better Part of Valor: Lessons From The AT&T Regulation FD Enforcement Action.” https://bit.ly/2RLsD8O

In this piece, Doug discusses the US Securities and Exchange Commission (SEC) charges against:

  • AT&T, Inc. for repeatedly violating Regulation Fair Disclosure (Reg FD)
  • Three members of AT&T’s investor relations (IR) team for “aiding and abetting” the alleged Reg FD violations.

This rare SEC action reinforces the importance of audit committaee oversight of company IR processes. Foresight’s recommended agenda topics include several aimed at ensuring effective audit committee oversight of company IR processes, including Reg FD compliance.

Categories
Board Effectiveness

Talking with Your Board

Leading effective discussions at board of directors meetings. Great board discussions elevate board decision-making.

You followed the advice in our last blog. You prepared a dynamite briefing piece (usually a deck) for the upcoming board meeting. Your deck included the information your directors need for informed deliberations and decision-making. You posted your deck to your board’s board portal — well before the board or committee meeting so they had time to read and consider it.

Now, as promised, we offer some suggestions to help you elevate your directors’ engagement and impact at the board meeting.

Assume that your directors have read your deck before the meeting. That assumption enables you to strive for less presentation, more discussion. Discussion is what allows your company to benefit from your directors’ varied experiences and perspectives. No need to replay your briefing deck you sent directors to review.

Be aware of meeting logistics and dynamics. Because of COVID, boards are not sitting at huge tables while “presenters” stand behind podiums. Most if not everyone will be participating virtually.

Likely, your board and management has developed agreed upon practices for not talking over each other during discussion. Respect those practices.

Set up the board’s discussion.

  • Say why the topic for discussion warrants board attention.
  • Say what you are asking the board to do.
  • Summarize management’s perspective.

You might start off by saying something like…  

“Annually, the board reviews and approves the company’s capital plan. Part of that process is consideration of  our dividend and share repurchase policies.

“The board must decide how best to return capital to our shareholders using dividends, share repurchases or some combination of those two. In our deck, we described four alternative approaches for the coming year. In sum, those are:

  1. Maintain both current dividend policy and share repurchase rate
  2. Increase current dividend policy and maintain share repurchase rate
  3. Maintain the current dividend policy and increase share repurchase rate
  4. Increase both dividend and share repurchase rate

“Today, we are asking for your input on the relative merits of those four alternatives. Based on your discussion today – and your input on the balance of the capital allocation topics discussed today, we will submit a final capital plan for approval at your next meeting.”

Speak in Plain Language. Use short, clear sentences and active voice. Decode acronyms.

Provide Context. Say something like… “As you recall from the March meeting, we are significantly increasing investments in plant and equipment during the coming year. Our dividend and repurchase policies need to take that into account.”

Be visual. Hopefully, a page in your deck graphically captures your recommendation or alternatives nicely, ask your directors to look at that page as you describe management’s recommendation or alternatives.

Generally, if you did a good job on your briefing deck, you do not need a separate presentation deck.

Prepare for questions. Typical director questions might touch on these topics:

  • How does what you are proposing compare to our peers/competitors’ practices? Do your benchmarking ahead of time!
  • What assumptions underlie your recommendation? Your briefing deck should cover those. Refer directors to the relevant page in your deck, summarize quickly, then ask what aspect you can clarify or expand.
  • How have you assessed risks? What will you do to mitigate them?
  • How does your recommendation advance your company’s long-term goals/strategy or address the crisis at hand?
  • What are current investors expecting? Will this direction help us attract our optimal investors?  
  • What legal considerations apply to the situation being discussed?

Invite questions and discussion. It may be harder to manage Q&A and a wide-ranging discussion in a virtual than live meeting. Nonetheless, try to engage as many directors as you can. Be open to challenges; that is part of a director’s role. Encourage directors to talk with each other as well.

Summary:

  • Great briefing materials can significantly elevate your board’s meetings and decision-making, and its overall effectiveness.
  • Great board discussions elevate board decision-making.

Categories
Board Effectiveness

Great Briefing Materials Make Great Meetings

Great Briefing Materials Make Great Meetings

Boards want briefing materials that provide them the information they need for informed deliberations and decision-making. So, here are some suggestions to help you prepare great briefing materials.

Page 1:  Tell the Board Why and What – Then Summarize Your Story

Say why you are providing this material to your board.

State the what of the agenda topic. What are you asking the board to do? This is where you say what you need from your board.

Here are examples of how to “set up” your board’s discussion or decision:

  • Report of internal audit. The Internal Auditor will present the Department’s quarterly report to the Audit Committee. During this report, the Internal Auditor will highlight progress on the department’s planned review of payment controls and audit of expat employee expenses. We look forward to your questions and comments on that progress.
  • Approve company’s strategic plan. Based on the board’s review and deliberations regarding the board’s July strategic plan meeting, management has updated the company’s 5-year strategic plan to reflect input and suggestions the board provided at that meeting. Management is recommending board approval of the updated strategic plan attached.
  • Review capital strategy and capital plan. In connection with the board’s review of the capital plan, we are looking for your input as to the relative merits of the alternative dividend policies we are presenting for your consideration. Based on your deliberations and input, we will prepare a final recommendation for approval at your next meeting.
  • Evaluate CEO Performance. In advance of the Compensation Committee making annual and long-term incentive compensation decisions for C-Suite officers, the Committee is seeking Board’s assessment and evaluation of the CEO’s performance during the fiscal year. The CEO will present his self-assessment then leave the meeting while the board meets in executive session of independent directors for discussion. Later, the Compensation Committee will meet to make compensation decisions.   

Then, summarize management’s perspective on the agenda topic. Do this in 2-5 bullets. Include a few key facts in support of that perspective. In other words, tell the reader what you are going to cover in greater depth in the following pages. State your conclusion here, do not leave readers guessing.

Pages 2-10: Tell Your Story

The balance of your deck dives into greater depth, but not too much! Most agenda topics can be addressed in 10 pages or less. Not all, but most. It’s a good goal to set for yourself. As you draft, consider:

Assume your directors will read your deck carefully – and come to the meeting prepared to discuss the agenda topic and make needed decisions.

Keep in mind the information imbalance between management and your board. Management is daily and deeply involved in the company’s operations, personnel and challenges; directors much less so. Ask yourself: what information will best help directors have well-informed discussions and make well-informed decisions? Avoid “inside baseball” minutiae and details.

Write in Plain English. Use short sentences, active voice, and bullets.

Decode acronyms. Provide a glossary with the terms spelled-out and definitions. Do not leave directors guessing what a “ACM” or “FIFM” or “GIP” is at your company.

Be visual. Use graphs, color, and pictures to illustrate your points or highlight information. Vary font size to organize information and guide the reader’s eye.  

Include any key financial takeaways. Put detailed financial schedules in your Appendix.

As you write, anticipate and address likely director questions:

  • How does your proposal compare to what our peers are doing? Do your benchmarking!
  • Did you consider other approaches before recommending this one?
  • What assumptions underlie your recommendation?
  • How have you assessed risks? What will you do to mitigate them?
  • How does your recommendation/proposal advance your company’s long-term goals/strategy or address the crisis at hand?

Appendix: Use For:

  1. Detailed financial schedules (key takeaways are in the body of the deck).
  2. Organization charts relevant to human capital management topics like succession planning
  3. Subsidiary structure if relevant to the agenda topic
  4. Supplemental flow charts at the level below those included in the body of the deck
  5. Excerpts from relevant documents, e.g., a provision of your company’s certificate of incorporation By-Law, stock plan, indenture or similar if relevant to the discussion and decision

Remember: Great briefing materials can significantly elevate your board’s meetings and decision-making, and its overall effectiveness.

Watch for more posts about presenting at board meetings and facilitating effective board discussions.

Categories
Board Effectiveness

More alike than different.

Private company governance does not receive as much press attention as public company governance. But governance is no less important to private company stakeholders. This is especially true in the midst of the COVID crisis. What private company boards do have in common with public company boards are their three priorities: Leadership, Strategy and Execution. These remain constant even in the face of COVID. Just the emphasis changes.

Priority 1. Leadership: Leadership decisions are mostly long-term. Example: CEO selection has long-term (10-15 year) impact. The board strives to select a CEO who can serve 10+ years (even if average CEO tenure is ≈7 years). Other Leadership decisions include, e.g., executive succession planning, CEO evaluation and compensation, board leadership structure and selection, board composition, and policies that establish corporate culture.

Not surprisingly, private company board leadership structures (e.g., combine or separate Chair and CEO) and governance practices (e.g., committee structure) take many forms. Leadership decisions can be challenging but are critical. Family-owned companies face generational transitions. Start-ups outgrow founders.   

Priority 2. Strategy: Srategy decisions tend to have a medium-term time horizon, i.e., 3-5 years. Examples of Strategy decisions: plans for growth, expansion into new businesses or geographies, reviewing the company’s biggest risks/mitigation, maintaining vibrancy of current products, and new product or service offerings.

 A company’s expresses its strategy in its strategic plan. Management and the board benefit if they align on the approach to plan development in advance of submission for board review. During board review, it’s helpful to discuss current and targeted investors’ expectations regarding strategy and corporate governance to ensure the plan reflects those.   

Priority 3. Execution: These agenda topics focus on tactics and results. Their time horizon is short-term — this quarter, this year. Typical Execution agenda topics include CEO’s Report, CFO’s Report (esp. profitability and disclosure), business continuity plan, updates to corporate governance guidelines or committee charters, and review of the company’s most significant risk/mitigation.  

Private Company Boards and Management Add Value with Advance Agenda Planning 

If agenda overemphasize Execution topics, they skew the company’s time-horizon to the short-term, starving the Leadership and Strategy agenda topics that generate long-term success. This often occurs if management sets agenda meeting by meeting, without having aligned with the board on the its goals for the year.

The Foresight® Advantage for Private Companies

Foresight’s annual agenda planning feature can help avoid misspent board and management time as well as highlight gaps that should be addressed to gain the maximum impact from the board’s efforts. The three categories described above form the basis of Foresight’s agenda hierarchy – and the organizing principles for Foresight board management software. It provides private companies a powerful tool for planning board agenda for the year and then for each meeting as it approaches – and managing the board’s time especially in times of crisis.

Private companies can use Foresight’s analytics to evaluate board effectiveness and adjust future agenda to increase the focus on impactful topics and address unexpected events. One private company board may find it must pivot quickly to address COVID-19 impacts. Another may find it urgently needs to address diversity, equity, and inclusion in its workforce. Another might find it should be spending more time on CEO succession, a Leadership question. Increasing the frequency and depth of board focus on these impactful agenda topics can be achieved by reducing time devoted to other topics or adding more meeting time. Management and the board can set and reset priorities, rather than choosing agenda topics that seem topical before each meeting (which tend to be short-term, Execution topics). Using Foresight to analyze and report board priorities makes priorities more transparent. 

Categories
Board Effectiveness

Board Committee Prep is a Team Sport

At most companies, each board committee has a “staff officer” who works with the corporate secretary to coordinate committee work. The staff officer’s expertise matches the committee’s role – the controller or internal auditor for the audit committee, someone in HR for the compensation or human capital management committee. Typically, the governance committee falls to the corporate secretary.  

These staff officers are key to committee effectiveness and are key teammates for corporate secretaries. Working together, they can ensure that agenda are well-crafted and committee time is well-spent. They also work together to see that committee briefing materials are well-prepared. They acquaint preparers with any “norms” the company has set for board briefing materials (e.g., decks not prose memos, not more than 12 pages, text must be at least 14pt font, each page must have a clear purpose stated at the top).  They help colleagues understand the committee’s role and that preparing materials for the committee is different from preparing materials for management.  

Staff officers and corporate secretaries can also leverage their experience to coach colleagues who are attending a committee meeting for the first time or will need to deal with a particularly contentious agenda topic. Some committees are looking for a “presentation” but more are looking for fulsome discussion. Preparing colleagues for committee discussion will make the employees more confident going into the discussion and committee meetings more effective. Helping those employees can also enhance those employees’ careers.

Categories
Board Effectiveness

Educating Your Board – at Every Meeting

Increasingly, investors want to know what companies are doing to educate their boards – and look for that information in proxy statements. University law schools and business schools are offering multi-day seminars. Accounting firms and consultants offer on-line training. In addition, board education can also be happening at every board and committee meeting. But not in the way you are thinking.

For every meeting, management and board advisors prepare significant amounts of advance materials (often called “briefs”). Too often these materials are not as “educational” as they could be. Here are a few suggestions for remedying that:

  • Explain why the topic is on the agenda. Is it required to comply with a regulatory requirement? Is it driven by an internal process – like succession planning? Telling directors why they are being asked to address this agenda topic grounds everyone in an understanding of purpose. Write something like “The SEC requires that the Audit Committee at least annually review….” Also, explain whether this agenda topic 1) is “Offense” (growth-related) or “Defense (risk-mitigating) and 2) relates to Leadership, Strategy, or Execution  (Learn more about Foresight’s proprietary agenda topics hierarchy at foresight.board-ops.com).
  • Specify the desired outcome from the agenda topic. Review and discussion leading to advice to management? Alignment between board and management on strategy? Decision on proposed transaction? Telling directors what management, after consultation with the Lead Director or Chair, is looking to accomplish with the board will help to frame the discussion. Write something like “Following discussion, the committee will be asked to approve the updated executive compensation program and performance measures for the 2020-2022 performance period.”
  • Provide external context for the agenda topic. If other companies are addressing this same agenda topic in some fashion, note that and explain why they are. If this is a purely company-specific topic, say that. Say something like “As a result of our company’s 2019 acquisition of BBB Company, the company must decide/report/is subject to/whatever….”.  
  • Anticipate the question: “What are our peers doing about this?”  Whether the board is addressing a new corporate policy on hedging or a compensation program provision or almost any topic, management will be asked. Directors want to know what peers are doing – not to follow like lemmings but to understand the landscape of alternatives and practices being used by others in similar circumstances.
  • Help those drafting briefing materials to understand the board’s role. Help them to identify the information critical to the board decision-making. Sending 100 pages of dense data is unlikely to help the board make the best decision. Better to pick the key data points, explain why those are the key data points, and focus the brief on those data points that will enable the board to make the best strategic or leadership decision or to provide management with considered advice and insights.
  • If your company’s significant investors have a point of view on the agenda topic, include that information. If your investors have varying views, explain the reason for those divergent views, if known. This information may not be dispositive, but it should be provided.

Hopefully these suggestions are helpful to you. And, if you follow our suggestions, you and your board will be better prepared for board meetings and you can describe your improved approach to board briefs in your next proxy statement.

Categories
Board Effectiveness

COVID-19 Response: Elevate Your Board’s Priorities

COVID-19 Reinforces the Importance of Elevating Your Board’s Priorities
Use Foresight Board Ops to take a measured and objective approach to improving your board work.

How to determine your board’s priorities during the COVID-19 pandemic? Your board had and still has three priorities:   

  1. Leadership – people questions
  2. Strategy – planning issues
  3. Execution – monitoring performance

What has changed is what your board should emphasize within those three priorities.

Your Board’s Leadership Priority

Leadership questions tend to be long-term. Example: Selecting the CEO has long-term (10-15 year) impact. But with COVID-19, some emphasis within the Leadership Priority has shifted as these other important Leadership decisions demonstrate:

  • What is your company’s executive succession plan – both emergency (e.g., CFO contracts COVID-19) and long-term (e.g., EVP of HR plans to retire in 3-5 years)? 
  • How should your board evaluate and compensate your CEO, including for your CEO and team’s handling of COVID-19 at your company? 
  • What are the risks in your company’s compensation system? How has COVID-19 changed those?
  • Does your board have the right combination of directors to oversee your company through COVID-19 and into the future? What tenure or age limits should apply to your directors? What perspectives or experience should be recruited? 
  • What workforce policies can help to build a specific corporate culture to best respond to new challenges?
  • What adjustments should your company make to adapt to COVID-19 workforce impacts including enhanced workplace safety due to COVID-19?

When making these Leadership decisions, your board is the main actor. Your management researches and advises your board on these questions.

Your Board’s Strategy Priority

Strategy questions (e.g., your company’s strategic plan) tend to have a medium-term time horizon (3-5 years). These questions require your board and management to work collaboratively. Your board cannot develop the first draft of your company’s strategic plan. Rather, management must propose a vision and path to move your company forward. Before approving your strategic plan, your board challenges management’s underlying assumptions, methods, and goals; debates the projected impact – including of COVID-19; and reviews every business unit’s major drivers. COVID-19 requires that your management and board revisit your company’s strategic plan in light of new opportunities, risks, and impacts. The desired outcome: your board approves an updated strategic plan that can carry your company through COVID-19.

Other important Strategy questions – with a COVID twist added – include:

  • How will your company grow? At what pace – factoring in COVID-19?
  • Into which new businesses or geographies should your company expand? Will COVID-19 slow expansion plans?
  • What are your company’s biggest risks (and how is your company mitigating them)? What additional risks has COVID-19 added or increased (and how will your company mitigate them)?
  • What new products or services should your company offer? Has COVID-19 reduced the viability of previously planned product launches? Are there opportunities for your company in COVID-19?  
  • Which of your existing products are at risk from COVID-19 or other product substitution, rather than direct competition? 
  • How have recent events changed your investors’ expectations regarding your company’s governance practices, employment practices – including equality, and ESG? Is your company adjusting to reflect those expectations?   
  • How well is your company engaging with the investment community and other stakeholders and adapting for COVID-19?

Your Board’s Execution Priority

Execution agenda topics tend to focus on tactics and results. The time horizon is short-term — this quarter, this year. Profitability and disclosure are typical execution agenda topics. Right now, your management is spending a good deal of energy on COVID-19 and equality. Here, your management is the main actor, running your company. Your board operates with their “noses in but fingers out,” monitoring performance. The board receives and reviews scorecards, including COVID-19 impacts, and watches carefully and questions where warranted.

Your Board’s Three Priorities Inform Each Other 

Each of your board’s three priorities (Leadership, Strategy, and Execution) inform the other two. For example, Execution agenda topics inform your board’s evaluation of management’s ability to deliver generally and specifically in the face of COVID-19. Certain Strategy agenda topics inform the evaluation of your management’s ability to think longer-term and to set a course that will guide your company through and beyond COVID-19. Some Leadership agenda topics determine which strategies have realistic goals in the face of COVID-19 and guide your board as it sets performance metrics for your management compensation in the Execution priority.

Upcoming Board Meeting Agenda Should Prioritize Leadership and Strategy

By overemphasizing Execution agenda topics during this COVID-19 crisis, your board and management might skew your board’s time-horizon to the short-term. Thinking that your board should focus solely on COVID-related agenda topics will starve the Leadership and Strategy agenda topics that will guide your company during COVID-19 and generate long-term success for your company. 

The Foresight® Solution

Using Foresight to plan your board and committee meeting agenda can help your board and management identify and elevate your board’s priorities and the agenda items that can drive your company’s success – in the face of COVID-19. Foresight’s agenda planning tool can also help you avoid misspent board and management time as well as highlight gaps your management and board should address to gain the maximum impact from your board’s efforts during these challenging times. For additional information about Foresight, click here: https://foresight.board-ops.com/

Categories
Board Effectiveness

Skating to Where the Puck is Heading: Succession Planning

Skating to Where the Puck is Heading: Succession Planning for Execs and Boards
Leverage Foresight BoardOps to see major improvements in your boards efficiency and effectiveness in making important decisions.

COVID-19 has reinforced the importance of ongoing executive succession planning as well as board succession planning. What follows are some suggestions for making that ongoing planning happen – starting with agenda planning. These suggestions apply to public and private companies.

Planning the Board’s Role in Executive Succession Planning

Putting executive succession planning on boards’ annual agenda calendars ensures that boards addresses this topic. An opportune time to take up this topic is following the board’s strategic plan review, so the succession planning process considers the company’s strategic evolution.

But succession planning is only one element of boards’ larger Human Capital Management processes. The board can also play a significant role in ensuring rigorous performance assessments (especially C-Suite assessments), coaching and mentoring, and career planning processes. Also, directors can serve as coaches and mentors for high potential executives or rising stars. Career planning is especially critical to advancement of women and minorities – as a lack of rotations with significant P/L responsibility often impedes progress toward C-Suite and the CEO role. 

Planning the Board’s Role in Board Succession and Refreshment

Getting the time on the agenda is a critical first step to board succession planning – which involves planning for both individual directors and the board as a whole.

Just as executives’ annual performance assessments are important to executive succession planning, annual director assessments are important to board succession processes. Annual assessments can reveal directors’ untapped strengths or aspirations as well as weaknesses that need addressing. Once recognized, untapped strengths and aspirations can be factored into committee assignment planning and committee chair rotation planning (it’s good practice to rotate committee members and chairs roughly every five years to maintain a sense of director equality and shared responsibility).

For identified weaknesses, an astute Lead Director or Governance Committee Chair can work with the director to develop a training plan (then share that plan with the governance committee or board). It can be as simple as spending more time with relevant company executives or on location to learn more about the company, attending a director education session at focused on a substantive area in which the director is weak. Behavioral issues can require one-on-one discussions. If another year passes and those weaknesses remain, the governance committee or board will face a tough decision as to whether to renominate the still weak director.

Increasingly, investors are interested in how boards conduct these annual assessments and what action boards take to address identified shortfalls. The desired information is easy to include in the proxy statement.

Committee assignments and rotations should appear as an agenda topic on the governance committee’s annual agenda calendar. Identifying and developing committee members and chairs to facilitate timely rotations is another pillar of board succession planning. Assume that all directors are capable of contributing to any committee; a doctor who leads a health care facility has experience in process management and controls that can benefit an audit committee.

Director recruitment planning is another element of board succession planning. As the company evolves, the board should too. In hockey, one skates to where the puck is going; the board should be building its future self for the future company. Increasingly, investors want boards to be diverse and include a mix of relevant experience (not to be confused with expertise), competencies, and perspectives. Investors want to understand the rationale for why the current director mix is appropriate and how they factor diversity into recruitment.

Some investors are also pressing for term limits or other means for boards to foster refreshment. Investors are interested in learning about how boards are planning to ensure that the future director mix will be appropriate for the future company. And boards are recognizing that board refreshment is the new normal. Effective recruitment planning does not just happen – it needs to be on governance committees’ annual agenda calendars.

In sum, directors and boards should be lacing up their skates and taking on the sometimes difficult topic of succession planning.

For additional insights into director succession planning, see Board Development and Director Succession Planning in the Age of Shareholder Activism, Engagement and Stewardship by Sabastian V. Niles, Wachtell, Lipton, Rosen & Katz, on Friday, June 7, 2019 at  https://bit.ly/3cxKV1Q