To Admiral Hopper’s point, leadership can make a dramatic difference to the people who make up an enterprise and, therefore, to the enterprise itself. For that reason, Leadership is one of every board’s three Priorities (the others are Strategy and Execution). A board’s role in Leadership takes several forms – specifically, three focus areas.
The board is a body of equals. It is empowered to choose its own leadership structure and its own leaders from amongst its members. Board leadership roles typically include either an independent or executive Chair or a Lead Director.
The board identifies the need for and establishes its own committees, consistent with requirements of listing standards, and regulations, its discretion, and its own governance guidelines. The board also assigns directors to committees.
The board also benefits from continuously developing its own members’ individual knowledge and effectiveness through activities such as self-evaluations, individual director education, and training. The evaluations, required in part by various rules, lead to improvements in the board’s operations and its collective development as a governing body.
Committee chairs and members may change. Directors complete their board service. For these reasons, succession planning is as necessary and beneficial for the board as it is for company executives. Moreover, periodic reviews of board composition can identify gaps in board experience. Finally, each vacancy is an opportunity for the board to reassess and to bring new perspectives into the boardroom.
CEO and C-Suite
Boards meet regularly, but not every day or even every week. Day-to-day, executives must manage the enterprise. Choosing a CEO is the most impactful decision a board makes. It must choose well, based upon articulated criteria and company strategy. A poor choice can lead to corporate failure. Finally, a board can wait too long to replace a CEO because it does not have a “ready now” successor or does not have the commitment to replace a failing CEO.
Below the CEO level, either a committee or the full board assesses and confirms the CEO’s choice of top executives.
Executive compensation is of great interest to investors, media, activist shareholders, employees, and regulators. Compensation strategy, annual and long-term performance goals and awards, and compensation policies are part of a board’s work to ensure an effective C-Suite. They are interested because compensation programs drive priorities, decisions, and behavior, and, hopefully, company results. Efforts to explain a company’s compensation philosophy, programs and decisions can take up one-third of a public company’s proxy statement and considerable time during investor engagements.
The board makes some decisions that affect the entire workforce – even a global workforce. The board should understand, for example, management’s compensation philosophy (i.e., pay parity, target the mid-range versus top of the industry) and Management’s program for achieving and leveraging diversity within the workforce to achieve competitive advantage. Finally, the board can lead by example.
By thoughtfully planning board and committee agenda and processes and devoting appropriate time and effective deliberation to its Leadership priority and these three focus areas, a board can make a significant difference in a company’s performance.
FORESIGHT™ is the first complete corporate governance software solution for boards of directors at public companies. The cloud-based software simplifies board planning and enhances board compliance and performance. FORESIGHT™ is designed for corporate secretaries, general counsel, CEOs and lead directors.
FORESIGHT™ enables users to:
- Plan board priorities annually and meeting by meeting
- Automate board and committee meeting agendas, minutes and compliance reports
- Compare meeting
agenda topics to regulatory and other stakeholder obligations and expectations,
- all updated as changes occur, and
- curated for specific stock exchange, state of incorporation, leading shareholder preferences, peer company practices, and more
- Identify regulatory exceptions for timely correction
- Export selected meeting and supporting documents
- Generate draft “ready-for-editing” minutes
- Generate and manage follow-up items after every meeting
- Measure board performance against industry benchmarks
- Get tips for improving board priorities and performance throughout the year
© Corporate Governance Partners, Inc., 2019
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