Trends in corporate governance. Concept of governance based on interpretation and type of organization: small-mid sized business, large corporation, publicly traded, privately owned, non-profit, etc.Governance practices in the US have come a long way but we have a long road aheadIn the US, in the
1. Trends in Corporate Governance Dr. Sandra B. Richtermeyer, CMA, CPA
President, Institute of Management Accountants (IMA)
June 21, 2011
2. Trends in corporate governance Concept of governance based on interpretation and type of organization: small-mid sized business, large corporation, publicly traded, privately owned, non-profit, etc.
Governance practices in the US have come a long way but we have a long road ahead
In the US, in the popular press, issues or problems that are related to poor governance are often attributable to executive leadership
Tonight’s discussion will have items that are applicable to a variety of organizational types
3. Developing best practices in board governance Board alignment with strategy, vision and mission
Separation of CEO/Chairperson role
CEO evaluation and compensation
Disclosure and transparency
Board diversity, culture, and training
Effective board meetings
Board succession planning
4. Board alignment with mission, vision and strategy Board’s role in strategic planning based on size of organization, sophistication, industry trends, etc.
Board member clarity regarding their role in strategy setting
Clarity in communicating and applying strategic goals
A vision statement is needed to start with goal setting and strategic direction
A clear strategic plan linked to the mission provides the essential platform for board’s effectiveness
An understanding of the board’s role in strategic planning is critical and this may vary by organization
5. Board alignment with mission, vision and strategy Mission and core competencies oversight How are board members informed and educated on the primary products and services?
Do board members conduct site visits?
When delivering key program services, how is quality maintained?
Are appropriate benchmarks provided to the board members?
6. Board composition/diversity Disclosures on board composition are often weak or not available
Position title, certification, education
Years of experience with organization
Years of experience serving on other boards
Internally – leadership assessment
7. Board culture Healthy board culture may be described using terms such as:
Level of trust
Opportunities for open discussion
Active collaboration occurs
Recommended: Ask board members to individually describe their view on the culture of the board
Recommended: Board satisfaction surveys can be helpful in gauging culture and understanding where problems exist
8. Board member satisfaction/self-assessment Board member satisfaction surveys can be conducted as often as quarterly and are easily implemented with an online survey tool
The results of the survey should go to a board member responsible for oversight, not the board chair
The end goal of a board satisfaction survey is to have an understanding of whether or not board members have an effective and satisfying leadership experience or to assess their level of engagement
9. Sample/basic questions for a board member satisfaction/self-assessment survey The following statements can be evaluated on a five point scale (agree on one end of the scale and disagree on the other end)
A climate of mutual respect exists between the board chair and the board members
All board members are engaged in the board’s activities
We have adequate time to ask questions at the board meeting and explore ideas
All board members are prepared for each board meeting
I feel prepared for each board meeting
10. More sample/basic questions for a board member satisfaction/self-assessment survey Do you feel the size of the board is adequate?
Do you feel that your service on this board is rewarding and satisfying?
How could you feel better about your performance as an individual board member?
Depending on the board size, a 360 evaluation of each board member may be helpful
Board surveys can be conducted via survey or interview (perhaps through a facilitator)
11. Board training If done properly, board training can lead to a stronger board that functions more like a team than a group of individuals
Most helpful if conducted at the beginning of board terms and if it includes continuing board members
Also helpful if conducted mid-way through the year as the board culture and sense of community has had an opportunity to develop.
Training can consist of
Bylaw, policy, procedure overview,
12. Board oversight (general) Board oversight is critical in terms of financial oversight and mission/program oversight
All board members should be educated on their fiduciary role and existing bylaws, policies and procedures
Board members should clearly understand where conflicts of interest could arise (a conflict of interest policy where each board member signs off is helpful)
For publicly traded companies, the compliance requirements are generally clear, but those can be interpreted as the minimum
13. Financial oversight – key questions to consider Does the budget support the org’s goals and objectives? Is it too aggressive? Too conservative?
Do all board members review and understand the financial results of the organization on a regular basis?
Are the revenue streams diverse? If not, how can revenue risk be minimized?
Are investment policies reviewed on a regular basis?
Are appropriate internal controls in place?
How do the financial results compare to prior years?
How are board members informed when compliance reports are submitted?
Do board members have easy access to all areas of oversight?
14. Effective board meetings
Keep the agenda template consistent
Distribute the agenda before the meeting
Only meet for the planned amount of time
Establish attendance guidelines
Distribute minutes as soon after the meeting as possible
As your board grows, implement committee structures and use full board meetings to report on committee activities
Allow time for brainstorming and free thinking
Allow time for socialization of board members outside of your standard board/committee meetings
15. Establish a succession plan for all board leadership roles Have clear role descriptions for each board member and make sure all board members understand all board roles
Establish paths to becoming a board chair/member and communicate those paths to members/constituents
Implement term limits for board roles
Find ways of engaging previous board members to allow them to contribute
Sharing of organizational history