by Simon Evans for Financial Review
A growing number of non-executive directors sitting inside Australia’s corporate boardrooms are being tapped to run the entire operations as a chief executive. Sometimes it’s out of necessity because of a sudden event, and sometimes it’s because boards want someone who “knows where the bodies are buried”.
Having a broad knowledge of the inner workings of a company through sitting around the boardroom table seems to count more and more. And corporate governance experts say the pressures on companies to deliver strong returns quickly means the six-month time frame it can take for an extended global search for the right person can be a deterrent to recruiting a complete outsider.
But does poring through monthly board reports and overseeing broad strategy around a boardroom table equip a director to actually run the company?
Explosives group Orica, theme park and fitness centre operator Ardent Leisure, copper and gold group Rex Minerals and insurer Suncorp have in the past six weeks hired chief executives from their boardrooms, joining pastoral company Elders Australia which installed Mark Allison into the chief executive role in April, 2014, swapping his previous duties as chairman. Read more here.
by N. Craig Smith for INSEAD Knowledge
Creating a sustainable future takes more than good intentions. Boards of directors have an obligation to help drive a strategic approach to corporate sustainability.
While environmental, social and governance (ESG) issues are becoming mainstream for corporations and the wider public, much more has still to be achieved. It is fairly well accepted that promoting sustainable practices can affect the long-term economic performance of a company. Organisations are beginning to understand that addressing sustainability is about managing risks and opportunities for growth, and developing solutions that respond to the future demands of customers, other stakeholders, and the needs of the planet.
What is not so well-recognised is that ESG issues need to be considered at all levels of decision-making, and that, as the highest decision-making corporate bodies, boards have an essential role to play in driving, overseeing and incentivising corporate sustainability across the organisation. It is up to directors not only to initiate sustainable practices, where absent, but also to ‘join the dots’ for employees, investors, customers and other stakeholders to demonstrate how a company’s actions today can have a real impact on its profitability in the future, if not its survival. This can be done in relation to many board agenda items, not just where sustainability is explicitly up for discussion.
Board members, of larger organisations at least, will most obviously discuss sustainability in the context of the company’s sustainability report. However, this is far from the end of the story. They need to realise that sustainability issues are interlinked with nearly every decision they make as a director. Read more.
Martin Lipton, 2nd May 2013, NACD Directorship
Directors must focus on doing the right thing for their corporations while understanding shareholder sensitivities.
The years since the onset of the financial crisis have served to further increase the demands on and scrutiny of public company boards of directors. The assault on the director-centric model of corporate governance continues in the shareholder activist and political arenas, and the challenges of planning for and investing in the long-term health of the corporation have become more daunting. As the power and organization of both governance and hedge fund activists have increased, the pressure to produce short-term results has only grown stronger, regardless of whether the steps necessary to produce those results may be harmful to the corporation in the long run.
In this environment, the challenge for directors is to continue to focus on doing what they believe is right for their corporations while maintaining a sufficient understanding of shareholder sensitivities to avoid a targeted attack that could undermine their ability to act in their company’s best interest. The primary focus of a director, of course, should be on promoting and helping to develop the long-term and sustainable success of their company. This encompasses a wide range of activities, including working with management on the company’s business and strategies, planning for the succession of the CEO and other key executives, overseeing risk management, monitoring compliance, setting the appropriate tone at the top and being prepared to step in to address any corporate crises that arise. At the same time, the board needs to be aware of and address shareholder demands in a constructive manner, consider how a hedge fund or other activist may view the company and its strategic alternatives and try to ensure that the company maintains a shareholder relations program that clearly articulates the reasons for the company’s strategies and engenders support from the company’s major shareholders. In some cases, this may include direct communication between board members and institutional shareholders. Continue reading…
by TK Kerstetter for The Board Blog, May 18th, 2011.
It’s not often I will get off my virtual soapbox and approach a topic that has a commercial aspect to it but as a former president and director of a public company, this is a topic that I am very passionate about. My favorite subject in the whole world is board leadership, particularly the relationship between the CEO and the non-exec chairman or lead director. As I have stated many times in this blog, on our “This Week in the Boardroom” webshow, and in speeches across the country, I believe the most important but least-discussed CEO skill set is guiding or managing the board. Now I know this will have the hair stand up on the back of the necks of many governance purists, but for me, nirvana is when the CEO and chairman/lead director can blend their board leadership skill sets, each providing the board what it needs to be a great company and build shareholder value. Having said that, I recognize the risk of a CEO becoming too imperial and manipulating the board, and I equally recognize the risk and challenge of making sure you have selected the right CEO to lead the company. But when those duties and skill sets come together and when trust, information flow, and healthy questioning resulting in great products and/or services creates maximum shareholder value, it is quite a sight and feeling to behold.
Two years ago after Corporate Board Member had successfully launched its chairman/lead director peer exchanges as part of its bigger Peer Exchange Program, it came to me that we were missing the opportunity of showcasing how various company boards and executives have accomplished this quest. While not every scenario has turned out perfect , and there are many unique aspects to each companies chairman/CEO relationship, I recognized that there is plenty for CEOs and board chairs to learn from each other about how certain companies and teams have “gotten over this hump.”
Last year this premonition resulted in our first Chairman/CEO Peer Forum, where chief executives, chairs, and lead directors heard from other teams of CEO/Chairmen/Lead Directors. These individuals spoke about their tricks of the trade and then divided into small groups to discuss specific challenges and solutions. I knew when I led our opening discussion with then-Reynolds American CEO Susan Ivey and lead director Thomas Wajnert on the topic of how they had developed as a team that we had something of value for our larger board audience. I couldn’t wait to meet with our education group to help put this year’s event together. And it’s turned into an amazing agenda—one that provides valuable takeaways for every company mover and shaker. (continue reading… )
by TK Kerstetter for The Board Blog – Boardmember, April 27th, 2011.
Less than two weeks ago I had the privilege of hosting both our Risk Oversight in the Boardroom and the Compensation Strategies to Build Shareholder Value conferences held at the New York Stock Exchange on successive days. Both these sessions go right to the heart of the two major challenges facing boards today: risk management oversight and executive compensation. I thought I would share some of the issues and topics that seemed particularly interesting to me during the two days.
If I tweeted, which I don’t, (although we did have a Corporate Board Member staffperson tweeting out some juicy morsels during both events) I would have definitely tweeted about how Constellation Energy Group has organized and handles risk management and the board’s oversight. Interestingly enough, it wasn’t really the board’s duties that struck a chord with me, it was the way they make sure the business unit leaders accept the responsibility for managing risk at the business unit levels. First, let me set the stage. On our panel, we had a board member who serves on the audit committee in addition to the chief risk officer for Constellation Energy and during the session, they discussed how they worked together to manage and oversee risk. While that was fascinating, because I really thought they had their act together, the most telling part of their session was describing how they establish their company’s risk/reward culture. To make a long story short, they make sure that all the business managers understand that they are the front line of managing risk and while senior management and the board are always pushing to grow the company, they make sure that the risk thought-process is part of every business-unit head’s strategic plan and subsequent presentations. I’m sorry that I can’t do the session justice in this blog, but the presentation was very compelling and really gave you comfort that Constellation Energy knows what it is doing with regard to enterprise risk management. When the session was done, I felt the chief risk officer was going to get several new job offers and Ann Berzin, the board member, might receive a few new board seat offers. (continue reading… )
by PRNewswire, March 21st, 2011.
Sessions Designed to Help Directors Become Strategic Assets for Shareholders
As the 2010 proxy season began, the National Association of Corporate Directors (NACD) devoted its March Director Professionalism course to providing directors with the tools needed to navigate the new environment created by Dodd-Frank and the Securities and Exchange Commission (SEC). The two-day program brought together more than 50 dedicated corporate directors and governance experts to discuss topics ranging from risk management and transparency to the enhanced responsibilities of the board’s key committees.
“The March Director Professionalism course tackled the most pressing issues that boards are facing during this period of change for corporate America,” said Ken Daly, the president and CEO of NACD. “The course also underscored what it truly means to be a director who adds value — one who is fully prepared for and knowledgeable about the responsibilities of boards in this new era of increased accountability and scrutiny.”
The latest Director Professionalism course, held March 3-4 in Park City, Utah, offered more than 17 sessions taught by active public company directors and corporate governance experts, including Michele Hooper, veteran director of several prominent corporate boards, including PPG Industries, Warner Music Group, UnitedHealth Group, AstraZeneca PLC and NACD;Professor Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware and a director for HealthSouth Corporation Thomas Bakewell, former director, Lindenwood University and Bethesda Health Group; and Robert M. Galford, managing partner, Center for Leading Organizations and chair of the Compensation and Governance Committees, Forrester Research.
“Directors must be prepared for the regulations and requirements that have broadened the scope of their work,” said Hooper, who led sessions on the new challenges and opportunities facing nominating/governance committees and effective corporate governance strategies in today’s regulatory environment. “The nominating/governance committee has an incredibly important role. It not only determines the skill sets, experiences and qualifications required to optimize the board’s composition, but the committee also sets the tone for corporate governance on the board.” (continue reading… )