Corporate Boards: 14 Questions for You

Posted on | October 9, 2009 | 1 Comment

Attending a company board meeting is ‘serious stuff’, be you director, presenter or just an observer. And given what’s at stake, the people involved, and how impactful the decisions can be, it’s no wonder there’s a palatable sense of electricity and power in the air when boards convene.

Are There Governance Problems?

What we need today is a serious rethink about how we handle corporate governance. We need this for the sake of capitalism, the health of the economy, the wealth and well being of everyone, and the preservation and improvement of our way of life.

I say this because of the out-of-control foolishness from Wall Street and financial institutions that precipitated the Great Recession we’re now struggling to recover from, and the years of corporate fraud we suffered through from such notables as Enron, WorldCom, Livent, and smaller ones like Atlas Cold Storage. Also because of  the countless times we’ve suffered from bad corporate decision making, ham-fisted management practices, and excessive organizational waste, particularly from arbitrary, frequently knee-jerk and often ego-driven firings of workers and executives alike.

Surely, if there’s a God above and the sun is to rise tomorrow, there must be better ways of managing and governing the affairs of corporations and the people who run them!?!

Sources of Governance Problems

Based on my personal experiences as a board chair, board member and non-member presenter in a number of private and public companies, I’d say there are four sources for the electricity and power that permeates the air when boards convene. These are:

1. the number of people involved both on the board and in the company,
2. the amount of money being managed in P&L and balance sheet terms,
3. the public visibility the organization, and
4. the size of the egos on the board and in management,

Now when egos and authority intersect, it usually doesn’t take long before observers start mentioning how power corrupts both people and decision making. But have you ever read the full quote from where this popular truism is drawn?

If you haven’t, here it is, taken from a letter Sir John Acton wrote to scholar and ecclesiastic Mandell Creighton in April 1887 when he addressed the 1870 great crisis in Roman Catholicism over Pope Pius IX’s promulgation of the dogma of papal infallibility:

"I cannot accept your canon that we are to judge Pope and King unlike other men with a favourable presumption that they did no wrong. If there is any presumption, it is the other way, against the holders of power, increasing as the power increases. Historic responsibility has to make up for the want of legal responsibility. Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority: still more when you superadd the tendency or certainty of corruption by full authority. There is no worse heresy than the fact that the office sanctifies the holder of it."

Ways We Can Make Governance Practices Better

Clearly, organizations have been struggling for a very long time with what’s the best way people in power can and should exercise authority and make decisions. Much of what gets done, however, is left to the discretion, judgment, wisdom, integrity and ethos of those who serve and those who regulate these high offices.

Thankfully such people can turn to at least three other sources of help and guidance:

1) Informed Commentators

I for one have repeatedly called for constructive change in corporate governance practices covering such things as:

1. what information, strategies and risks should get considered and how,
2. what checks and balances on CEO power should be adopted, and
3. what feedback mechanisms boards need to better stay on track and avoid biased or wrong-headed decision making.

(These topics I covered in the following previous blog articles: Don’t Lead Your Company into Trouble; CEO Hubris, Fraud & How to Prevent It; Why CEO’s Are Blind To Trouble!; and Lehman Bros: What Failure Felt Like)

2) Directors Courses Offered By Leading Institutions

If you are looking for education and training covering the structures, roles, and responsibilities for boards of directors and their members, as well as what’s considered best practice, check out:

- in the US:
  a) the National Association of Corporate Directors (‘NACD’)
  b) Universities such as Stanford Law School in California and
      Harvard Business School’s EE Program in Corporate Governance.

- in Canada:
  a) The Canadian Institute of Corporate Directors
  b) Universities

3) Books on Corporate Governance

One recently published book that strikes me as timely and well done is OWNING UP – the 14 Questions Every Board Member Needs to Ask by Ram Charan, Ph.D. Corporate Governance, a long-time Harvard Business School professor and corporate consultant.

Charan presents 14 questions that directors can use to challenge their current thinking and, with the book’s guidance, come up with fresh and appropriate answers to the following:

Question 1.    Is Our Board Composition Right for the Challenge?
Question 2.    Are We Addressing the Risks That Could Send Our Company
                    over the Cliff?
Question 3.    Are We Prepared to Do Our Job Well When a Crisis Erupts?
Question 4.    Are We Well Prepared to Name Our Next CEO?
Question 5.    Does Our Board Really Own the Company’s Strategy
Question 6.    How Can We Get the Information We Need to Govern Well?
Question 7.    How Can Our Board Get CEO Compensation Right?
Question 8.    Why Do We Need a Lead Director Anyway?
Question 9.    Is Our Governance Committee Best of Breed?
Question 10.  How Do We Get the Most Value Out of Our Limited Time?
Question 11.  How Can Executives Sessions Help the Board Own Up?
Question 12.  How Can Our Board Self-Evaluation Improve Our Functioning
                    and Our Output?
Question 13.  How Do We Stop from Micromanaging?
Question 14.  How Prepared Are We to Work with Activist Shareholders and
                    Their Proxies?

Summary

So there you have it. There is clear and good reason why we need improved corporate governance practices and better company check-and-balance power structures.

Now, be warned not to fall for the idea that University Business Schools and Directors Institutes will save us. That’s because while they’ve been around for quite some time, they didn’t prevent the corporate excesses, bone-headedness and frauds we suffered in the last 10 years. Heck, the Canadian Institute has only run their director’s course 23 times so far.

All of us need to feel responsible for making governance systems of all kinds better functioning, not just in the short term but for the long term as well.

That said, what’s your idea where and how to start making this happen?

(Come on now, time’s a wasting, and we need to make progress!)

© Blog.TonyJohnston.biz & Compass North Inc. 2009

Article by –

Tony Johnston, CMC, CGA, MBA, BA (Econ)
President
Compass North Inc.
18 Balding Court
Toronto ON
M2P 1Y7
Office:  416-342-5652
Mobile: 416-346-4140
www.CompassNorthInc.com
www.CNiRapidResearch.com

Tony Johnston is a results-oriented executive & management advisor with success in 4 turnarounds and many significant other business accomplishments to his credit who helps companies drive:
› top line growth (revenue)
› bottom line improvement (profits)
› cashflow management (credit line control)
› growth strategy (more / new)
› financing & stakeholder relationship management (debt / equity)
› enterprise value maximization (mkt price)
› acquisition planning & execution (find / close)
› divestiture preparation & execution (prep / negotiate)
› information gathering (competitive intel / market research)
› crisis control (turnarounds & wind-downs)
› enterprise leadership (CEO / CRO / CFO)

Compass North Inc. is a management & advisory services firm that helps companies access and use money brilliantly so they achieve important, challenging goals. Examples of what we do include helping companies and their owners:
– make better decisions by providing customized competitive intelligence,
– grow by crafting strategic plans and implement them,
– get turned around by dealing with their debt or other business problems,
– borrow more money and/or raise more equity, and
– plan, prepare, negotiate and close acquisitions, divestitures and ownership
   transitions.

Bottom-line: The benefit that Tony and Compass North Inc. deliver is helping company owners maximize both what they earn while they own their business and what they bank when they sell.

> Follow me on Twitter @CompassNorthInc

Comments

One Response to “Corporate Boards: 14 Questions for You”

1. bizsugar.com
   October 9th, 2009 @ 11:36 am

   Corporate Boards: 14 Questions for You | Biz Money Matters |…

   We need a serious rethink about how we handle corporate governance. Here is why, what and how we can do that. It’s important to you, me, companies, the economy and our way of life (seriously!)….

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