Small business of-interest and need-to-know takeaways.
Excerpt: This decision reaffirms the Chancery Court’s low tolerance for hastily filed shareholder derivative lawsuits brought under the In re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996), line of cases where the plaintiff makes little effort to plead any connection between a “corporate trauma” and the conduct of a board of directors.
Read full article via Delaware Court of Chancery Dismisses Hastily Filed Caremark Action — The Harvard Law School Forum on Corporate Governance and Financial Regulation.
Interesting read for all leadership and management. If you are a CEO, are you taking advantage of the network opportunities with positions on other boards? What are other issues when CEO and founder is one and the same?
Excerpt: Firms in serious decline are more likely to rebound and avoid bankruptcy if their CEOs hold appointments on other companies’ boards, according to this paper. The more numerous a CEO’s posts, the more likely it is that the firm will recover, lending credence to the argument that external board positions for corporate leaders provide more value than just social ties. Especially for the CEOs of struggling companies, board posts can be used to access outside expertise, advice, and resources that aid in developing and executing an effective turnaround strategy.
Unfortunately, according to this paper, the same is not true for a founder’s status. Having the original founder as CEO does not make it more likely that a company can recover from trouble.
Despite intense interest, especially in times of economic strain, in the factors that can turn a struggling company around, little research has been done on these two potentially important elements — whether the firm’s CEO holds posts on other boards and whether the CEO is a founder.
Read full article via Bettering the Odds for a Turnaround. From Strategy + Business
This is an interesting article about board of directors; written from an Australia reference, it also holds value for all small business development of boards and the accountability / responsibility that should and should not be expected.
Excerpt: Our findings are a challenge to the ASX and ASIC, which discourage outside directors from owning shares in companies they hold board roles on for fear it undermines their independence. Ownership can be a tool to help align shareholder and manager interests and is linked to a firm’s positive performance. It is only likely to be fully effective if the board size is restricted to no more than about five or six. If management needs advice then it should simply hire consultants, not create large unwieldy structures made up of so-called ‘advisors’ kowtowing to management.
Before accepting a board role, a prospective director needs to signal his believe in the board’s monitoring role either by substantial personal shareholdings or taking his pay in the form of escrowed shares during his tenure. He may also need to negotiate funds set aside to assist board members in their monitoring role as boards need access to resources independent of day- to-day managerial control, especially when dissatisfied with the CEO’s performance.
Read full article via Knowledge Today – Shareholders Short-Changed by Big Boards. From Australian School of Business Knowledge Today
Small business of-interest, need-to-know and news-to-watch.
Excerpt: The issue of gender diversity in the corporate boardroom has risen to new prominence in the wake of recent efforts to impose quotas for women directors for companies in the European Union. The EU’s recent initiative has provoked controversy not only as to the optimal gender balance of boardrooms but also as to whether a quota system is a fair or effective way to achieve the underlying objective of women’s full and equal participation in corporate affairs. In the United States, the relative dearth of women directors on public company boards, and the potential effect on company performance of increased gender diversity, has been a topic of interest in the corporate governance sphere for many years.
The meaningful participation of women at all levels of the corporate hierarchy is an important goal. From a practical perspective, however, we believe that aspects of the European experience demonstrate the downsides of using a quota system to obligate this result. Individual public companies, and the U.S. corporate culture generally, would, in our view, be best served by corporate boards’ taking a dedicated, thoughtful and individualized approach to the nomination, election and full integration of women directors. This approach seems likely to yield the most successful substantive result in the short and long term, producing benefits both for corporate performance and the common weal.
Read full article via Gender Diversity on Public Company Boards — The Harvard Law School Forum on Corporate Governance and Financial Regulation.
Small business need-to-know and takeaway how-to in setting up your board of directors.
Excerpt: Of all requisite competencies, industry expertise is perhaps the most important attribute for board members because it equips directors with a deeper understanding of the risks and opportunities in a specific industry and also enhances directors’ knowledge of the regulatory environment and key industry players. These points are well understood by practitioners. The consulting firm McKinsey & Co. states in a 2006 report: “…in our work with boards we find that too many simply lack directors who have industry expertise to participate effectively in shaping strategy… [W]e believe that on a board of, say, a dozen directors, a litmus test of strategic energy is the presence of at least three or four members who have deep industry expertise in the core business and market conditions the company faces” (Carey and Patsalos-Fox, 2006). Similarly, 40% of respondents in a recent survey of S&P 500 firms identified industry expertise as a desired background for director candidates, second only to financial expertise at 42% (Spencer Stuart, 2011). Nevertheless, there is a conspicuous void in the literature concerning the impact of this board attribute. We aim to fill this gap by examining whether, how, and in what circumstances directors’ industry expertise enhances board effectiveness.
Read full article via Industry Expertise on Corporate Boards — The Harvard Law School Forum on Corporate Governance and Financial Regulation.
Small business how-to takeaways. You may download the full toolkit by volume. There are 3 volumes listed. Good information and reference.
Excerpt: The Forum’s fourth toolkit, Resolving Corporate Governance Disputes, provides practical guidance on how consensus-based alternatives to adjudication can help prevent, resolve, and reduce the negative impact of corporate governance disputes and consequently contribute to improving corporate governance practices, strengthening investor confidence, and supporting business continuity.
Governance disputes involve the board’s powers and actions or its failure or refusal to act. The conflicts may arise between the board and its shareholders or between directors and executive management. They may also involve issues among the directors themselves and between the board and other stakeholders.
The toolkit is divided into three volumes. The first volume explores the rationale for applying ADR mechanisms to corporate governance disputes. The second focuses on the implementation and use of corporate governance dispute resolution mechanisms and services. The third reviews the skills required for effectively resolving corporate governance disputes and addresses the training needs of both directors and dispute resolution professionals.
Download 3 volumes here via Toolkit 4: Resolving Corporate Governance Disputes. From The International Finance Corporation
Here is good basic advice that most CEOs do know but in case you need a reminder or a heads up — read this article.
Excerpt: Over the years I’ve met more than a few CEOs who did little more than pay lip service to their board of directors, only to find themselves wondering what went wrong as they were being ushered out the door prior to the expiration of their employment agreement.
As a CEO, your board can be one of your greatest allies. Conversely, and just as easily, they can be a significant contributor to your undoing resulting in an early and unnecessary demise. In today’s column I’ll deal with a skill set that all successful CEOs excel at—managing board relations.
Read full article via Managing The Board – What Every CEO Must Know | CEO.com.
Small business of-interest and takeaway advisory for when the “time makes sense” to choose inside legal versus private firms. Legal
Excerpt: Obviously, private law firms have terrific lawyers who provide great service to business. And obviously the two trends described above are not uniform or universal. But there is a crisis in private firms, at the same time that there has been increasing growth, prestige and pay for general counsel and other inside lawyers. (For a more extended treatment of the views, go here.) No report on the the “uncertain times” facing “big law” should ignore the rise of inside counsel. Boards, CEOs and other business leaders have increasingly recognized that hiring outstanding general counsel and other inside lawyers is vital to the twin goals of the global corporation: high performance with high integrity.
Read full article via The Rise of the General Counsel — The Harvard Law School Forum on Corporate Governance and Financial Regulation.
Small business and board of diretors need-to-know and takeaways. Where are we, accomplishments, needs, news-to-watch.
Excerpt: Corporate directors have adjusted to significant changes in the governance environment during the last year. On the regulatory front, the Securities and Exchange Commission (SEC) continues to implement new rules stemming from the Dodd-Frank Act, causing companies to rethink and react. The voice of shareholders has never been louder, pressuring companies to adopt structural governance changes by submitting proposals on board declassification, splitting CEO and board chair roles, and majority voting. Shareholder “say on pay” votes moved into a second year with some companies uncertain about how to respond based on their voting results. Plus, more companies had their shareholders withhold approval on their “say on pay” votes, maintaining the pressure on compensation committees.
In the summer of 2012, 860 public company directors responded to PwC’s 2012 Annual Corporate Directors Survey. Of those directors, 70% serve on the boards of companies with more than $1 billion in annual revenue. As a result, the survey’s findings reflect the practices and boardroom perspectives of many of today’s world-class companies. We structured the survey to provide pragmatic feedback directors can use to assess and improve performance in areas that are “top of mind” to today’s boards. The survey shows directors are clearly making progress and enhancing their practices. At the same time, directors acknowledge the numerous challenges they still face. The following are the highlights:
Read full article via Board Evolution: Progress Made, Yet Challenges Persist — The Harvard Law School Forum on Corporate Governance and Financial Regulation.
Small business and boards of directors of-interest, need-to-know and thoughts to ponder. Regardless of which side of this collaboration and governance you are on …. this study has takeaways for you.
Excerpt: Being a director on the board of a public company is a privilege that often brings generous monetary compensation, prestige, publicity, power, and access to valuable networks. In order to retain old board seats and gain new ones, directors need to develop a reputation and prove they are a good match for other companies. However, it is not clear what reputation is “relevant” in this context. If corporate governance is strong and boards of other companies protect the interests of their shareholders, then building a reputation for being shareholder-friendly can help in obtaining more directorships. On the other hand, if corporate governance is weak and boards of other companies are captured by their managers who want to maintain power, then having a reputation for being management-friendly might be more useful. The goal of this paper is to understand how the labor market for directors and these conflicting reputational concerns affect directors’ behavior and the quality of corporate governance.
To study this question, we develop a model with three key ingredients.
Read full article via The Labor Market for Directors, Reputational Concerns, and Externalities — The Harvard Law School Forum on Corporate Governance and Financial Regulation.
Recommended read. Great takeaways for all leadership and management. The first article in this series, see below, “The Role of the Board of Directors” was a posted link here on a prior day . I would also suggest you explore the other 3 articles he mentions here.
Excerpt: What role does the C-Suite have in exercising the company’s innovation governance responsibilities? In this article, the last in a series of five, professor Jean-Philippe Deschamps, defines six domains that are essential to organize and mobilize for innovation. They will condition the way innovation will be carried out and sustained by the organization and hence belong to the prime innovation governance duties of the top management team. In a previous series of three articles published by InnovationManagement I introduced the concept of innovation governance. These first articles covered: (1) the definition and scope of innovation governance; (2) the organizational models that companies have chosen to allocate innovation management responsibilities; and (3) a first assessment of the perceived effectiveness of these models.
In a new series of two articles on “governing innovation in practice” I first reviewed the specific role of the board of directors. In this second article I will summarize the role of the C-Suite in exercising the company’s innovation governance responsibilities.
If you compete through new products or services, your company has, by necessity, a new product development system and organization in place. As part of it, management allocates functional and process responsibilities for the planning, design, production and introduction of new offerings. In some companies the process works well and smoothly. In others, it may be more chaotic as different functional interests collide and conflict resolution takes time.
Read full article via Governing Innovation in Practice – The Role of Top Management | Innovation Management.
Small business of-interest, need-to-know takeaways and news-to-watch. Board of directors and shareholders communication.
Excerpt: Historically, there has been little direct dialogue between individual board members and shareholders. This is changing, however, as directors, particularly lead directors, face increasing pressure to meet directly with their companies’ largest shareholders. Accordingly, at many companies, individual directors are beginning to engage with investors on an ongoing basis, and not just in response to a particular issue or crisis.
The Lead Director Network (the “LDN”), a group of lead directors, presiding directors and non-executive chairmen from many of America’s leading companies, met on June 19, 2012 to discuss the relationship between directors and major shareholders. Representatives of two institutional investors also participated in the meeting. Following this meeting, King & Spalding and Tapestry Networks have published a ViewPoints report here to present highlights of the discussion that occurred at the meeting and to stimulate further consideration of this subject.
The following provides highlights from the LDN meeting, as described in the ViewPoints report.
Read full article via Board Engagement with Corporate Shareholders — The Harvard Law School Forum on Corporate Governance and Financial Regulation.
Another great article today on board of directors for nonprofits. The board self assessment — what a great tool or program. Is there a similar excercise for the for profit sector?
Excerpt: It is critically important for nonprofit boards to stop, reflect, evaluate and appreciate their performance. It’s also extremely rare that the typical board takes that time – or uses what members learn when they do.
Board self-assessment has been on my mind in the last month, thanks in part to the launch of an online version of Alice Korngold’s powerful Board Vector tool. I saw great potential in the original, paper-based version of her assessment process. Taking it online will only enhance its capacity to provide meaningful, data-driven opportunities to evaluate our performance as boards. I also had a chance to facilitate a local board’s self-assessment process, appreciating its commitment to taking this step and helping them to explore what members could learn from the results.
Read full article via Laramie Board Learning Project: Building reflective boards: Self-assessment.
This is a cool idea that I didn’t know. Is your nonprofit using minors on boards and for voluteer work? Read here. The article is extensive in ideas, examples, legal ramifications and more.
Excerpt: Youths represent a growing volunteer population for nonprofits and for some, a potential pool of nonprofit board members. The 2007 National Survey of Children’s Health estimated that 78% of youths between 12-17 years of age had participated in at least a few volunteer work or community service events that year. Some groups have taken note of this increasingly service-oriented age group and focused discussions about integrating younger individuals into nonprofit boards beyond young professionals and even young adults to youths (i.e., person under the legal age of adulthood).
Youth board members are most commonly found in youth-serving organizations such as, for example, America’s Promise Alliance which has two youth board members and Youth As Resources which has a primarily youth board. While interest in the idea of youth board members may be growing in recent years, in practice, it still remains an anomaly
Read full article via Nonprofit Law Blog: Youth Board Members: Can minors serve on a nonprofit board?.
Good small business information read. Sort of the why, when and how-to.
Excerpt: In Part I of this blog entry, we looked at how often one should do board assessments, who should facilitate, and the merits of inviting a third-party facilitator into the boardroom. In Part II, I want to discuss evaluation goals, evaluation method options, and how the results can be used. First let’s talk about board evaluation goals.
Read full article via Board Blog. by TK Kerstetter