Being Thankful in the Boardroom

Hand drawn thanksgiving greeting card with leaves

This week, as the country turns its attention toward gratefulness and generosity, it seems only appropriate to do the same when discussing boardroom topics. A board of directors involves an intricate web of relationships, so it’s important to pause to appreciate how each of those interactions strengthens corporate governance for an organization.

Board Admins

Every business leader understands the value of exceptional assistance. In fact, the best administrators help leaders take their effectiveness to the next level. Board admins spend a lot of time in the background of the board process, but the truth is that they are the principal organizers for most board-related activities. Not to mention, keeping a collection of busy board members satisfied and plugged into a structured communication system is no small task.
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Better Banking Boards

better banking boards

While many industries have embraced innovative ideas regarding boardroom leadership, the financial services (FS) industry still has a reputation for being set in its ways. Intriguingly, banking board members have faced what are arguably some of the most unique and daunting challenges over the past two decades. The rise of the Internet-age has brought about major changes in how we bank as well as how we keep our accounts secure. As PwC’s most recent financial services survey explains, “Boards face a growing set of risks, opportunities, and competitive challenges from technology. New customer-facing options, such as mobile wallets and social media, hold promise to boost revenues, while better back-office systems can improve efficiency. FinTech competitors are intruding on traditional FS space, while cybersecurity is demanding more attention.”

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Effectively Vetting Board Candidates

effectively vetting board candidates

Company culture is extremely important to the success of any major company, but what about boardroom culture? How do board members ensure that incoming directors are the right fit for their team moving forward? It all comes down to vetting the candidate and doing it well. Board members must go the extra mile to determine whether a nominee has what it takes to help the company succeed. Here are a few suggestions for the vetting process:

A. Don’t be afraid to make them “tryout.”

You read that right. Professional sports teams make potential new players tryout for their position, so why not extend that practice into the corporate world? Create a fake scenario in which the board member will have to make a difficult choice or confront a roadblock; use this exercise as a way to measure their ability to respond to challenges. The decision they ultimately make in this trial is less important than the way in which they make it. Look for individuals who are willing to ask tough questions or who reach out for assistance when they feel like they need more expertise.
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Board Resignation: When & How?

board resignationThe fact of the matter is that board membership isn’t a life long commitment. Sure, some directors spend decades on a particular board, but others might serve happily for a couple of years before stepping down to pursue other goals. There’s no right or wrong amount of time for board service; it all comes down to the individual. There are, however, some ways to know when it might be your time to move on.

  • You simply don’t have the time or the energy.

These days, board service comes with some serious obligations. Board members should be thoughtful when deciding whether or not they should sign on for another year of service. Personal events can come up as well as other business accountabilities. It’s always better to admit that you can’t keep up with the responsibilities than to be a lackluster director.

  • You disagree with a major operational decision.

First and foremost, disagreements happen on boards; it’s just the nature of the role. Before you decide to jump ship based on a disagreement, be sure that it’s the right choice for the organization. If your differing opinion could be of assistance moving forward, that might be reason enough to stay and keep playing devil’s advocate. It’s a tough choice to make, but if you feel like your divergence from the group will hinder the organization’s growth or future, it’s acceptable to confront that reality and politely resign.
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Healthcare Boards: The Widening Role of the Compensation Committee

healthcare boards

In recent years, executive compensation has become a hot button topic in both the for-profit and nonprofit realms. Healthcare boards of directors have come under fire for allowing high-level execs to take home excessive yearly earnings and bonuses for work that has often been deemed lackluster. The topic has become so controversial that the Securities and Exchange Commission recently issued its first ever guidelines for calculating executive pay ratios. Board members all around the country are feeling the pressure to present salaries that can be legitimized through performance evaluations and overall company success.

For the healthcare field, in particular, executive pay has become highly scrutinized because of the public’s perception of its link to rising medical costs. In fact, activists in both Arizona and California recently tried to pass Hospital Executive Compensation Acts that would limit the salaries of hospital CEOs in those states. The initiative did not make it onto either of the ballots for the 2016 election this month, but the activist impulse is not likely to fade away. Several other states are also dealing with backlash; “In Ohio, an ABC5 investigation found hospital CEOs earn up to $4 million annually, and often earn bonuses of up to 40 percent of their salary. Critics in both states say these numbers are particularly concerning among non-profit hospitals, where CEOs earn more despite more inpatient care complications and higher expenses.”

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Sarbanes-Oxley Is Still Shaping the Modern Boardroom

Sarbanes-Oxley Is Still Shaping the Modern Boardroom

We’re 14 years removed from the Sarbanes-Oxley Act, but its influence is constantly shaping the modern boardroom. In the wake of the Enron scandal—what has now become the poster child for corporate greed and fraud—American legislators became abruptly aware that the corporate governance landscape needed some thoughtful regulation. CEOs and CFOs had become increasingly powerful in the corporate structure; while boards (the “independent” backbone of the system) were more like figureheads.

Although Sarbanes-Oxley (SOX) didn’t present any seemingly massive changes to corporate structure, it did force companies to pay closer attention to financial details, and it demanded more oversight from board members. As Inside Counsel writer, Melissa Maleske, writes, “SOX led to greater internal control of financial reporting, and increased expertise and independence among more-focused boards, committees and directors. It imposed new reporting, audit, disclosure and ethics requirements, and created internal reporting and whistleblower structures upon which the Dodd-Frank Wall Street Reform and Consumer Protection Act has built.” SOX also helped re-situate the relationship between management and board members; it affirmed that management serves at the will of the board and not the other way around.
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The Rise of the Chief Audit Executive

The rise of the chief audit executive - compliance

The recent Wells Fargo disaster reminds us that for companies, the best kind of watchdog is the internal kind. For some reason, Wells Fargo’s internal watchdog (or Chief Audit Executive) didn’t suffice in this instance, though. Whether that means they overlooked unethical sales practices or whether their reports to management went unheard is unknown. What we do know, though, is that Wells Fargo probably wishes they had dealt with these concerns internally before it became the debacle playing out in our daily news headlines.

Chief Audit Executives play a vital role in a large corporation’s system of checks and balances. Simply put, they exist in order to operate as a fully independent audit assessor, who also often supervises other aspects of risk and compliance. These executives, who typically report to the board’s audit committee, are becoming more sought after with each passing day. In fact, “Chief audit executives hired by large companies now command total pay packages approaching $1 million—about 30% more than a decade ago,’’ said Scott Simmons, a managing director at Crist|Kolder Associates, which recruited nearly 15 current CAEs.
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The Dangers of Sending Board Documents Via Email

The Dangers of Sending Board Documents Via Email

Thanks to a leaked board document via email that was originally sent in May of this year, the world is now keenly aware of 14 different companies that Salesforce was considering for acquisition. The email, which came from former Secretary of State and current Salesforce board member Colin Powell, also included a 60-slide presentation detailing these potential acquisitions. This isn’t the first time that a high-powered board member’s email has been targeted. Emails between the CEO of Snapchat and his board members were leaked back in 2014—some of which were considered highly embarrassing for the very young founder and CEO. In 2013, a Google board member’s email account was also hacked. There are many more examples in recent years.
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Best Practices for Planning a Smooth CEO Succession

Best Practices for Planning a Smooth CEO Succession

As most corporate directors know, CEOs come and go. For that reason, boards must be adequately prepared to facilitate smooth transitions between leaders regardless of whether the current CEO is exiting due to a new opportunity, retirement, or because they’ve been asked to leave. Although it can be a stressful time for any company, CEO succession can be a highly strategized and monitored evolution.  Here are some of our CEO succession “best practice” suggestions:

  1. Craft a written succession plan. 

This may seem like a no brainer, but it must be said. This policy can and should include emergency plans in case of sudden death or a completely unplanned vacancy. Russell Reynolds Associates suggests, “The entire board, together with a senior human resources executive, should review the succession plan twice a year, including an examination of the relevant bylaws and succession procedures and a review of the baseline capabilities requirements for the next CEO.”

  1. Set and communicate clear time frames.

Nothing throws a company into turmoil quite like a period without clear leadership. Employees start to get antsy and worry whether the transition will have an adverse effect on their position. To avoid this unsettling time as much as possible, the board should establish clear succession time frames. As Ivey Business Journal shares, “CEO succession planning must begin immediately following the installment of a new CEO. The planning must be a constant, ongoing process that is managed as closely and attentively as any of the company’s critical business issues.”
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Higher Education Boards Move From Ceremonial to Challenging

Higher Education Boards Move From Ceremonial to Challenging

Historically speaking, many higher education boards have been viewed more as symbolic leadership and less as entities that are shaping the future of education. The trustees often play the role of donor, booster, or simply cheerleader for the university they serve. As governance demands continue to grow for all boards of directors, though, higher education boards have entered the spotlight on more than a few occasions.

Several recent reports have called for more investment from board of trustee members. In fact, the National Commission on College and University Board Governance insisted, “Boards can no longer serve as rubber stamps for university presidents.” Former Tennessee Governor (and chairman of the commission) explains, “Many meetings of trustees or regents follow the same pattern: The president gives his presentation, you have some more presentations about all the wonderful things people are doing, you have lunch, and it’s time to go home. You can get away with that when nothing is changing, but the world has changed. The boardroom needs to move from being a country club to a place where they can work.”
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