esg standards

Why Board Members Need to Understand ESG Standards

On Tuesday morning, January 16, Laurence Fink—founder and CEO of the investment firm BlackRock—sent an important letter to the CEOs of the world’s largest companies. In that letter, he explained, “Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”

BlackRock is the largest investor in the world—thereby giving Fink’s voice a great deal of power and influence. But what exactly do his statements mean?

Put simply, Fink’s letter advocates for Environmental, Social and Governance criteria, which is commonly referred to as ESG. Investopedia defines esg standards as “a set of standards for a company’s operations that socially conscious investors use to screen investments.”

The environmental element examines how a company is handling their impact on the natural environment.

The social portion of the criteria scrutinizes how the company handles its relationships—with employees, partners, customers, its local communities, and more.

The governance component analyzes exactly what you’d expect: executive leadership as well as pay, auditing processes, shareholders rights, etc.
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What Is Directors and Officers Insurance?

Insurance is pivotal to the existence of any private organization. Companies often have to purchase a variety of coverage options to ensure their business is completely safeguarded: property insurance, liability protection, loss control assurance, and more. Directors and Officers Insurance (D&O) is one more type of specialty coverage that companies with boards of directors should consider purchasing.

Directors and Officers Insurance

According to Investopedia, “Directors and officers (D&O) liability insurance is insurance coverage intended to protect individuals from personal losses if they are sued as a result of serving as a director or an officer of a business or other type of organization.

It can also cover the legal fees and other costs the organization may incur as a result of such a suit.”
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The First-Time Board Member Checklist

Hand holding bezel-free smartphone with green checklist as concept for mobile and online todo lists. Vector illustration with frameless touchscreen in front of blue background.

Board membership is an adventure in leadership unlike any other. Individuals who are new to the role of director will be challenged in new and unique ways.

In order to meet this challenge head-on, they’ll need to continually develop their expertise while adjusting to a system of checks and balances that is meant to help bring the best decisions forward.

An experienced CEO or CFO may jump into a first-time board member position with a lot of confidence, and that’s a good thing! But they also need to understand the ways in which their role will differ from the internal positions they’ve held in the past.
Here are some tips for making a smooth transition from business leader to board member extraordinaire.
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Taking an Unpopular Stand as a Board Member

Individuality concept, birds on a wire

Disagreement is a natural part of the boardroom process. In fact, it’s an integral element in decision-making. Diversity of thought helps board members analyze their options from varying angles, which ultimately helps them make better choices as a collective.

From time to time, however, you may find yourself as the odd man out. First and foremost, don’t worry; it’s OK to take an unpopular stand, but there is a more effective way to way to do it. Here are our suggestions:

  1. Don’t go silent.

For many directors who realize they’ve adopted an unpopular stance, the choice to go silent makes the most sense. While you may believe that you’re being a better group member by bowing out of discussion, you could actually be doing a disservice to your board. Keep in mind that your opinion has equal value in the board setting, and you may be looking at a problem from a truly unique angle that others need to hear.
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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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Cultivating Better Boardroom Conversations

better boardroom conversations

Every board meeting is different; in fact, a meeting that’s relatively dull and discussion-less might follow a meeting comprised of contentious and heated debate.

There isn’t a “right” kind of meeting, but there are some ways to help ensure that you’re getting the most out of your in-meeting conversations.

Don’t avoid disagreements; give them a structure

Many individuals are conflict-averse, but the truth is that board meetings sometimes demand that two sides state their cases for different paths forward.

Some of the best boardroom discussion can come from a debate-style format, but that’s the trick—the moments of disagreement should feel heavily controlled like they would in an actual debate competition.

In other words, set time limits for laying out arguments. Give individuals a structure that ensures balanced speaking time. When directors feel as though they have an equal opportunity to speak, it’s easier to focus on the topic at hand rather than on potential unfairness.
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What’s the Worst Board Meeting Ever

Let’s be frank: not every board meeting is going to be a walk in the park. Sometimes, board meetings are tedious, contentious, and even directionless. Here’s a list of some things that can truly go wrong at the worst board meeting…plus tips for handling them if they do!
The Worst Board Meeting Ever

One or two members dominate the meeting

This is a common occurrence in boards that contain one or two big personalities. Unfortunately, those dominant members can derail a potentially effective board meeting by bulldozing over other opinions or making members fearful of sharing their views. In this instance, it’s important that the board chair steps in to ensure that all members are getting an equal opportunity to speak.

The board chair can also address the issue with the member in question outside of the meeting. If the domineering member is the board chair, it’s important for other members to speak up in support of reevaluating the way the meeting is conducted; suggesting a stronger use of Robert’s Rules of Order might also help alleviate disputes.

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What Corporate Directors Can Learn From Wells Fargo

Wells Fargo has certainly had better years than 2016. If you’ve somehow missed the flood of news headlines, check out this summary article by The Week writer, Jeff Spross. The title alone—“The Mind-Blowing Stupidity of Wells Fargo”—should be enough to give any board member a shudder.
What Corporate Directors Can Learn From the Wells Fargo Fiasco

No director wants their organization to be the topic of a headline like that. The Wells Fargo PR disaster began with aggressive cross-selling tactics and the creation of hundreds of thousands of fraudulent bank accounts and credit lines.

These practices were implemented when lower level employees were met with impossible sales expectations and quotas.

When scandals like this occur, it’s important that leaders of the affected organization (as well as leaders of other major companies) take note of the failures and analyze ways they can be either confronted or avoided in the future. Here are some examples of learning opportunities for corporate directors who want to glean something from this downward spiraling situation.
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Is Your Board A Broken Board?

broken board

Because boards are ever-changing entities, they often go through phases of effectiveness. Some phases might include sharp financial growth and strong teamwork between directors and management.

Other phases might include the exact opposite.

And still others could be a combination of the two—both positives and negatives. Once in a while, though, you may find yourself on a board that is essentially broken. What do we mean by broken?

Put simply, we mean that because of one or more internal issues, the board is unable to operate with its highest goal (shareholder benefit) in mind.

Here are some signs that you might be serving on a dysfunctional board. Don’t worry, though; all hope is not lost! In fact, here we’ve got some tips for how you can help bring your board back to life.

Lean on parliamentary procedure

Are you having trouble getting through a basic meeting because of clashing agendas or antagonistic discussions? In this instance, it’s important for boards to turn to their parliamentary procedures; in the U.S. these procedures will typically follow Robert’s Rules of Order. The board chair will have to take an extremely active role in overseeing this process.

They will need to conduct themselves with as much neutrality as is possible in order to establish an environment where discussion and voting can occur within the appropriate constraints.
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Building the Most Effective Healthcare Board

Building the Most Effective Healthcare Board

Healthcare is one of the fastest moving industries in the world. Hospitals and health providers are investing in new technology, new processes, and new personnel constantly while working to ensure that they can provide top-notch care at a reasonable price—that’s no easy task!

Healthcare boards—or traditional community-based boards—are finding that between changes in compliance legislation and the pace of innovation, staying ahead of the curve takes some serious effort.

So how can your healthcare board be a leader in the field and not just playing catch up? Here are a few of our suggestions:

Embrace diversity

We speak to this topic often on our blog, but it rings particularly true for the healthcare industry. Healthcare boards should strive to include a representative sample of the groups they’ll be serving. A mixture of ethnicities, genders, religious affiliations, and even age can help healthcare boards ensure that they’re not overlooking the needs of any potential patients.

A diverse board also means a diversity of ideas, which ultimately leads to better decision-making.
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