Managing a Large Board of Directors

Directorpoint recently took a closer look at Deloitte’s Board Best Practices Report. While our deep dive focused in on the financial services industry, a few of our findings have may prove to be universally valuable. Deloitte’s 2017 survey found that the average board of directors is made up of between nine and eleven members. We compared those numbers to the responses from 2014 to learn that boards, at least within the financial services industry, are growing. As we know, a board’s decision-making decreases as the size of the board increases. This knowledge may help smaller boards but reducing the size of a larger board is often unrealistic. So what’s the best way to make sure a larger board of directors is maximizing its decision-making effectiveness? Let’s find out.

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What Bank Boards Lose When They Use the Wrong Technology

Earlier this month, Directorpoint published an article in BankDirector.com. In it, we discussed the “magic” of a board meeting. Rarely does a bank have the opportunity to bring decades of experience together in one room to make the decisions that determine its future. It begs the question, then: when the stakes are high and the moment fleeting, why waste a single second?

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A board of directors taking attendance.

Disclosing Director Attendance: Methods and Implications

Keeping up with new research in corporate governance is hard. Unfortunately, ignoring industry journals means missing out on opportunities to strengthen your board’s communication and increase its decision-making effectiveness. Our series, Research Recap, aims to change that. We give boards a snapshot of the latest findings and best practices, cutting straight to the chase and giving you only what you need to know. Without further ado, let’s get started!

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Board Meeting Attendance by Outside Directors

Directors miss out by not reading up on the latest research and best practices in board governance. But, with all the demands of governing an organization, who’s got the time? Luckily, Research Recap — our series where we give you the need-to-knows from the world of academia — is here to help. We’re keeping things short and sweet, so let’s get started!

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entrepreneur

Does Your Board Need an Entrepreneur?

Board members tend to have lots of experience in at least one of these three areas: financial expertise, industry-specific knowledge, or operational management. Over the past couple of decades, though, companies have become more interested in diversifying their boardroom—both in race and gender as well as in expertise.

Today, you’ll find individuals with backgrounds in marketing, IT, and human resources in addition to the “classic” board member tracks.

The latest trend, however, is adding someone with an entrepreneurial background to your team of directors, and we’re big fans of this movement.

Here’s what an entrepreneur can bring to the table:

A focus on long-term, strategic thinking

Boards are constantly being pulled between short term goal-oriented oversight and long term, strategically focused planning. Entrepreneurs are generally going to default to strategic thinking and will help pull your board out of conversations that should be left to your company’s C-suite.
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shareholder activism

Shareholder Activism: What Board Members Need to Know

Shareholder activism plays a pivotal role in the evolution of corporate America’s public companies. In fact, the listed companies that shareholders targeted in
2013
“had an average market capitalization of $10 billion.”

That’s some serious power when it comes to influencing major corporations in the United States.

But what does shareholder activism really mean? To put it simply, shareholder activism occurs when an individual (or an entity) uses their equity stake in a corporation to put pressure on the company to make specific changes.
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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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