Corporate Governance in Startups

The need for appropriate governance in startups is becoming increasingly acknowledged, however the experience in doing so in the best possible way is however limited.

Luc Sterckx, President and member of the boards of a number of international boards, and an INSEAD alumnus and IDP-C (INSEAD Certified International Director) has recently published his book, “Corporate Governance in Startups” which clarifies the distinctions which need to be made, in particular in the context of the limited means of a startup.

The book combines the structural and legal basis of governance in startups with his extensive experience in the field over several years and shows the way of very practical implementation including setting the right priorities.

We asked Luc his advice on the following important questions:

How do you implement good governance in a start up?  What should be the right priorities?

Given the limited resources (in time, experience, competence) of a startup, implementing of good corporate governance is not an easy task – that does not make it less important however quite the contrary.

When asked what the priorities should be, I think compliance with legal provisions is a first must have, second investing into an appropriate board of directors and thirdly realizing you start on a never ending journey of continuous improvement in this field. It is a team effort much like in bigger companies but in a quite significant environment.

The implementation of good Corporate Governance in a startup is mostly a matter of learning and improving along the way. In the often-hectic environment of getting a company launched, Governance seldomly gets the priority it deserves (although this appears to be changing).

Anyway, at the start the situation will be what it is, which probably is a long distance away from “best” Governance practices. That should not be necessarily too negative, provided there is consensus on continuous improvement of the Governance process.

What are the best practices you recommend in governing startups which allow them to remain workable and efficient compared to bigger companies?

A startup by definition is facing a serious number of challenges and choices – possibly even larger and more complicated than an “established” company. The need for focus has been stressed before but considering the many options and questions, it is clear that not all matters might get focus. It is all a matter of setting priorities and setting such priorities, balance is essential and Governance structures play an important role in this process.

“It is all a matter of setting priorities and setting such priorities, balance is essential and Governance structures play an important role in this process.”

The first balance which needs to be respected is the one between the short and the long term. In a startup fires abound, and it is tempting (and sometimes necessary) to turn the entire team into firefighters.

The second balance is the one between the different stakeholders, where especially the interaction between founders- entrepreneurs-shareholders-managers on one side and the external shareholders on the other is a tricky one.  A particular point of interest is the relationship with the founder(s) – he/she or they did not start the company to become experts or champions in Corporate Governance. Their key values and interests revolve around creativity, freedom, growth … and these should be taken into account and above all respected by the Governance structures.

The third balance in the company relates to the structure of the balance sheet. In particular, the company should be attentive at financing the long-term capital needs by long term liabilities such as equity and long-term loans.

The fourth balance concerns the necessity to maintain a creative, entrepreneurial free spirit and atmosphere in the company while on the other side a similar necessity to manage and control the company through instruments such as budgets, reports, procedures.  Once a company has been set up, the latter principle becomes unavoidable whereas the former necessity can be and often is essential for the growth of the company.

The fact that financial resources are always with a limit makes it however necessary to stay in control of what is happening. That can be done in a remote way, at arm’s length by allowing “creativity with a purpose” to evolve within a given framework. A lot will depend on the personalities of the people involved in this debate, but with some goodwill things can be straightened out.

What would be your key recommendation to directors who are asked to be on the board of a start-up?

I don’t think these are so different from the ones for “ordinary” companies.

Before anything else understand the fundamentals of the business and the strengths / weaknesses of the company are prime objectives. And maybe some particular qualities required: be flexible and above all prepare to ride the storm!

 

Getting Board Ready

By Mary Francia IDP-C, IDN Americas Ambassador

As part of the Leadership Development Series for the INSEAD Alumni in North America, Mary Francia has been delivering webinars designed to help position leaders for C-Suite and Board positions.

This paper is loosely derived from her presentation about how boards function, how boards are changing to meet the emerging demands of the 2020s, and how prospective board members can best land their first director positions.

Part 1: About Corporate Governance

Types of boards

There are different types of boards—seed/early stage, later stage, private, public, not-for-profit, and advisory—and each has different goals, operating procedures, challenges, and expectations for their board members. A startup or early-stage company, for example, typically expects its board members to contribute knowledge—things like how to turn an emergent technology into a business plan, how to scale upwards, or how to court investors. Public boards, meanwhile, expect directors to be stewards of the company’s long-term strategy, advisors to the CEO and executive team, monitors of company performance, and public faces for the company.

When looking for your first board position, it’s important to be familiar with these differences. You also need to decide what kind of board you’re interested in serving on, and what type of board will be best served by your presence on it.

The mandate

The chief goal of the corporate director is to create and protect value for the shareholders; directors do this by guiding strategy, monitoring the financials of the company, managing human capital (especially leadership), and overseeing risk.

In executing this mandate, board members face three main challenges.

  1. Information: Boards have to be on guard against “window dressing”—i.e., information that is impartially curated and filtered in ways that veil the true health of the company and the viability of its strategy. This often means that directors have to go out of their way to be knowledgable about the company’s performance and fact-check the information they receive.
  2. Group dynamics: The board is not your typical leadership team, and working together is important, but it’s not always easy.
  3. Time management: The average corporate director spends 240 hours a year on board work—that’s six forty-hour weeks, excluding travel. And in times of crisis, that 6-week-a-year commitment can turn into a full-time role. Far too many new directors underestimate the amount of time they will have to devote to the job, so it’s important, before you begin looking for a director role, to honestly calculate the feasibility of this commitment.

Fiduciary duties

Boards have three primary duties against which their goal of long-term stewardship and resilience is measured:

  1. The duty of care (fiduciary and legal responsibility).It sounds like common sense, but directors have a legal obligation to care about their company’s health and to act upon that care. The board of Blue Bell Creameries, for example, faced legal action when—in the wake of a listeria contamination that ended up killing three people—it was demonstrated that the board had failed to recommend or implement any system that would monitor the safety of the company’s product and production methods.
  2. The duty of loyalty.As is implied above, directors need to be loyal to the company, not to themselves. In other words, directors shouldn’t take advantage of the information available to them because of their role as a board member. Board members can face jail time for offenses such as insider trading.
  3. The duty of candor. Directors are duty-bound to make full disclosures of pertinent information to other directors, management, and shareholders—regardless of how unpopular or personally inconvenient that information might be.

Part 2: Getting Board Ready

What boards want—the behavioral traits of a good director

  • Good directors are balanced judges with strategic clarity. Because CEOs average about five years in their positions but directors generally serve longer, the board gives the company stability of oversight, helping it weather executive transitions and retain continuity of purpose. One aspect of this, and one of the board’s most important jobs, is judging the leadership team’s fitness to steer the company.
  • Good directors are skeptics. They are uncomfortable following impulses or gut reactions. They want to see the data and develop a fluent grasp of all the options before they make up their mind.
  • Good directors are collaborators. The board as an institution relies on its members to correct each other’s blind spots and those of the executives they oversee—and good directors, directors who value collaboration, thrive in this context.
  • Good directors are socially savvy.They are adept at measuring personalities and know how to deliver information to different kinds of people. Like politicians, they need to be able to structure their advice around the emotional and intellectual needs of the people to whom it is addressed.

What boards want—skillsets

For decades, financial expertise, executive experience, and prior board experience were the most desired skillset traits on boards. Recently, however, responding to widened complexity, the speed of change, technological disruption, and a new suite of business risks, the primary expertise profile has expanded significantly to include, among other things, expertise in international politics, sustainability, national security, strategic development, and information technology. This has opened whole new sectors of the workforce to board positions at the highest level.

Certain prerequisites to board service remain in place, however, and all prospective board members should have experience working closely with a board, and/or a developed understanding of corporate governance principles. This is where mentorships and formal director education programs are invaluable.

Seven steps for getting board ready

  1. Know your motivations.By knowing why you want to join a board, you can better identify what kind of board role you’re best suited and what types of companies and boards that you should consider.
  2. Identify your proposition. This is harder than it sounds, and it often involves doing some serious self-evaluation. On the positive side, you need to identify both what value you can bring to a board—what specific skills and behavioral traits make you stand out from other prospective board members. But you also need to build a clear picture of the skills, experiences, and knowledge that you don’t yet have—then go about filling in those holes, either by taking classes or changing roles or jobs. Looking for firms that offer leadership development and succession planning programs can be a huge benefit for prospective board members.
  3. Know where you’re needed.This, too, is harder than it sounds, because director expertise is often relevant outside of the specific industry from which it comes. Finance experts, for example, are highly sought out in non-financial fields—as are technology experts, supply chain experts, and others. Sometimes your expertise may be in high demand in spaces you haven’t considered.
  4. Write a board CV or bio and tailor it to each board.Just as you might slightly (and truthfully) adjust the emphasis of your resume depending on what job you’re applying for, you need to adapt your CV to highlight the specific skills, experiences, and traits that will be appreciated by boards. In addition to your skills, your CV should outline your motivations, the value you expect to bring to a board, and the specific kind of role you expect to play on the board in question.
  5. Control your image and reputation. In searching for your first board, you’re trying to project a persona. You can influence your online persona by publishing articles, appearing in interviews, and, conversely, by ensuring that you come across as calm, mature, and balanced in all online appearances.
  6. Make your interests known.The best way to get on a board is by networking, so it’s important to tell your acquaintances—especially those who currently sit on boards—that you’re interested in a board position. At the very least, these current directors can offer you guidance or act as references. In the best-case scenario, they may be able to introduce you and help bring you onto their board when a vacancy comes up.
  7. Network responsibly. When self-marketing, it’s essential to put yourself out there while not seeming pushy. You don’t want to appear self-serving or monomaniacal. Attend events, engage with people, and expand your network—these actions will get you seen over time.

Part 3: New Board Challenges

Risks—direct and indirect, short-term and long-term

Boards have a duty to consider risk and risk mitigation from two perspectives: the current cost of mitigation, and the future cost of failing to mitigate. We can see this paradigm in the way companies are currently responding—or not—to climate change, which has a number of significant implications around the world. Given that five of the World Economic Forum’s top 10 global risks for 2020 are environmental in nature, corporate boards can no longer rationalize unsustainable business practices with their duty of care. Today’s board members need to find ways to minimize their company’s contribution to climate change while offsetting their exposure to its fallout.

New Competencies

As mentioned in Part 2, boards are looking for a far more comprehensive range of competencies and experience than they did several decades ago. Public boards especially are now finding it necessary to devote board-level expertise to a number of major categories formerly considered outside the mandate and responsibility of business. These include:

  • Environmental expertise: an expert who can realistically gauge the company’s impact on and susceptibility to the environment.
  • Social expertise: an expert committed to thinking about the short- and long-term implications of the company’s actions on stakeholders.
  • Geopolitical expertise: an expert—probably with experience in academia and/or government—who has the tools to monitor, gauge, and steer strategy around geopolitical fluctuations.

To help manage this diversifying array of risks and responsibilities, some companies are creating adjacent advisory boards whose members help provide subject-specific guidance to directors and executives. For prospective directors, getting a position on an advisory board is a good way to get the corporate governance experience required for more traditional board positions.

Conclusion

It is the job of corporate directors to successfully guide their companies through a business landscape now defined by its exponential rate of technological disintermediation, rising levels of environmental and health risks, and rampant geopolitical uncertainties. These three factors are fundamentally changing what it takes to be a board member, what mixtures of expertise are relevant, and how a board’s composition is directly related to its effectiveness. These changes have significant implications for demographics like women and people of color, who were traditionally excluded from the boardroom but whose presence has now been demonstrated to deliver superior performance and enhance shareholder value. Organizations that fail to enlist this broader range of director expertise and diversity are likely to face a variety of consequences—some short-term, others long-term, some reputational in nature, others existential.

Mary Francia IDP-C is the IDN Americas Ambassador. 

Corporate Governance and Performance Imperatives in Africa

Imperatives for Directors – SDGs, AfCFTA and Agenda 2063

By Dr. Lucy Surhyel Newman IDP-C

COVID – 19 appears to have enhanced the brightness of the stage lights on stakeholders’ expectations of good corporate citizenship, with closer scrutiny of how boards plan and execute corporate brand identity strategies as fundamentals of the corporate culture.  Emerging issues with potentially profound combined effects include increasing shareholder activism, increasing relevance of Environment, Social and Governance [ESG], the socioeconomic effects of COVID-19 and, the social awakening on the need for enhanced inclusivity and diversity.  Many Boards have from March 2020 to date, had at least one Board meeting that calls for revisiting their corporate fundamentals and strategies over the next two to five-year horizon, in context of this momentous time in human history.

Dr. Lucy Surhyel Newman IDP-C in this article, earlier published in IoD Nigeria’s quarterly journal The Director, makes a clarion call on Directors of African corporates and global corporates with operations or interests in Africa.  The principles are adaptable to other continental blocks while placing Directors at the center of the article’s expectations for closer attention to the need for alignment of corporate strategy and corporate social impact initiatives, with systemic issues in the broader environment within their sub-region and continent, even as they keep track of global market trends and competitive benchmarks.

Article Reference – Newman, L.S (2020). Corporate Governance and Performance Imperatives for Directors in Africa: SDGs, AfCFTA and Agenda 2063. The Director, a Magazine of the Institute of Directors Nigeria. Issue No. 24; Pages 64-71.

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Dr. Lucy Surhyel Newman IDP-C is a Policy Advocate, Independent Director and Corporate Governance & Performance Improvement Advisor.

Board Governance during a Crisis

By Joergen Jakobsen IDP-C

When a company is facing a crisis the board leadership is put to the test. The actions of the board can be critical for how successful a company will emerge from a crisis – or if they will be able to emerge at all. Writing this blog during the time of the COVID-19 pandemic this is more evident than ever. In this blog I will examine the top 3 priorities a board need to focus on during times of crisis.

Framing of the crisis and its phases appropriately

As a company finds themselves in a crisis having a material impact on the company the risk of losing sight of appropriate governance is real for many companies. When facing a crisis, it is helpful for the board to break down the crisis into 3 key phases in order to frame the crisis with different time horizons allowing for appropriate options to be considered in the various phases. These 3 phases are:

1. The crisis phase

During this phase the frame is typically short term and relative narrow in scope.  The key consideration is about how to protect the company, the people and its key assets. It is about damage control, prevention of major harm to the company and its stakeholders – and maybe even about the survival of the company. This is often talked about as the Business Contingency Plan for the company.

2. The recovery phase

In this phase the frame becomes wider and more mid-term in. The focus turns to how the company will emerge from the crisis. In this phase a range of tactical options will typically be evaluated in the context of how the underlying market environment starts to improve. This is often talked about as the Recovery Plan for the company.

3. The New Normal

It is important to think about the post-crisis environment as a different market environment compared to the pre-crisis environment. The market conditions and the customer requirements might have changed. The competitive landscape might have changed. The stakeholder expectations might have changed. Thus, the frame required to plan for the New Normal must be wider and a new Strategic Plan is required for the company.

Although it is helpful to think about the 3 phases as different in frame and scope it is important for boards to have an overall view of the planning and decision framework required to bring the company from the crisis situation into the New Normal given the decisions made in prior phases can impact optionality of future phases.

Focus on what matters most during the 3 phases of the crisis

The objective of the board is to govern the company by setting the frame for the future of the company within which the CEO and the executive team will define and execute the strategy under the review and approval of the board. The role of the board is to preserve and enhance the value of the company as seen by both shareholders and other stakeholders while minimizing the risk. In this light let us evaluate the key governance priorities of the board pertaining to the 3 phases:

1. The board’s key focus during the crisis phase

The key priority in this phase relates to value preservation and risk mitigation to minimize the impact of the crisis on the company. Thus, the key areas of focus relate to organizational and financial resilience:

  1. Establish scenario planning to determine the worst-case scenario of the crisis. Establish a Business Contingency Plan to ensure the company can withstand the worst-case.
  2. Review organizational resilience and experience in handling a business crisis at the anticipated level. This includes review of the experience of the executive team and the board and if required involve external resources to address deficiencies. It also includes review of the company’s work processes to effectively handle the nature of the crisis.
  3. Review the financial resilience required to handle the crisis. Assess capital requirements related to the worst-case scenario and if required increase the company’s liquidity.
  4. Review the potential crisis impact to strategic customers and partners and determine how to mitigate this risk.
  5. Increase communication frequency to the employees and key stakeholders to ensure their understanding and buy-in for decisions made.

During the depth of the crisis the board often brings a key value in being less consumed in the day-to-day operational challenges than the executive team. They often bring perspectives and experience from how other companies and other industries handle the crisis which can prove valuable. Also, during this phase the board should increase their meeting frequency to ensure decisions are made in a timely manner.

2. The board’s key focus during the recovery phase

Pending the context of the crisis this phase might have a high degree of uncertainty as timing and nature of the recovery might be difficult to predict. Thus, it is important to stay agile and adjust the recovery plan as required. The key priorities by the board would be:

  1. Evaluate the probable scenarios and strategic business recovery options provided by the executive team against the company’s ability to execute. Challenge the board to ensure various scenarios and recovery options are presented before deciding on the best plan forward.
  2. Review the compensation plans to ensure it is aligned to the new business realities striking the optimal balance between motivation of the organization and the reduced business level.
  3. Ensure the executive team defines and reviews changes required to align the organization and the operational business processes required for the business recovery plan.
  4. Review and update the financial plan and ensure adequate capital is available and allocated to make the plan successful.
  5. Communicate the business recovery plan to the organization as well as key stakeholders to ensure their support and understanding of their role to execute the plan.

3. The board’s priorities preparing for the New Normal

As the company emerges from the crisis it will be facing a New Normal. Customer behaviors and expectation might have changed from the impact of the crisis. Competition might have changed and potentially consolidated. Business processes and associated technologies might have evolved during the crisis. In addition, stakeholder expectations or legal requirements might have changed. In short, the New Normal phase might look very different from the business environment experienced prior to the crisis.

With the above in mind the board should undertake the following activities to ensure the company is well positioned for the New Normal:

  1. The board should review and if required update the overall frame and vision of the company.
  2. Request the CEO and the executive team to develop strategy options aligned to the updated frame and vision for the company and aligned to the New Normal as well as the internal capabilities of the company. The board should review and approve the new strategic plan and its KPIs and empower the executive team to execute the strategic plan.
  3. Evaluate the profile of the CEO and the execution team in order to ensure the leadership has the adequate experience to carry out the new strategy of the company.
  4. Update the risk assessment framework of the company and define risk mitigation actions as required to ensure the risk of the company is managed at the adequate level. Ensure learning and experiences from the crisis are captured.
  5. Communicate the updated strategy to the organization and key stakeholders to ensure support and alignment to the new plan.
  6. Revert to a normal cadence and format for board meetings to manage the overall governance to the company and support of the CEO and the executive team.

Having appropriate board governance processes in place

In summary, it is critical for the board to adapt and contextualize their governance practice during a crisis situation. However, the fundamentals of good board governance continue to be critically important and should be in place before a crisis develops. Good board governance includes aspects like having a diverse and active board, understanding of the roles between the board and the executive leadership team, and having in place a strong board culture and processes to optimize the effectiveness of the board – which will be put to the test during a period of crisis.

First published on LinkedIn on 25 May 2020.

Joergen Jakobsen, IDP-C is a board member, business advisor and consultant leveraging more than 30 years of experience from multiple large global technology vendors. His consulting practice is mainly focused on board advisory, business performance management, leverage of partner eco-systems for profitable growth, and optimizing organizational and individual performance in a culturally diverse environment.

Ensuring ESG Effectiveness on Boards

Blogpost by IDN US Ambassador Mary Francia

Though environmental, social, and corporate governance has seen increased attention over recent years, the COVID-19 pandemic has put ESG in the spotlight. With stakeholders measuring businesses based on their perceived preparedness—for the pandemic, for the recession, for a post-COVID rebound—it’s never been clearer that boards play a crucial role in helping their executive teams with both long-term strategic planning and short-term crisis management.

Businesses, employees, shareholders, communities, and customers are all dealing with unprecedented levels of financial and emotional stress, and this is drawing attention to how companies compare to their peers in terms of ESG performance. Stakeholders have elevated their expectations for transparency around corporate ESG efforts, pressuring leaders to (a) think deeply about the social, environmental, and moral implications of business decisions, (b) communicate their company’s specific ESG responsibilities, and (c) recognize the need for ESG expertise at the board level.

Here are nine tips to maximizing the effectiveness of your board’s ESG oversight.

  • Define what ESG means for your organization. ESG is a framework for analyzing companies and assessing their environment, social, and governance performance. But every organization has a unique exposure to these factors. A paper company, for example, has different environmental responsibilities than a fintech company. So boards must understand their company’s specific relationship to this general framework.
  • Communicate. To build this understanding, it’s essential to have constant discussions between board members, boards and executive teams, and boards and other stakeholders. Directors need to know what peoples’ expectations are around ESG and align those expectations with each other. Pick up the phone, have the conversations.
  • Evaluate for ESG competency. Just as you review your company portfolio, ESG should factor in the director review process. Evaluate skills and educate board members to fill any gaps.
  • Convert ESG into the strategy. In working to foresee, identify, and capitalize on ecosystem changes, boards need to imbed ESG into their company’s strategy; and to achieve this, they need to make ESG considerations part of the agenda in every committee meeting.
  • Know how to measure ESG. Whether it’s evaluated using an external advisory or with internal teams, it’s important for boards to measure their environmental, social, and governance proposition, know-how ESG interacts with company value in the present, and be prepared to steer that interaction in the future. Not only do board members need to be familiar with the way their organization measures and the external disclosures it makes, but they also need to be confident that these measurements and disclosures are accurate and complete.
  • Create your dashboard and accountability. Run a session with your board, define what is essential for your company, and then ask management to react to these findings. Build a dashboard using metrics that represent your business context and then assign ownership—at both the board and management level—over the process. To ensure management’s priorities remain aligned with the board’s, link ESG performance to executive compensation.
  • Understand how your stakeholders measure sustainability. To see the impact of ESG on the value of a company, some investors will conduct a scenario analysis, calculate an ESG valuation, and compare it to a baseline valuation. The difference between the two scenarios reveals the type and magnitude of ESG factors affecting a company. Directors need to know what scores apply in their industry and what indices their investors use to measure their value.
  • ESG is not just about risk; it’s about building value. Risk and opportunity often come hand in hand. Boards who consider ESG as purely a risk-prevention measure often fail to acknowledge that ESG considerations can, when capitalized on, drive long-term performance gains.
  • Refresh and Educate. It has never been so crucial for companies to have best-in-class ESG performance. To achieve that and fully inject ESG considerations into the company’s everyday functioning, it’s necessary to have expertise on the board, and to task those experts with infusing ESG considerations into short- and long-term company strategy.

There could not be a better time, give the current volatility, to bring ESG competency to the board.

 

by IDN US Ambassador Mary Francia, also Partner at Board Practice Odgers Berndtson

This blogpost was originally shared at

https://www.odgersberndtson.com/en-us/insights/ensuring-environmental-social-governance-effectiveness-on-boards

 

What makes an Effective Chair?

by Mary Francia, INSEAD IDN’s ambassador for the Americas and host of the referenced Chairmen event. 

I was thrilled to join fellow alumni last month in San Francisco for the opening of the INSEAD San Francisco Hub for Business Innovation. We had the privilege to inaugurate the Hub with the first Masterclass, featuring Professor Stanislav Shekshnia, co-director of the program ‘Leading from the Chair’ and author of  Leading the Board, followed by the panel ‘How to Be a Good Board Chair’, presented to an audience of directors, shareholders, CEOs, chairs and executives.

The discussion examined a variety of board practices, comparing European and American boards in the public and private sectors, in family firms, technology companies and startups, and looking at how types of board structures and duties can vary due to cultural differences. Below you’ll find highlights of our fantastic exchange between Stanislav Shekshnia, Dominique Trempont and Tommaso Trionfi – each of them experienced chairpeople of public and private companies – on what board chairs do, how they do it and what makes an effective chair.

What is the No. 1 challenge of board chairs?

Managing a “difficult” board member, where a problematic board member is seen as domineering, makes too much noise, too much room or does not listen. The interesting finding, however, was that a silent board member is actually the hardest challenge: how do you get a silent board member to contribute?

Who does the chair work for?

A chair leads the board and represents it in its relationship with shareholders and the CEO. But who does the chair work for? The company? Shareholders? Interestingly, we heard that – with few differences – the overwhelming response in Europe today is that the company is the principal – much as we’ve seen in the trend for stakeholders vs. shareholders.

What defines culture in a board?

Interestingly enough, it is not nationality or the country! Instead, in Europe it’s the ownership structure, the company lifecycle and the size of the board that defines cultural differences in boards.

The concept of ‘Empty Head’.

“Not knowing much about the industry of the board you chair” is a theme we carried from the class to the panel with Dominic Trempont and Tomasso Trionfi, and even beyond it via a e-mail discussion. If we agreed on the role of the chair, would it be better not to have an opinion?  Should we pursue a chair position in an industry that we do not belong to? Would it free us to focus more on our role?

So, what is the role of the chair?

It’s about enablement, and the board is not a team! Enable leadership. A chair must enable a board to work effectively as a team and make the collective decisions required – but that doesn’t mean a chair is there to make a team out of the board.

Who owns the materials and the concept of the ‘0 – 30 – 50 – 20 Rule’.

Listening to presentations in a board meeting takes up a lot of time – sometimes as much as 70% of a meeting. How does this encourage directors to prepare on a subject that they will listen to repeatedly or often in a meeting? In a useful board meeting the chair owns the materials and drives the 0-30-50-20 Rule – in which there are zero presentations! Guess what the other percentages are that drive aproductive conversation?  This is a critical insight as usually, material presented to a board is structured to get it to approve a proposal. This approach should incorporate the most valuable information for decision making.

What is the right way of working with the chair on a board?

The type of relationship with a CEO – and what defines it – is important. Should it be collaborative? One based on mentoring? An advisory capacity? We discussed how the chair role in a private board might differ from other institutions, and the outcome identified the role being driven by two scenarios:

1) The chair is the major shareholder and decision reside with that person.

2) The mix of shareholder ownership is dispersed and decisions are made by the board. The chair, in this case, enables conversations and effectiveness is vital, regardless of their percentage of ownership representation in the board.

The value of the chair in a technology company

The role of the chair is often fundamental to the core of the company DNA.  The Chair is the institutional memory of the company,safeguardingits mission and its culture. He or she can not be an “empty head.”

The challenges of the board chair at a startup

Very common or systematic, the role of the chair and CEO is often combined in startups. The recommendation is that when a board is created, the roles are split. The duties and legal exposure of a CEO and chair are different in the early stages of the company, and impact the thresholds from growth to failures – who the company serves, who it needs to protect and what it is liable for?

What makes a board effective?

Having a clear understanding of the board’s needs and a plan towards achieving them. For example:

  • What critical competencies the board should have and a process to measure against them.
  • The right diversity in the boardroom to enable fruitful discussions and capture a 360-degree view when evaluating opportunities and risk.

 

Diversity is not the only gender: an effective chair provides a nomination committee with a clear understanding of what kind of diversity they want to bring to a board.

In our conversation about the challenges of rebuilding a board towards gender diversity, a key challenge is the recruitment of female candidates, especially in California, where regulations exist that drive quotas for female participation. Our panel delivered a key message to nomination committees: change their view that a female CEO needs to be a qualified candidate, and be open to candidates in other C-level roles as well as partners in consulting firms. They see the business and have larger exposure. And to the corporations: build a larger pool of qualified female leaders with succession planning.

The critical attribute of an effective chair

What makes an effective CEO does not help as a chair. It was interesting that on American corporate boards with ‘one-tier’ structures in which the CEO/chair role is combined, there is often a lead director with a strong preference towards independent directors.

To conclude, this was such a vibrant discussion and everyone taking part learned so much from the lessons shared by the panel. Clearly, there are many more insights on this subject to unearth! Our next piece of research, capturing the practices of chairs across the Americas, commenced last month, and I’m excited to be involved in the program, looking forward to sharing and capturing its insights on this crucial topic with our clients.

by Mary Francia

Mary Francia she is INSEAD IDN’s ambassador for the Americas, and she engages the alumni on subjects of governance.  Mary was the host for the above referenced Chairman event.  She is a Partner in the Board Practice of Odgers Berndtson based in their Atlanta office helping boards with composition strategy and succession planning.

25 additional Board appointments at INSEAD Directors’ Network

March 12, 2020

Members Board & Corporate Governance Positions Announcement 1Q – 2020 

25 additional International Board appointments of INSEAD Directors’ Network members, totalling 238 with previously announced.

INSEADs International Director Network, IDN, is proudly sharing the recent appointments of board and corporate governance positions of our members, truly recognizing our members and the strength of our IDN network.

IDN members has been appointed to 25 new board positions in 15 countries, summing up to 238 position announcements since 2017.

IDN is a network of International Board Directors, where full membership is open to all INSEAD Alumni with appropriate directorship experienceand is automatic for Certified Directors (IDP-C) from INSEADs International Directors Program (IDP).

The aim of the IDN network is to facilitate contacts, share insights and experiences on international board topics and promote excellence in corporate governance.  

To date, IDP has been completed by 1302 participants, with 981 certified IDP-C/ IDBP-C directors, and our International Board Network IDN of INSEAD Alumni includes more than 1600 members.

IDN works closely with INSEAD Corporate Governance Centre, which undertakes cutting-edge research and teaching tailored to the needs of boards and international directors. It fosters a global dialogue on the challenges of corporate governance and leadership in an international context.

INSEAD Directors’ Network – Members New Board & Corporate Governance Positions 

IDN members – Certified IDP-C Board Directors

Stefan Buser – November 2019 & January 2020 – Non-Executive Chairman nexcellent AG & Board Member BE Electric AG (both Private, HQ Switzerland)

Margaret Clandillon – May & August 2019 and June 2019 – Non-Executive Director at Dara Aviation Finance Limited and Navigator Aviation DAC (Private, HQ Ireland) and at AASET 2019-1 International Ltd (Private, HQ Cayman)

Mary Francia – February 2020 – Board Member at OnBoard Inc (Private, HQ USA)

Allison Gaines – January 2020 – Board Director of AESC (the Association of Executive Search and Leadership Consultants) (Professional Association, HQ USA)

Fennemiek Gommer – January 2020 – Non-Executive Director at Ridder Group (Private, HQ The Netherlands)

Louise Nicolin – January 2020 – Non-Executive Director at Optinova Group (Private, HQ Finland)

Gbenga Oyebode – March 2019- February 2020 – Board Member at Cleveland Museum of Art International Council f Collectors & Smithsonian’s National Museum of African Art (Private, HQ USA)

Helen Pitcher OBE – October 2019 – Independent Director at One Health Group Limited (Private, HQ UK)

Monica Porfilio – September 2019 – Observer at Grape Hospitatliy Holding S.A. (Private, HQ Luxembourg)

Mary Sue Rogers – January 2019 – Non-Executive Director at East-West Seed (Private, HQ Thailand) 

Steen Stavnsbo Jan 2020 – Non-Executive Director at ARoS Art Museum (Private, HQ Denmark)

David Surdeau – January 2020 – Chief Financial Officer at Marks and Spencer PLC (Listed, HQ UK)   

Marcia de Wachter – November 2019 – Non-Executive Director at MeDirectBank (Private, HQ Malta)  

IDN Members – Board Directors

Roy Ling – Dec 2019 – Lead Independent Director Sino Grandness Food Industry Group Ltd (Listed, HQ Singapore)

Martin McCourt – November 2019 – Non-Executive Director at Veridium ID Ltd (Private, HQ UK ) and at IDnow GmbH (Private HQ Germany)

Bruno Mercier – November 2019 – Board Member at Driscoll China (Private, China)

Etienne Haumont – May 2019 – Member Supervisory Board at Momentum Single Family Office (Private, HQ Luxembourg)

Nicolas Naudin – October 2019 – Non-Executive Director at CELL-EASY (Private, HQ France)

Garo Sarkissian – January 2020 – Non-Executive Director at SmartWitness (Private, HQ US) 

IDN Board – New Board Directors

Helen Wiseman, IDP-C – Board Member at INSEAD Directors Network (Non-Profit, HQ France)

 

Previous announcements and more information

Previous board position announcements by shared by IDN;

October 2019 July 2019  February 2019  November 2018 July 2018 April 2018  January 2018   October 2017

For more information about: 

INSEAD International Directors’ Network: https://blogs.insead.edu/idpn-globalclub

INSEADs Corporate Governance Programmes: https://www.insead.edu/executive-education/corporate-governance

For members of IDN, please ensure that you share your new appointments via the collection link shared via mail to the IDN Network

For head hunters interested in finding international board members focused on staying up to date with latest board and governance insights, please contact IDN President, Helen Pitcher OBE, at helen.pitcher@insead.edu

For organisations interested in partnering with IDN, please contact IDN President, Helen Pitcher OBE, at helen.pitcher@insead.edu

 

On behalf of the INSEAD International Directors’ Network Board,

Liselotte Engstam,
IDN Board Member, Chair Communication Committee
l.enstam@insead.edu

 

 

33 Additional Board Appointments at INSEAD Directors’ Network

Members Board & Corporate Governance Positions Announcement 3Q – 2019 

INSEADs International Director Network, IDN, is proud to share the recent appointments of board and corporate governance positions of our members, recognizing our members and the strength of our IDN network.

IDN members has been appointed to 33 new board positions in 18 countries, summing up to 213 position announcements since 2017.

IDN is a network of International Board Directors, where full membership is open to all INSEAD Alumni with appropriate directorship experience and is automatic for Certified Directors(IDP-C) from INSEADs International Directors Program (IDP).

The aim of the IDN network is to facilitate contacts, share insights and experiences on international board topics and promote excellence in corporate governance. 

To date, IDP has been completed by 1133 participants, with 837 certified IDP-C/ IDBP-C directors, and our international board network includes more than 1300 members.

IDN works closely with INSEAD Corporate Governance Centre,which undertakes cutting-edge research and teachingtailored to the needs of boards and international directors. It fosters a global dialogue on the challenges of corporate governance and leadership in an international context.

INSEAD Directors’ Network – Members New Board & Corporate Governance Positions

 IDN members – Certified IDP-C Board Directors

Natalisio Almeida – May 2019 – Non-Executive Board Director at Banco Original, (Private, HQ Brazil)

Reon Bernard – August 2019 – Chairman at Sekta Group (Private, HQ South Africa)

Katia Ciesielska – June 2019 – Board Member at Luxembourg Institute of Directors (Private, HQ Luxembourg)

Margaret Clandillon – January 2019 – Non-Executive Board Director at Investec Aircraft Syndicate SPC (Private, HQ Cayman) 

Patrick Devenish – May 2019 – Chairman Tobacco Industry Marketing Board (Government, HQ Zimbabwe)

Hamza Didaraly – November 2018 – Chairman at A. I Ambassador (Private, HQ France)

Daniel Flammer – July 2019 – Non-Executive Chairman at Tiwel Holding AG (Private, HQ Switzerland) main shareholder of Sulzer AG (Listed, HQ Switzerland)   

Fennemiek Gommer – October 2019 – Non-Executive Board Director at IME Medical Electrospinning (Private, HQ Netherlands)

Richard Grotendorst – November 2018 – Supervisory Board Member at Atomic Austria GmbH (Public, HQ Austria)

Susana Gomez Smith – September 2019 – Non-Executive Board Director, Member Audit and Remuneration Committees at Banco CTT (Private, HQ Portugal)

Fernand Grulms – January 2019 – Non-Executive Board Director at BIL Manage Invest S.A. (Private, HQ Luxembourg) 

Matthew Kimball – June2019 – Board Member of Brunei Shell Marketing Company, JV of the Government of His Majesty the Sultan of Brunei and Shell Overseas Holdings Limited (Private, HQ Brunei)

Denise Koopmans – May 2019 – Non-Executive Board Director at Swiss Post (Public, HQ Switzerland)

Saskia Kunst – October 2019 – Chairman of the Board at Everitt Healthcare  (Private, HQ Netherlands)

Karen Loon – September 2018 – Independent Director, Chair Audit and Member Risk Committees at Banque Pictet & Cie (Asia) Ltd (Private, HQ Singapore)

Abdulla Al Mansoori – April 2019 – Member of Adv Board at Awad Capital (Private, HQ Dubai)

Andrea Prencipe – May 2019 – Chairman at Satispay Europe S.A. (Private, HQ Luxembourg)

Thomas Seale – June 2019 – Board Member at Norvestor VIII GP (Private, HQ Luxembourg)

Philip Spriet – June 2019 – Non-Executive Board Director at HRD (Private, HQ Belgium)

Nicoline Spruijt – January 2019 – Board Member at Brewery de Brabandere (Private, HQ Belgium)

Luc Sterckx – June 2019 – Non-Executive Board Director at Sarens Bestuur NV (Private, HQ Belgium)

Jeremy Tan – January 2019 – Executive Director at PTC Far East, Fayat Group (Private, HQ Singapore)

Jillian van Turnhout – October2019 – Board Member at The Arts Council of Ireland (State, HQ Ireland) 

IDN Members – Board Directors

Jeroen Cammeraat – March 2019 – Chairman of the Board at Cassini Technologies BV (Private, HQ Netherlands) 

Jack Clemons – January 2018 – Non-Executive Board Director at DKSH Holding AG (Listed, HQ Switzerland) 

Johan van Genechten – 2018– Chairman of the Board at Board Member at 4C Nordic – weare4c.com (Private, HQ Belgium) 

Chandra P Leo – November 2018 – Board Member at Galecto Biptech (Private, HQ Denmark) 

Paul Leinders – September 2018 – Board Member at Holding de Participation Marocaine (Private, HQ Marocco)  

IDN Board – New Board Directors

Karen Loon – September 2019 – Board Member, Member Communication & Membership Committees, Treasurer at INSEAD Directors Network (Non-Profit, HQ France)

Pamela Ravasio – September 2019 – Board Member, Member Fundraising Committee at INSEAD Directors Network (Non-Profit, HQ France)

Hagen Schweinitz – September 2019 – Board Member, Chair of the Membership Committee, Member Nomination & Communication Committees at INSEAD Directors Network (Non-Profit, HQ France)

Jeff Scott – September 2019– Board Member, Member Communication Committee, Lead for the IDN Ambassadors at INSEAD Directors Network (Non-Profit, HQ France)

 

Previous board position announcements by shared by IDN;

July 2019 February 2019 November 2018 July 2018 April 2018 January 2018 October 2017

 

For more information about: 

INSEAD International Directors’ Network: https://blogs.insead.edu/idpn-globalclub

INSEADs Corporate Governance Programmes: https://www.insead.edu/executive-education/corporate-governance

For members of IDN, please ensure that you share your new appointments via survey shared to you vi mail, any queries contact l.engstam@insead.edu

For head hunters interested in finding international board members focused on staying up to date with latest board and governance insights, please contact IDN President, Helen Pitcher OBE, at helen.pitcher@insead.edu

For organisations interested in partnering with IDN, please contact IDN President, Helen Pitcher OBE, at helen.pitcher@insead.edu

 

On behalf of the INSEAD International Directors’ Network Board,

Liselotte Engstam,
IDN Board Member, Chair Communication Committee
l.enstam@insead.edu

 

 

 

Independent External Board Reviews

This blogpost was first shared at abexcellence.com and is an excerpt from an article published in Spring 2019 at Ethical Boardroom. _____________________________

 Independent external board reviews 

By 

IDN President Helen Pitcher, OBE 

Independent external board evaluations emerged in parallel with the general development of the governance code for companies. The question now arises whether their current shape is fit for purpose in the modern corporate environment, where society/CSR and employee engagement are playing an increasing part in the context of a company’s right to operate and accumulate numerous benefits and advantages from society?

As the code of governance became more formal, so the question arose of how the effectiveness of the board would be monitored. While the legal aspects of operating a company has a built-in ‘monitor’ through the courts and regulatory agencies, governance monitoring has emerged as a voluntary process, over which the company and board have significant discretion and control. Best practice has been led in the UK by the FTSE 100 companies and influenced by the governance compliance indexes, which inform the investor communities of the ‘governance footprint’ of a company.

The emerging code and evaluation

Under the FRC (Financial Reporting Council) Governance Code in UK, the use of independent external board evaluation has staggered into existence in the form it has today. Emerging from the Higgs Report in 2003 the combined code suggested good practice to be ‘an annual evaluation of board performance’ with the suggestion that ‘use of an external third party will bring objectivity to the process’. The 2006 code retained the annual performance evaluation, but the reference to external facilitation disappeared!

It wasn’t until 2010 that an externally facilitated review at least every three years became part of the code in UK for the FTSE 350, this included a statement of the facilitator’s connection to the company. The following year the FRC produced a ‘Guidance on Board Effectiveness’, which set out a detailed approach to the ‘independent externally facilitated board evaluation’. This started a process of creating a board evaluation standard, but which was still voluntary under the ‘comply or explain’ doctrine.

Since 2011 the ‘independent external board evaluation’ process has meandered on, with various failed attempts at a code of practice, including ABExcellence code of Advanced Boardroom Excellence published in 2014, which sought to advance the discussion. All these endeavours called for greater formalisation of what would be covered by a board review. Consequently, the interpretation of what should be covered in an independent and externally facilitated review was, and still is, at the discretion of the board and covers a wide range of standards applied to supporting the effectiveness of the board.

To read full article click here

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Read more about becoming an IDN member. For upcoming webinars see our event calendarIf you are an IDN Member or IDN Partner, or like to become an IDN Partner, with a questions or suggestion on contribution to a future IDN Webinar or IDN Blogpost, contact IDP.Network@insead.edu.

Why Should Boards Care About Culture?

This blogpost is shared as part of a series of insights from INSEAD Directors Network, based on webinars run for IDN Network members exclusively, and invites shared via mail. For more about our webinars, becoming a member or a partner with our network, see further down in blogpost.

On March 19 IDN Directors Network held a webinar on the topic Bords role in guiding corporate culture and diversity for strategy alignment. The expectations on boards to guide and monitor corporate culture and diversity and align it to desired strategic outcomes are increasing. In the webinar we listened to experiences on managing and influencing corporate culture and diversity, how it can be guided and monitored by the board, and shared and discussed experiences

We listened to Magali Depras, Chief of Strategy at TC Transcontinental, MBA, IDP-C, President Insead NAA Canada, sharing experiences on the topic and Kay Formanek  CEO KAY Diversity & Performance, INSEAD faculty on Diversity topic, Leadership Coach and Speaker, sharing approaches used and related trends.  

This is a follow up guest blog post shared by Kay de Gier on this important topic, and relating some of the insights shared at the webinar.

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Why Should Boards Care About Culture?

By Kay Formanek

Let us tackle this question by first having a robust understanding of the term culture. Culture in a corporate context is defined as “a combination of the values, attitudes and behaviours manifested by a company in its operations and relations with its stakeholders. These stakeholders include shareholders, employees, customers, suppliers and the wider community and environment which are affected by a company’s conduct.”

Photo: Unsplash

Boards are starting to care deeply about culture and this is anchored in 2 primary reasons:

  1. The impact on total enterprise value when a reputational crises occurs has increased dramatically. This can be explained by intangible assets as a percentage of total corporate value increasing from 20% to 80% from the 1980’s to today.
  2. A positive culture has been shown to deliver higher engagement, higher financial performance and long-term sustainability.

These factors have resulted in an examination of the role of boards in setting and monitoring culture. The UK Corporate Governance Code specifically ascribes to boards the responsibility for setting the company’s values and standards, while the preface to the Code states:

‘One of the key roles for the board includes establishing the culture, values and ethics of the company. It is important that the board sets the correct “tone from the top”. The directors should lead by example and ensure that good standards of behaviour permeate throughout all levels of the organisation. This will help prevent misconduct, unethical practices and support the delivery of long-term success.’ – UK Code. (1)

The reading of the UK Code sets out expectations from the board at the strategic level and also at the operational level.

At the strategic level the board is expected to set and monitor the company’s culture, in terms of values and behaviors, so as to deliver best value creation and ensure that incentives support the desired culture.

At an operational level the board is expected to obtain assurances that the desired culture permeate throughout the organization and that there are not pockets within the organization where values are undermined and at risk.

Not all countries have issued a Code, like the UK Code where the role of boards in culture setting and monitoring are defined. Yet increasingly boards are applying time and attention to setting out their role and actions in both setting and monitoring the culture of their organization.

Yet how do boards influence culture in practice? As a first step a board needs to support the development of a clear purpose of the organization and to describe the values by which the organization conducts its business.  Stakeholders will read much into the behavior of the board itself and thus the board needs to behave in a manner that is consistent with the espoused values and the desired culture. The CEO is probably the most important role in articulating and translating the desired culture within the organization and its operations. Thus the appointment and removal of the CEO is one of the most important levers of a board in influencing culture.

And yet, the difficult part for a board is to monitor and assess the culture within the organization. How is this done considering that culture may be considered intangible and difficult to measure?

The reality is that there is no one measure or instrument that will provide an answer to the board on the state of their organisational culture. However there some great hints (lets us call them the litmus test of culture) that boards can use as a proxy for a positive or negative culture.  In the interesting article “11 Toxic Tell Tale Signs of a Noxious Culture”, Forbes 2018 (2), eleven indicators of a potentially sick culture are listed and serve as a reminder to boards on what they can be looking for to yield an answer on the state of their culture.

The 11 Toxic Tell Tale Signs of a Noxious Culture include:

  • Not enough talk about innovation, indicating a potential lack of focus from the leadership on the innovation agenda of a company
  • Employees fear retaliation, indicating that leaders are not subscribing to values of respect and transparency and teaming
  • Cross-department collaborations stall, indicating that departmental incentives may be mis-aligned and that there may be an absence of a common purpose
  • Fear, apathy, exhaustion and over-politeness, indicating lack of engagement and avoidance of raising issues that should be discussed
  • Microaggressions in the form of bias, indicating the presence of stereotypes and a none-inclusive environment
  • Low employee retention rates, indicating that employees may not feel a sense of belonging and being valued
  • Aversion to taking risks, indicating that there may be a fear to make mistakes
  • Something does not feel right (instinctive knowing), when observers have a “gut feel” that something is awry and “things do not add up”
  • “No” isn’t an option, indicating that top down orders may need to be fulfilled without discussion
  •  People seek reassurance outside meetings, indicating potential issues of distrust and second-guessing formal communication channels
  •  Silence or defensive communication, indicating that there is resistance and a fear of speaking up

 

In addition to these tell-tale signs, there are a number of instruments that offer a great view of the culture of an organization. Let me share three examples, out of a multitude of tools that are present in the market.

 

Glassdoor (3) is a website where current and former employees anonymously review companies and their management. The site collects comments and averages scores posted under headings such as CEOs, salaries, hiring process and what it is like to work in jobs in general at each company. Glassdoor offers boards a unique window on what is being said about the organization and the company leadership.

 

There are also assessments that offer a measure of the alignment of values throughout the company.  The Cultural Values Assessment (CVA) of Barrett Values Centre (4) provides a clear view on the overall values alignment within an organisations and points to the factors that get in the way of people doing their jobs and prevents customers from experiencing the full potential of the organization.

 

The Hairball Social Network mapping tools, graphically represents the degree of interaction and collaboration within an organization and can provide clues on whether cross-department collaboration has stalled.

In conclusion:

The role of the board in setting and monitoring culture is critical in an environment where a positive culture is directly linked to organization sustainability and corporate value. While there is no “one-stop-shop” assessment of the culture in an organization, there are a variety of indicators and tools that offer the board an excellent view on the state of the culture of an organization. These tools are for the plucking of any board, but require a board to register the importance of culture and to undertake the strategic and operational interventions that are required to sustain a positive culture in the organization.

References:

1.

https://www.frc.org.uk/getattachment/88bd8c45-50ea-4841-95b0-d2f4f48069a2/2018-UK-Corporate-Governance-Code-FINAL.PDF

2.

https://www.forbes.com/  11 Telltale Signs Of A Toxic Company Culture — And What You Can Do To Start Fixing Things; Forbes Coaches Council

3.

https://www.glassdoor.com/index.htm

4

https://www.valuescentre.com/our-products/products-organisations/cultural-values-assessment-cva

 

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Other relevant information shared

 

INSEAD Research: Corporate Culture Alarmingly low priority for boards

https://knowledge.insead.edu/leadership-organisations/corporate-culture-is-an-alarmingly-low-priority-for-boards-7676

 

Identifying and responding to a Dysfunctional Culture (incl interview of IDN Board Member Liselotte Engstam) https://www.mmc.com/insights/publications/2019/feb/identifying-and-responding-to-a-dysfunctional-culture.html

 

Focus on Corporate Culture to prevent the next scandal

https://www.strategy-business.com/article/Focus-on-corporate-culture-to-prevent-the-next-scandal?gko=57b60

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Read more about becoming a member and about previous webinars. For upcoming webinars see our event calendar.If you are an IDN Member or IDN Partner, or like to become an IDN Partner, with a questions or suggestion on contribution to a future IDN Webinar, contact IDP.Network@insead.edu.

More insight from INSEAD Directors Network webinars will be shared – Lookout for more upcoming blogposts!