Month: February 2021

Categories
Board Effectiveness

Talking with Your Board

Leading effective discussions at board of directors meetings. Great board discussions elevate board decision-making.

You followed the advice in our last blog. You prepared a dynamite briefing piece (usually a deck) for the upcoming board meeting. Your deck included the information your directors need for informed deliberations and decision-making. You posted your deck to your board’s board portal — well before the board or committee meeting so they had time to read and consider it.

Now, as promised, we offer some suggestions to help you elevate your directors’ engagement and impact at the board meeting.

Assume that your directors have read your deck before the meeting. That assumption enables you to strive for less presentation, more discussion. Discussion is what allows your company to benefit from your directors’ varied experiences and perspectives. No need to replay your briefing deck you sent directors to review.

Be aware of meeting logistics and dynamics. Because of COVID, boards are not sitting at huge tables while “presenters” stand behind podiums. Most if not everyone will be participating virtually.

Likely, your board and management has developed agreed upon practices for not talking over each other during discussion. Respect those practices.

Set up the board’s discussion.

  • Say why the topic for discussion warrants board attention.
  • Say what you are asking the board to do.
  • Summarize management’s perspective.

You might start off by saying something like…  

“Annually, the board reviews and approves the company’s capital plan. Part of that process is consideration of  our dividend and share repurchase policies.

“The board must decide how best to return capital to our shareholders using dividends, share repurchases or some combination of those two. In our deck, we described four alternative approaches for the coming year. In sum, those are:

  1. Maintain both current dividend policy and share repurchase rate
  2. Increase current dividend policy and maintain share repurchase rate
  3. Maintain the current dividend policy and increase share repurchase rate
  4. Increase both dividend and share repurchase rate

“Today, we are asking for your input on the relative merits of those four alternatives. Based on your discussion today – and your input on the balance of the capital allocation topics discussed today, we will submit a final capital plan for approval at your next meeting.”

Speak in Plain Language. Use short, clear sentences and active voice. Decode acronyms.

Provide Context. Say something like… “As you recall from the March meeting, we are significantly increasing investments in plant and equipment during the coming year. Our dividend and repurchase policies need to take that into account.”

Be visual. Hopefully, a page in your deck graphically captures your recommendation or alternatives nicely, ask your directors to look at that page as you describe management’s recommendation or alternatives.

Generally, if you did a good job on your briefing deck, you do not need a separate presentation deck.

Prepare for questions. Typical director questions might touch on these topics:

  • How does what you are proposing compare to our peers/competitors’ practices? Do your benchmarking ahead of time!
  • What assumptions underlie your recommendation? Your briefing deck should cover those. Refer directors to the relevant page in your deck, summarize quickly, then ask what aspect you can clarify or expand.
  • How have you assessed risks? What will you do to mitigate them?
  • How does your recommendation advance your company’s long-term goals/strategy or address the crisis at hand?
  • What are current investors expecting? Will this direction help us attract our optimal investors?  
  • What legal considerations apply to the situation being discussed?

Invite questions and discussion. It may be harder to manage Q&A and a wide-ranging discussion in a virtual than live meeting. Nonetheless, try to engage as many directors as you can. Be open to challenges; that is part of a director’s role. Encourage directors to talk with each other as well.

Summary:

  • Great briefing materials can significantly elevate your board’s meetings and decision-making, and its overall effectiveness.
  • Great board discussions elevate board decision-making.

Categories
Governance News

A Timely Recommendation…

A Timely Recommendation…

Corporations Should Reconsider the Value of Their Political Action Committees

We are happy to share Douglas K. Chia’s’s timely memo about board oversight of corporate political activities, especially PACs. You can find it on Harvard Law School Forum on Corporate Governance: https://corpgov.law.harvard.edu/2021/02/08/corporations-should-reconsider-the-value-of-their-political-action-committees/. Mr. Chia, a valued member of our Advisory Board, observes that “corporate political spending has long been an issue in corporate governancere” and predicts it “will become a bigger board issue.”

Notably, Foresight’s recommended agenda topics include an annual “Report on Government Relations Programs and Compliance.”

A bit about Douglas K. Chia:

Mr. Chia is sole owner and President of Soundboard Governance LLC and Fellow at the Rutgers Center for Corporate Law and Governance. Previously, he was Executive Director of The Conference Board ESG Center and continues to contribute to The Conference Board as a Senior Fellow. He is also an Adjunct Professor at Fordham University School of Law.​​

Before joining The Conference Board in 2016, Mr. Chia served as Assistant General Counsel and Corporate Secretary of Johnson & Johnson. Previously, he served as Assistant General Counsel, Corporate of Tyco International. He also practiced law at the global firms Simpson Thacher & Bartlett and Clifford Chance in New York and Hong Kong.​​

Mr. Chia has held a number of central leadership positions in the corporate governance field, including Chair of the Board of the Society for Corporate Governance, President of the Stockholder Relations Society of New York, and member of the New York Stock Exchange Corporate Governance Commission. He is a current member of the American Bar Association’s Corporate Laws Committee and the National Asian Pacific American Bar Association. Mr. Chia has received numerous awards and recognitions in corporate governance. He has frequently appeared in the news media, including CNN, NPR Marketplace, The Wall Street Journal, Financial Times, and The New Yorker.

Mr. Chia received an A.B. degree from Dartmouth College and a J.D. degree from the Georgetown University Law Center. ​

Categories
Board Effectiveness

Great Briefing Materials Make Great Meetings

Great Briefing Materials Make Great Meetings

Boards want briefing materials that provide them the information they need for informed deliberations and decision-making. So, here are some suggestions to help you prepare great briefing materials.

Page 1:  Tell the Board Why and What – Then Summarize Your Story

Say why you are providing this material to your board.

State the what of the agenda topic. What are you asking the board to do? This is where you say what you need from your board.

Here are examples of how to “set up” your board’s discussion or decision:

  • Report of internal audit. The Internal Auditor will present the Department’s quarterly report to the Audit Committee. During this report, the Internal Auditor will highlight progress on the department’s planned review of payment controls and audit of expat employee expenses. We look forward to your questions and comments on that progress.
  • Approve company’s strategic plan. Based on the board’s review and deliberations regarding the board’s July strategic plan meeting, management has updated the company’s 5-year strategic plan to reflect input and suggestions the board provided at that meeting. Management is recommending board approval of the updated strategic plan attached.
  • Review capital strategy and capital plan. In connection with the board’s review of the capital plan, we are looking for your input as to the relative merits of the alternative dividend policies we are presenting for your consideration. Based on your deliberations and input, we will prepare a final recommendation for approval at your next meeting.
  • Evaluate CEO Performance. In advance of the Compensation Committee making annual and long-term incentive compensation decisions for C-Suite officers, the Committee is seeking Board’s assessment and evaluation of the CEO’s performance during the fiscal year. The CEO will present his self-assessment then leave the meeting while the board meets in executive session of independent directors for discussion. Later, the Compensation Committee will meet to make compensation decisions.   

Then, summarize management’s perspective on the agenda topic. Do this in 2-5 bullets. Include a few key facts in support of that perspective. In other words, tell the reader what you are going to cover in greater depth in the following pages. State your conclusion here, do not leave readers guessing.

Pages 2-10: Tell Your Story

The balance of your deck dives into greater depth, but not too much! Most agenda topics can be addressed in 10 pages or less. Not all, but most. It’s a good goal to set for yourself. As you draft, consider:

Assume your directors will read your deck carefully – and come to the meeting prepared to discuss the agenda topic and make needed decisions.

Keep in mind the information imbalance between management and your board. Management is daily and deeply involved in the company’s operations, personnel and challenges; directors much less so. Ask yourself: what information will best help directors have well-informed discussions and make well-informed decisions? Avoid “inside baseball” minutiae and details.

Write in Plain English. Use short sentences, active voice, and bullets.

Decode acronyms. Provide a glossary with the terms spelled-out and definitions. Do not leave directors guessing what a “ACM” or “FIFM” or “GIP” is at your company.

Be visual. Use graphs, color, and pictures to illustrate your points or highlight information. Vary font size to organize information and guide the reader’s eye.  

Include any key financial takeaways. Put detailed financial schedules in your Appendix.

As you write, anticipate and address likely director questions:

  • How does your proposal compare to what our peers are doing? Do your benchmarking!
  • Did you consider other approaches before recommending this one?
  • What assumptions underlie your recommendation?
  • How have you assessed risks? What will you do to mitigate them?
  • How does your recommendation/proposal advance your company’s long-term goals/strategy or address the crisis at hand?

Appendix: Use For:

  1. Detailed financial schedules (key takeaways are in the body of the deck).
  2. Organization charts relevant to human capital management topics like succession planning
  3. Subsidiary structure if relevant to the agenda topic
  4. Supplemental flow charts at the level below those included in the body of the deck
  5. Excerpts from relevant documents, e.g., a provision of your company’s certificate of incorporation By-Law, stock plan, indenture or similar if relevant to the discussion and decision

Remember: Great briefing materials can significantly elevate your board’s meetings and decision-making, and its overall effectiveness.

Watch for more posts about presenting at board meetings and facilitating effective board discussions.