Admiral Grace Murray Hopper’s point: leadership can make a dramatic difference to the people who make up an enterprise and, therefore, to the enterprise itself. For that reason, Leadership is one of every board’s three Priorities (the others are Strategy and Execution). A board’s role in Leadership focuses on three areas: Board, the C-Suite and Workforce.
Board Leadership
The board is a body of equals. It chooses its own leadership structure, typically either an independent or executive Chair or a Lead Director, and leaders.
The board identifies the need for and establishes its own committees, consistent with requirements of listing standards and regulations, its discretion, and its own governance guidelines. The board also assigns directors to committees.
The board benefits from continuously developing its own members’ individual knowledge and effectiveness through activities such as self-evaluations, individual director education, and training. The evaluations, required in part by various rules, lead to improvements in the board’s operations and its collective development as a governing body.
Committee chairs and members change over time; rotation is seen as good practice. For these reasons, succession planning is as necessary and beneficial for the board as it is for company executives.
Moreover, periodic reviews of board composition can identify gaps in Directors’ experiences and perspectives. Finally, each vacancy is an opportunity for the board to reassess and to bring new perspectives into the boardroom.
CEO and C-Suite
Boards meet regularly, but most not even monthly. Day-to-day, executives must manage the enterprise. Choosing a CEO is the most impactful decision a board makes. It must choose well, based upon articulated criteria and company strategy. Notably, a board can wait too long to replace a CEO because it does not have a “ready now” CEO successor or the commitment to replace a failing CEO.
Below the CEO level, either a committee or the full board assesses and confirms the CEO’s choice of top executives.
Executive compensation is of great interest to investors, media, activist shareholders, employees, and regulators. Interest exists because compensation programs drive priorities, decisions, and behavior, and, hopefully, company results. Compensation strategy, annual and long-term performance goals and awards, and compensation policies are part of a board’s work to ensure an effective C-Suite. Efforts to explain a company’s compensation philosophy, programs and decisions can take up one-third of a public company’s proxy statement and considerable time during investor engagements.
Workforce
The board makes some decisions that affect the entire workforce – even a global workforce. The board should understand, for example, management’s compensation philosophy (i.e., pay parity, target the mid-range versus top of the industry) and Management’s program for achieving and leveraging diversity within the workforce to achieve competitive advantage. Finally, the board can lead by example.
By thoughtfully planning board and committee agenda and processes and devoting appropriate time and effective deliberation to its Leadership priority and these three focus areas, a board can make a significant difference in a company’s performance.
About Foresight®
Foresight is the first complete corporate governance software solution for boards of directors at public companies. The cloud-based software simplifies board planning and enhances board compliance and performance. Foresight is designed for corporate secretaries, general counsel, CEOs, and lead directors.
Foresight enables users to:
- Plan board priorities annually and meeting by meeting
- Generate board and committee meeting agendas, minutes, and compliance reports
- Compare meeting agenda topics to regulatory and other stakeholder obligations and expectations
- Identify regulatory exceptions for timely correction
- Export selected meeting and supporting documents
- Generate draft “ready-for-editing” minutes
- Generate and manage follow-up items after every meeting
- Measure board performance against industry benchmarks
- Get tips for improving board priorities and performance throughout the year
