Author: Carol Ward

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BoardOps

Has WFH got you rethinking how you work?

We built Foresight® expressly to enhance your board-related workflows: preparation, document, and evaluation.

Board and committee agenda-building is a key component of board meeting prep. It’s an iterative process. Foresight is more efficient and reliable than the word processing and spreadsheets most corporate governance professionals use now. It reduces tedious work, freeing time for your high-impact work.

Foresight users can quickly build draft agenda, then share those with colleagues and committee chairs for review. Users can check their draft agenda for compliance with state law, SEC requirements, and exchange listing standards. Foresight also generates draft minutes to document meetings as well as analytics to help boards assess their effectiveness. It also allows you to track follow-up tasks, so they do not get lost in the shuffle.

As you shelter in place, learn more about how Foresight can improve how you work! 

Categories
Governance News

The way forward…

DOJ Compliance Update: What does it mean for Boards?
The Way Forward | Foresight BoardOps can help you navigate complex corporate governance issues.

Larry Fink’s March 30 letter to BlackRock shareholders included this observation about the impact of COVID-19 on business and investing:

“…Even more profoundly, people worldwide are fundamentally rethinking the way we work, shop, travel and gather. When we exit this crisis, the world will be different. Investors’ psychology will change. Business will change. Consumption will change. And we will be more deeply reliant on our families and each other to stay safe.”

Indeed, things have changed and will continue to change! Both public and private boards are under greater internal and external scrutiny as COVID-19 tests them in new ways. We have been rethinking how boards, executives and corporate governance professionals do their work. The result: Foresight®, a cloud-based knowledge-management and decision-support tool for planning, preparing for, conducting, documenting, and evaluating board meetings

Categories
Governance News

Tackling ESG: “How to” for boards and committees

COVID-19 Reinforces the Importance of Elevating Your Board’s Priorities
Use Foresight Board Ops to take a measured and objective approach to improving your board work.

Boards must decide whether to address ESG elements as standalone agenda topics or incorporate those elements into regular agenda topics. Example: Board oversight of ESG elements in the company’s supply chain can be incorporated into supply chain reporting and planning – human rights protections at the company’s suppliers, worker and product safety, sustainable sourcing, environmentally-responsible manufacturing (e.g., water, energy, waste). This integrated approach is holistic and holds business leaders, not just corporate staff, responsible for ESG outcomes.

How can boards communicate their oversight to investors?

  • Companies can talk with investors about the board or committee discussions of particular ESG issues “x” times per year and which executives join those discussions.
  • In-depth disclosure on the company’s website and in the proxy statement of the board’s approach to ESG helps all investors gain an understanding of the board’s role in oversight of ESG issues and take comfort that the board is addressing ESG issues in a proactive manner.
Categories
Governance News

Gotta Get Some Governance

COVID-19 Reinforces the Importance of Elevating Your Board’s Priorities
Use Foresight Board Ops to take a measured and objective approach to improving your board work.

Experience at WeWork suggests that it missed a few preparatory steps before its IPO – an important one being getting its corporate governance in order.

During 2019, about 159 IPOs were priced at $50 million or more in the US (compared to 192 in 2018). Whether they listed on NYSE or Nasdaq, these companies needed to adhere to minimum listing standards. In addition, they had to comply with SEC and other standards. Even complying with those standards did not keep all those newly public companies from going off the governance rails.

Setting up the mechanics, the processes, and the culture to be a successful public company requires planning as well as alignment on values and policies. Experienced governance professionals can advise and help company leaders build these out.

Experienced governance professionals can help in other ways. Helping to determine the checks and balances needed to mitigate risk and promote desired behaviors. Building a diverse board. Building an annual board and committee calendar that ensures the board identifies and addresses all required and relevant agenda topics. Ensuring that meeting agenda focus on the things that must be addressed and those that will matter over the long-term. Fostering candid board discussion and effective board decision-making.

Do not overlook how technology can help the IPO preparation, transition to public company compliance and long-term success. Foresight® is an enormous aid to the law firm or in-house personnel putting in place the mechanics. It provides the framework and the governance confidence needed to get the organization and the board ready for the IPO. And it will help prepare and keep the newly public company on track with governance.

Categories
Savings

Where does the time go?

Saving Time and Money

Often board and committee meetings end before the board addresses its most critical agenda topics. Or, those topics get short shrift so the board can adjourn on time. Human nature is to spend time on the topics for which the answers come more easily, less on the uncomfortable topics. But boards and committees really need to get to those tough agenda topics if they want to move their companies forward. If this is happening to you and your board, you are not alone. Happily, there is a solution.

Effective use of a board’s limited time requires an understanding of board priorities – then rigorously planning board and committee agenda based on those priorities. The board’s three Priorities are:

  • Company’s Leadership. It is the Board’s most important function. Identifying, developing, and retaining high quality leadership is critical to an enterprise’s success.
  • Company’s Strategy. It is about setting the Company’s direction, the aim and trajectory of its products and services, its capital allocation, and its contributions to society.
  • Execution. A Board reviews and discusses results, evaluates proposed transactions, and pursues “red flags.”

All corporate boards, whether start-up or well-established, have these Priorities in common. Devoting the appropriate time and energy to these Priorities can drive the Board’s impact and the Company’s success.

But, building board and committee agenda the old-fashioned way will not move your board and company forward. Until now, that has been a time-consuming, manual process.

Going forward, you can improve board effectiveness and decision-making with Foresight. Foresight is an interactive, secure SaaS platform that streamlines and elevates the agenda planning process (as well as follow-ups). Foresight is an effective tool to elevate priorities and build effective agenda– for the entire year and for each board and committee meeting.

Foresight helps produce agendas that:

  • Prioritize agenda topics which have the greatest strategic value.
  • Allocate more time to those more important agenda topics, over the more ministerial but still essential agenda topics.
  • Better reflect how much time agenda items and meetings are likely to require, allowing chairs to better plan and lead meetings and management and directors make travel plans.
  • Are planned for the year but be easily adjusted as meeting planning progresses.
  • Validate compliance with relevant governance and regulatory requirements.

Foresight also produces analytics that allow comparisons between planned and actual time allocations. Management, Lead Directors and Chairs can use those analytics when building future agenda and to lead more efficient and effective meetings.

Use Foresight to better plan your agenda and generate the analytics needed to help your board devote enough attention to the topics that really drive your company’s success.

Categories
Governance News

I’m not done just yet

Skating to Where the Puck is Heading: Succession Planning for Execs and Boards
Leverage Foresight BoardOps to see major improvements in your boards efficiency and effectiveness in making important decisions.

I was very honored to be recognized at Corporate Secretary magazine’s 2019 Corporate Governance Awards dinner with a Lifetime Achievement Award. This post attempts to capture a few thoughts from my impromptu acceptance speech and add one or two more.

Corporate governance is very much a team sport. No one does it well alone.

A corporate secretary is reliant on colleagues within and well beyond the Legal Department. Partnering with Compensation can mean a better outcome on Say on Pay, with Finance can make for a smoother, less costly bond issuance, with External Reporting can produce a clearer, more concise 10-K, with Investor Relations can build an investor engagement program that generates meaningful communication.

Beyond the confines of the company, a corporate secretary needs and benefits from the expertise of investors, outside counsel and service providers of all sorts (among them transfer agents, proxy solicitors, strategic advisors, software vendors (who provide tools to automate board planning, compliance, board postings and subsidiary records). Building effective partnerships with these individuals and their organizations increase one’s efficiency and impact – and improve outcomes for your company.

Membership in the Society for Corporate Governance is another reliable way to build a network of experts on whom you can call for help (Yes, there is such a thing as a Corporate Governance Emergency!) and with whom you can share in return. (Look into the Society’s new Certified Corporate Governance Professional designation!)

Because corporate governance is a team sport, coaching is involved. So many people helped me! I am eternally grateful to them all. I have tried to pay it forward and urge others to do so as well – and one need not wait until one is senior in an organization to do so. At any level of your company, create opportunities to spread the word about corporate governance. Speak at brown bag sessions for development programs. Invite members of rotational development programs onto the corporate secretary’s team for a year or two. They will learn about the board, stock compensation, investor engagement, and securities laws – all good things to know as they rise through the ranks and manage others. Create a one-hour “Public Company Boot Camp” that covers board basics, fundamentals of disclosure (“materiality,” 8-Ks, GAAP/Non-GAAP, Reg. FD, insider trading and company policies. Hold “Boot Camp” whenever an executive is elevated to Executive Officer/Section 16 Officer status and at a quarterly Legal (this is good stuff for the commercial lawyers to know!), Finance or Compensation Town Hall. Whenever and whoever will have you. Offer to be a mentor – and weave corporate governance into your discussions.

Share learnings (not confidential information) beyond your company, with others in the corporate governance space. We improve together. Find early career professionals outside your company to mentor and coach. See an interesting article, share it. Sharing can also take more formal forms. Be a panelist at a local or regional or national conference – or at a service provider event.

With your time and funds, support organizations devoted to furthering research and education (at all levels – from undergrads to professionals to directors) regarding longstanding and evolving corporate governance topics.

While I am grateful to have received this amazing award, I am not done just yet. My latest “pay it forward” initiative is Foresight — the first end-to-end corporate governance software solution. Foresight does for agenda planning and meeting management what portals did for board mailings. It provides a framework to simplify board planning and governance compliance, generate draft minutes, and analytics to improve board effectiveness and decision-making. Moving from 80,000 plus employees to a tech start-up has been an education but also an opportunity I am grateful to have and share.

Corporate governance is a team sport. Play well. Play nicely. Pay it forward.

Categories
Board Effectiveness

That benchmarking question is coming…

As you prepare for a board or committee meeting, you just know that you are going to get the question: “What are our peers doing?” You may get it from the CFO, the GC, the CEO, or the Committee Chair. If you are lucky, you get the question before the meeting. If you are really good, you anticipate and have the answer.

Why does the questioner care about what others are doing? It is as simple as the questioner wants to know if the company is or will be an outlier; there is sometimes safety in numbers.

Even if you do not get the question, knowing what your peers are doing about certain things can help you in your role:

  • Provide better advice to your board and board committees
  • Spot trends and be ready to explain them
  • Explain your approach in meetings with shareowners

Typical “peer questions” are –

  • Do our peers split the Chair and CEO roles?
  • Who are our peers’ independent auditors? What are our peers paying in audit fees, tax fees and non-audit fees?
  • Who are our peers’ compensation consultants?
  • What board committees do our peers have?
  • Do our peers have a board succession plan in place?
  • How many directors do our peers have? What is their gender make-up?
  • Do our peers have anti-hedging, clawback, and executive stock ownership policies?

If you are really organized, you already have your compensation peer group proxies bookmarked on your computer or you have saved some recent surveys by director recruiting firms or a professional association to your laptop. But still you need to dig around for the right data.

Being able to display those comparisons effectively allows you to convey your analysis clearly and make your point more powerful. That is where knowing when to use a “bar chart” or “donut” versus “radar” versus “sankey” graph to convey the information allows you to provide added value to deliberations.

Foresight presents peer information for just these occasions (it is just a click or two away) in the most clear and compelling manner.

Categories
Board Effectiveness

Dividing up the work on strategy

Strategy is one of the board’s three Priorities. (The other two are Leadership and Execution). Yet the division of responsibility for strategy between the board and management is often unclear. That lack of clarity can create tension and inefficiencies.

The executive charged with clarifying the complementary roles of the board and management can start by laying out the parameters of “Strategy.” It covers:

  • Planning & Risk
  • Innovation
  • Capital Planning & Shareowners.

Planning and Risk

The strategic plan, capital plan, and the annual budget are all important articulations of strategy and planning. Start-ups may begin a year not knowing whether they can meet payroll come Q3 and Q4. Some smaller companies may only have an annual budget. These important tools enable enterprises to plan for and achieve greater progress.

Risk analysis is an essential element of planning. The 2002 “Enron” and 2008 banking crises increased the importance of risk oversight for the board – especially as it reviews and approves strategic plans. Understanding and articulating a company’s appetite for risk is a management function. But the board should understand and align with management, then oversee management’s implementation of the plans and risk mitigation.

Innovation

Boards can foster a corporate culture of innovation by showing interest in new products and services, improvements to existing products and services, as well as improvements to the supply chain, methods of production and service delivery.

Capital and Shareowners

The Board ensures efficient allocation of the company’s capital – acting on management’s analysis and recommendations to update and upgrade capital assets or dispose of underperforming assets. It must also understand the peculiarities of the company’s balance sheet, credit ratings, and shareowners (including their priorities and policies). And it oversees management’s communications with shareowners.

Divide the Work and Conquer the Marketplace

Management should:

  1. Drive development of the Company’s strategy
  2. Lay out the Company’s main purpose, the uses, and sources of funds, and
  3. Plan for profitability.

Then, the Board makes the decisions on key capital allocations and structural decisions. In doing this work on Strategy, the Board will be less hands-on than when it is working on Leadership.

Strategy Plan Meeting Process

It can be helpful to discuss well in advance of the (typically annual) strategic plan meeting how to approach preparation for and expectations for the meeting itself. Gaining alignment at this early point saves prep time and reduces disconnects at the meeting.

The meeting itself will cover a lot of ground – the company’s mission, M&A priorities, dividend levels, new product initiatives, shareowner base and priorities, the regulatory environment, expense management, the role of technology in the company’s business, marketing initiatives, customer value proposition and new business opportunities. Allow time for the board to reflect on the discussions and for management to respond to any open questions. Then, at the next regularly scheduled board meeting, approve the strategic plan, the capital plan, and the annual budget.

After board approval, management must execute these plans – and boards must monitor and oversee that execution.

Let Foresight help you develop agenda that ensure that your Board addresses your Company’s fundamental Strategy topics. Learn more at https://foresight.board-ops.com/

Categories
Board Effectiveness

“You don’t manage people, you manage things; you lead people.”

COVID-19 Reinforces the Importance of Elevating Your Board’s Priorities
Use Foresight Board Ops to take a measured and objective approach to improving your board work.

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
Categories
Savings

“Couldn’t you have anticipated this?”

Saving Time and Money

It is no trouble to cancel an unneeded meeting. It is another story when your board or governance committee needs an unscheduled meeting.   

Of course, sometimes an unscheduled meeting is unavoidable – say, to discuss the opening salvo in a potential proxy fight. But the need for most meetings is foreseeable. Let’s look at two examples.

Example One

Last week’s U.S. Securities and Exchange Commission (SEC) reminded us of this first foreseeable example — when a company seeks SEC permission to omit a shareholder proposal from the company’s proxy statement.  (The SEC staff’s view often carries the day. So, the company nearly always asks the SEC staff to weigh in before the company decides whether to omit the proposal.)  In 2018, the SEC granted many requests like this, but in several cases made it clear that it wanted to know that the company’s board had considered the issue and the board’s rationale for its position.

On September 6, 2019, the United States Securities and Exchange Commission (SEC) reaffirmed this view. The SEC said, “The staff continues to believe … that when a company seeks to exclude a shareholder proposal from its proxy materials [under two of several established categories], an analysis by its board of directors is often useful.”

In practical terms, this means that the board (or, in some cases, the proper board committee) must meet to discuss a shareholder proposal, so the company can provide the SEC evidence of the board’s consideration and rationale.  Companies that skip the board consideration step have had far less success with the SEC staff.

Does your annual board calendar include a board or governance committee meeting between the deadline for submission of shareholder proposals for inclusion in your proxy statement and when you must submit a no-action request to the SEC staff?  Better to include shareholder proposals as a board or committee agenda topic in anticipation that you might need it; then, delete the topic if no shareholder proposal requires this kind of attention.  Better planning leads to less disruption.

Example Two

Proper planning avoids a year-end scramble to address the board’s compliance requirements.  One company almost lost a multi-million-dollar tax benefit because it had not complied with a government regulation requiring board and shareholder action. The company’s brand-name law firm also missed the omission. A hastily called board meeting saved the day and the money. Vetting annual agendas – laying out agenda meeting by meeting – in order to catalog compliance requirements at the beginning of the year, rather than until the compliance deadline looms and an unscheduled meeting is needed.

Foresight, from Corporate Governance Partners can help you simplify board planning, enhance board compliance, and elevate board performance.