Category: Board Effectiveness

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.

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/

Do your directors go off topic; asking about subjects that you already plan to cover later in the year? An annual agenda calendar solves that problem and helps management and board leadership better guide the board’s work.

Annual agenda building is about encompassing it all. And, no matter who does the annual agenda planning and later revisions, they face the same dilemmas: 

• How to fit in all the required, appropriate, and aspirational Agenda Topics and decisions into the limited time the Board is together — giving each agenda topic enough time for deliberation, debate, and decision?
• How to organize the Agenda Topics in a logical flow and budget the right amount of time for effectiveness?
• How to achieve the appropriate balance between topics that build the business, and topics that protect the Company from loss?
• How to achieve the right emphasis on the most important agenda topics? 
• Is the Board making the best possible use of its valuable time?

Best use of the board and committees’ limited time requires thoughtful and rigorous agenda planning, followed by prioritization of agenda items.  This can be implemented using four important principles.

First, a well laid out annual agenda establishes clear cadences and allocation of responsibilities (between the board and committees) for the board’s key processes — such as

• Strategic planning
• Annual budgeting and business reviews
• Management evaluation, development, and compensation
• Investor engagement and annual meeting planning
• Board evaluation process and leadership decisions

Second, good board and committee agenda planning results in annual agenda items synchronizing with the Company’s business cycle.  Information comes to the board and committees at the appropriate time, when it is needed for advance planning or decision-making, and when it is top of mind for management.

Third, the annual agenda should align each committee with its charter responsibilities, to ensure that all committees are covering their assigned duties.

Fourth, each committee and the full board should review and provide input into the annual agenda.   Recent shareholder governance codes urge boards to proactively adopt good agenda-setting habits.

If both the board and committees engage in annual agenda planning, the result should be better alignment, and less time lost to wondering (or worrying) about when the board and committees will do what.

How to do all of this? Foresight brings board support into the 21st century, giving management a powerful planning and compliance solution – speeding management’s work in preparing for, executing, and reporting on board and committee meetings. 

Foresight streamlines and elevates the annual and individual meeting agenda planning process for and follow-ups to the calendar of board events. 

• Before the new fiscal year begins, Foresight helps plan the board’s year, meeting by meeting, to ensure both compliance with the minimum requirements and a clear business purpose for each agenda topic, using either Foresight’s best practice template or your own annual agenda which Foresight compares to its database of requirements and goals. 
• Before each board and committee meeting, Foresight helps adjust the agenda for each meeting. 
• During each meeting, Foresight automatically documents the decisions made and generates draft meeting minutes suitable for editing by the General Counsel or Corporate Secretary. 
• At the end of each meeting, Foresight helps identify and assign follow-up items from the CEO, the chair, the General Counsel, and others. 
• At the end of the year, Foresight generates compliance checklists, helps evaluate the board and helps to identify ways to improve board performance the following year by providing analytics regarding agenda prioritization.