|
|
| Duty of Knowledge |
A Director is expected to know more than the "common person" about the corporation/organization and its "business". This includes knowledge of the governing by-laws and the operating bases of the business or government or association or charity. Governors must also understand the marketplace and/or community in which it operates and how the organization delivers its products and services. This might require regular reading of newspapers, web-reports, and/or industry journals. For Council members or Cabinet Ministers, this means clearly understanding what their government programs actually do, and the kinds of clients and contractors used. It also means understanding how they might affect the various inter-regional or international trade agreements in place. For these and non-government situations, this duty likely requires regular interaction with other communities, own community members, clients, other stakeholders, etc. so as to understand the value their organization provides and how they are seen in the community/marketplace. This does NOT mean doing the work that the CEO/Management is hired to perform. It DOES mean understanding the dynamics, issues, trends surrounding the organization and its products/services so that appropriate vision, mission, outcomes measures can be established by the Board and acted upon by Management and staff.
|
| Duty of Care |
Generally this duty
centers on the concept of prudence. Recently publicized examples of imprudence and malfeasance have been featured in media around the world. Increasingly, ethical practices expectations, transparency practices, community/public engagement and others are considered important work of those in the governance role - separate from management - to evidence the fact that the organizations are truly acting in good faith and in the best interests of both the organization and the wider community. An important aspect of this duty is the realization that professionals such as lawyers, accountants, consultants, etc. are usually held to a higher standard of care than regular Board members; and regular Board members are held to a higher standard of care than the average citizen. [By community as well as law.]
|
| Duty of Diligence |
This speaks to the requirement of Directors working to be as fully informed as possible about the various aspects of the organization: operational, financial, political, risk, etc. Here the duty addresses the integrity of both Directors and the organization itself, and their overall reputations. Traditionally this includes, but is not restricted to:
Recently, increased Governance expectations have started to create a "dynamic tension" between Board members and Management; between Political leaders and Civil servants. The CEO, Management and Staff are paid to look after the organization 24/7/365 (24 hrs a day/7 days a week/ 365 days a year). These professionals will obviously have a more thorough understanding of the organization than those in Governance. However; Board members must work to understand the "business model" or "professional model" or "political model" that applies. They must also work to be informed enough to ask good questions of Management that will help the Governance body truly understand the risks and opportunities faced by the organization. Finally, Board members must be able to assess and ensure that the CEO/Management is not acting/recommending things that are illegal or likely to negatively affect the reputation and future sustainability of the organization. This can be tough! Depending on the issues and challenges being faced by the organization; proactive time spent by the governing members is preferable to the "clean-up" time required if the issue gets out of hand. Aspects such as Ethics policies, Values statements, and Issues briefs may be important investments of time on top of the traditional expectations.
|
| Duty
of Management/ Delegation |
Ultimately, responsibility and accountability for all acts of the organization rests with the Governance body. Practically, we delegate responsibilities and authority to the CEO, who in turn further delegates these to others who will guide and manage the organization on a day-to-day basis. In return for these delegated responsibilities and authorities, the Board/Council/Cabinet must also establish accountability and reporting mechanisms. Further, the Board will often establish policies and/or limitations to guide the CEO/Management. I regret to say that even these basics are not common practice today (in a concrete and criteria-referenced manner), and leave many Governance bodies open to significant problems. Most important to effectively fulfilling this duty, is the joint establishment (between Board and Management) of Outcomes Measures to guide the success of the organization; plus the institution of mechanisms to measure and report on the activities of the organization towards these goals. Finally, the Directors must establish policies and mechanisms to hold themselves accountable to shareholders, members, stake-holders, and community in an increasingly transparent manner. Governance without Outcomes Measures and Accountability structures is fast becoming unacceptable in almost every jurisdiction in the world. This is important and time-requiring work for those in the governance role. However, done properly, it should help avoid conflicts of interest, nepotism, corruption, and malfeasance, plus set the bases for effective transparency.
|
| Fiduciary Duty | Despite
how it sounds, this duty has nothing to do with financials. There are three key components to a Board member carrying out their Fiduciary Duty. First, the Director must act honestly and in good faith. Second, they must be loyal to and act in the best interests of the organization. (This means they can NOT represent a constituency or negotiate for some parts/members/shareholders of the organization over others.) Third, they must subordinate every personal interest to those of the organization/corporation - no conflict of interest, no "contract voting". |
I wonder how many Board members and people in other Governor positions truly understand these duties and inform themselves appropriately in order to carry out their responsibilities?
In fact, from our work in Governance and study of Governors, we know that they come to the table with very different perspectives for their role.
In addition to understanding
the duties, is the need for an understanding of how Board members
approach their job. Banff Executive Leadership's ongoing research
has identified the key competencies for Governance practice;
however, more importantly, we have clearly shown the following
four frames for Board Governance practice.
The different frames reflect different levels of pattern recognition and perspective that Governors bring to the Board table. (See separate pdf file on the 4 Frames for Leadership/Governance.)
Frame A - Self/Technical perspective tends to focus on personal tasks, personal skill/expertise development, and might even take a "what's in it for me" or "cover my butt" attitude. Technical competence in a relatively narrow aspect is highly valued and displayed. Perspective of the bigger picture and how to leverage this expertise with others is somewhat limited. In a Governance position, the individual operating from this frame is likely seen as directive, and wanting things done their way; often they are there for the 'status' of the role. When they comment, they contribute from their background, personal experience, and with reference to their personal circle of friends. They easily take a "position".
Frame B - Team/Analytical perspective works to lever the talents and knowledge of the immediate team. Directors using this frame will often keep a tight grip on their areas of responsibility (committee or knowledge area), providing strong direction, clear delegation, and personal oversight of decisions and problem solving, yet generating high performance local-team success. Issues and opportunities are analyzed from a context of what the team (Board + Management) can control. Cause and effect thinking is common in the belief that a single correct answer is required by the Board and indeed possible. The focus on producing products or delivering services is in 'pushing' them out to as many buyers as possible the way you think best based on your assessment of needs/interests. "Stovepipes", blame assignment, and competitive advantage for common resources is usually evident between their organization and the rest of the world.
Frame C - Organizational/Systems perspective Governance more easily reaches throughout the organization and its suppliers/partners to orchestrate collaboration, co-operation, and innovation across the organization. With a systems approach, Directors & Management consider the nature of the relationships between parties, and their multiple inter-dependencies looking to lever added value. In this frame, Governors take ownership for the success of the organization as a whole (including their own Board processes), yet recognize that it may be impossible to predict all the results of an intervention in the system before making decisions. This requires looking for patterns and facilitating ingenuity from a variety of contributors to continuously re-combine elements into new products, services or operational processes that enhance value.
Frame D - Community/Network perspective moves the Governance reference points external to their organization - pursuing an understanding of how their organization impacts and connects to other parties. The Network Director also studies the "dynamics" in the marketplace, trying to conceive how best to position the organization's products, services, programs to continue to provide value amid shifting expectations, competition, and trends. They try to both create and capitalize upon new dynamics while remaining focused on achieving the broad outcomes co-created with the involvement of others (clients, government, citizens, suppliers, etc.). With this co-creation comes increased accountability in meeting shareholder/owner expectations, heightened ability for transparency to community, and responsibility for societal advancement.
Staying at the technical/analytical level keeps leaders and their organizations in reactive, inward-looking practices, but with a 'sense' of control. Resultant efficiencies while good for the business in one aspect can also threaten the creativity and innovation - particularly with those employees/managers that are continuously overloaded. This further carries the risk of negatively impacting others outside your focus. Moving to systems and network frames allows the leader to build ownership for success, plus increase energy, motivation and co-creation of new value with a passionate group of workers.
As Einstein said; "The significant problems we face today can not be solved at the same level of thinking we were at when we created them." A shift to Network Leadership approaches can help Directors deal more effectively with the challenges that traditional/analytical Governance & Management approaches have unintentionally created.
When one talks about following a model for governance, the model represents an approach to the combination of the above elements. Beyond attention to Processes, Policies, Structures, etc. there are considerable differences in the kinds of Board in the world today. And, these unique forms of governing bodies drive specific considerations to the application of different models.
There are five fairly commonly identified models in use today: Traditional, Carver, Cortex, Consensus, and Competency. There are of course advocates for each model which often focus on their particular model - usually at the exclusion of the others - though the models are in fact not mutually exclusive. Indeed, each model focuses on an element of governance important for the effective functioning of a Board. Many Boards actually adopt a combination of these models, in a blend appropriate to the unique features of their organization and Board composition. However, in and of themselves these models do not provide a comprehensive prescription for Board work. There is much more to good governance than simply adopting a particular model of governance.
Let's look at each of the mainstream models in practice today.
1. The Traditional
(Structural) Model
This is
the oldest model, created in the earliest of corporate structuring
(1700's) and passed down over the years into charitable and not-for-profit
organizations, even government crown corporations. It is the
template most law firms use to establish articles of incorporation
even today. It is somewhat out-of-date for today's realities;
however it still useful. Acts of Legislatures also follow this
approach in bringing into force the existence of a specific enterprise.
The structural model has its foundation upon the concept that the Board is the legal ownership entity, and in some ways even more - it is the body corporate itself, a 'legal person' in view of the law. This is true whether the entity is a for-profit, not-for-profit, or charitable Corporation or even a Society. These structures have changed significantly in the eyes of the law since their earlier forms, and have evolved today to limit the liabilities of both the Corporation and its Directors. This structural approach also has evolved slightly differently in the Anglo/American environment with an accountability approach to widely held shareholders. This is compared to German/Japanese cross-ownership Governance approach that often puts value a longer-term sustainability attitude; and also to family-owned enterprises with either other family members or minor partners ownership structures looking to essentially construct and run long-term family Trusts.
A basis of this
model is that the structure of the Board itself, and the way
in which it makes decisions, holds meetings, and the parameters
by which it must abide are put into an approved structure and
format. Another fundamental concept in this model is that the
Board only speaks as a Board, and members of the
Board speak on behalf of the Board but do not have an individual
voice on the outside world. The Board chair is usually structured
to be the "voice" of the Board, but again can only
speak in a way authorized by the Board as a whole.
The structural model will usually define the delegation of responsibilities from the Board to:
(a) The CEO or Management Board, and/or
(b) Board Committees (including Executive Committee)
Unfortunately, where this helpful model often goes awry, is that it is silent on the accountability mechanisms and expectations for reporting-back when the Board delegates its powers. Thus, any Board utilizing this model must create Policies or By-Laws to define responsibilities, expectations, and accountability requirements for both Management and Board Committees. The Board should also create clear job descriptions for Board members, Board Executive positions, the CEO, along with Terms of Reference for Board Committees. An Annual Board Calendar should also be developed to ensure specific annual/quarterly/monthly accountability and reporting (as appropriate) to the whole Board by Management and the Board's Committees.
Another area of challenge comes when the CEO creates operating committees of management/staff that interface with Board committees of similar-sounding responsibility. For example there may be a Human Resources & Compensation Committee of the Board, and there may also be a Management executive-level committee that addresses job classifications, benefits, promotions, high-performers, bonuses, performance management, labour relations and even discipline. Board committee members may interface with executives from the Management committee to gain information for the Board concerns around Risk Management, Transparency/Accountability, etc. and may inadvertently direct staff without going through the CEO, leading to confused staff and Board members crossing the boundary between governance and operational management.
Traditional models have also been used in the past to create large Boards with "representative" members from either geographic, family, or constituent elements, and may even ascribe weighted voting to different ownership parties/classes. Trends recently have been to reduce the size of such Boards and seek Board members capable of real governance for the whole, as opposed to simply representing constituents. However, this "representative-ness" structural design is one of the most potentially debilitating aspects to proper governance today. Constituency thinking or even negotiation behaviour at the Board table flies in the face of Fiduciary Duty to the good of the whole. Boards with this constituency or representative structure need to be able to engage the knowledge and perspective from different stakeholder groups, but still come together to focus upon and make decision in the best interests of the whole enterprise.
Thus, the Traditional model helps organizations define Board structures, but requires the Board to actively and specifically address appropriate processes (especially accountability and communication) through Policy or By-Law creation. It must also work very hard to not have its committees delve into operational matters and end-run the CEO in the process. And, it must remember its Fiduciary duty to avoid conflicts of interest and focus on the good of the whole.
2. Carver (Policy)
Model
This model
popularized by American, John Carver over the past 15 years;
is in his own words, "a rigorous academic approach to a
practice area that has had very little research over the years".
The Carver model has 2 fundamental concerns:
(a) Boards focus on defining the "ends" of the organization - i.e. what the organization strives to achieve or in some cases what it must do in order to put itself out of business; and
(b) Creating the policies by which the Board and Management must abide in its pursuit of the ends.
The Board's main role in this model is to create policy to guide management in its operational work, and to guide the Board in its governance work.
The policy approach favoured by Carver is through statements of "limitation". In the operational environment, the Board's policies define what the CEO is not allowed to do, the limits to his/her decision-making, and the guide-posts within which he/she must operate. As long as the CEO doesn't break these limitations, he/she has significant freedom to decide how, when, where to do things - the means of getting to the ends. This is of course motivational to CEO's and recognizes the competence, knowledge and full-time focus that a CEO gives to an enterprise compared to the part-time focus given by Board members.
Policies also describe the parameters within which the Board must operate: minimum number of meetings per year, minimum number of members, requirement for annual meeting with members, etc. As long as the Board operates within these parameters, Carver's model suggests that the Board Chair has the freedom to decide how to do things in the area of governance. This is very beneficial when a Board has a knowledgeable and competent Board Chair with the time or specific responsibility/compensation to work almost full time in this capacity.
Carver also suggests the reduction/elimination of Board committees and to do as much as possible as "Board of the Whole", recognizing that all Board members are equally accountable for the decision-making of the Board.
The challenges of this model come when the Board spends so much time focused just upon Policy-building, that they actually miss attending to some of their other responsibilities. Many Boards that have gone through the in-depth, time-consuming process of policy-building, reach the end of the process, and then ask what's next? Only to find that the "real work of governance" has been waiting all the while they have been developing policy.
Policy is good, it is helpful, and it helps define parameters - potentially protecting the Board and organization, plus giving broad guidelines in moving forward. However, this Model doesn't establish clear strategic/annual expectations or measures of success. Ends help define direction and goals to pursue but they don't necessarily connote strategy. These measures of success and strategy for example, are given over to the (assumed competent) CEO and/or Board Chair to decide if the Board policy doesn't define.
As such, "Carver Boards" must augment their policy work with the creation or approval of a comprehensive Strategic Plan, Business Plan and Budget. They must look beyond the guidelines of the Policy to assert the need for fund-/friend-raising efforts, government relations, community interface, and more.
3. Cortex (Outcomes)
Model
Developed
by John Por of Canada, the Cortex Model challenges the Board
to focus on their: customers/clients, the community/marketplace,
legislation, best practices of other similar organizations, and
employee knowledge; in order to define the standards, expectations
and performance outcomes to which the organization aspires.
The Board's main job under this model is to clarify and set the outcomes measures of success. To do this, the Board must truly seek to understand the value their organization provides to the community. Finally, the Board creates an Accountability Framework around the outcomes measures, and identifies who is responsible for leading/taking action in each area - Board, CEO or Staff.
With a clear accountability framework, the Board now moves to ensure the capacity of resources exists in each group, and a mechanism for each group to report-back to the Board on its progress.
This model is useful in that assessing performance of Board/Board Committees, CEO and/or staff; and is relatively easily done against the clearly delineated outcomes and areas of accountability. It is particularly valuable in assisting a Board become broadly Transparent and Accountable! For, in order to be transparent & accountable, an enterprise must have clear outcomes and performance measures established to report against.
One of the challenges to this approach is the Board's ability to understand the "business" well enough to clearly enunciate these outcomes measures. Being practical, the Board will have to rely on Management to do much of this research and develop draft performance statements. However, Board members also need to become more broadly knowledgeable of the industry segment, client expectations, trends etc. Another challenge is in the measurement and reporting of performance. In most cases, the organization is likely not to have current mechanisms or report structures in place to measure performance against the new outcomes, so these will have to be developed and shaped over time.
Boards and Management that adopt the Cortex approach will have to be careful to ensure they measure what is important versus what is convenient. And, they will have to provide the resources required to appropriately design measurement mechanisms and collect the information regularly in new areas of performance.
4. Consensus
(Process) Model
This model
is anchored by the understanding that all Board members are equal
- with an equal vote, equal responsibility, equal liability for
decision-making, and equal accountability for the actions of
the organization/Board. It also recognizes however, that Board
members have different areas of expertise, knowledge and wisdom
to bring to the table.
As such, the model addresses how decision-making is achieved by the Board:
This model is clearly valuable for the NFP sector, family-owned businesses, as well as widely held corporations with no major shareholder. It supports contribution from all Board members, and expects others to listen, respect, and consider their colleagues' input. It may well protect an organization in that all sides of an issue or decision are considered and resolved before making the decision.
Of course, it can also slow the proceedings of a Board. If for example, there are constituent representatives on the Board who must posture or receive authorization from their constituency before agreement is reached, then issues can get sidetracked; and particularly powerful individuals/constituencies can hold what in effect is a veto over other members - effectively nullifying an otherwise "consensus-driven" orientation. What is the status of the CEO, CFO or other executives on the Board - do they have equal voice/vote?
The consensus model developed by your Board, may rely on elements of Robert's Rules of Order, Parliamentary Rules of Order, or other aspects for when consensus is not possible.
As one can see, this model focuses on the way decision-making is made within the Board. As such the Board will have to develop Policy or By-Laws to convey its important processes, and then add attention to strategy, planning, reporting on operational issues, etc. in addition to the decision-making framework.
5. Competency
(skills/practices) Model
This model
is essentially a developmental one. It strives to ensure all
members of the Board have the appropriate knowledge, skills and
attitudes to be a good Board member. It addresses Board as a
team - communications, trust, relationships etc. And, this approach
seeks to continuously improve the performance of the Board over
time.
The Competency approach can also prescribe behaviour expectations through the implementation of Board assessments (either external or self-driven) and ensure they have a common context for their work together.
While this is a strong model for recruiting and developing Board members, and it can prescribe types of practices and real work of governance to be done by the Board; it doesn't drive policy creation, establishment of strategy, or monitoring practice per se. It may well identify that these later things are important practices of Board members, but doesn't prescribe through legal structure, Policy or By-Laws how it will be handled.
What an action-oriented Competency model can do however, is define the style of behaviour and frequency/or level of engagement for Board members in their work. It may assist new Board members by giving them a picture of the practices they should strive to adopt; and if combined with some mentorship from more experienced Board members can bring new members up to speed fairly quickly to more fully discharge their Fiduciary, Trusteeship, Community interface and other duties.
Talk about complexity! If the business world isn't complex enough, Governance adds yet another layer of complexity! While the above may be the most common models, there are many others written and being presented in governance circles today. Yet another way of looking at this issue is by the type of Board - which may have significant bearing on the blending of the various governance components into an appropriate model of governance for each unique need:
As the reader will realize, none of the 5 popular Models of Governance, nor consideration of the Types of Boards, address the need for the creation of a strategic/operational framework also described in our starting definition of Governance. Often this is the most important and time-consuming requirement in the work of Governance - but it is not the only aspect of Governance work! To this end, Banff Executive Leadership Inc. described a couple of years ago, The REAL Work of Governance Model as an attempt to outline and systematize the work of the Board and their interface with Management in accomplishing these important aspects.
Expectations for improved Governance in all organizations are changing the dynamic of the Board room in a big way. Stakeholder expectations for organizational sustainability, community relevancy, transparency, and accountability are demanding new practices - ones that are not in the domain of the executives hired to run the organization 24/7/365; but important, often neglected leadership tasks in their own domain. These practices require more information sharing, and enhanced collaborative efforts between Board members and executive team members. Such new, sometimes formerly taboo relationships can make or break executive careers, and they can either paralyze or mobilize the overall organization itself.
It also presents a real Knowledge Management challenge.
Beyond policy making, Board members today must be prepared to put time and energy into the following areas of Governance work:
Network Scanning. Board members must understand the "business" of the organization and industry or professional sector in which they govern. This includes knowing the business model(s) at play, the target audiences for services, and the "flow" of products, programs, services, and money related to clients, members, competitors and collaborative suppliers/ researchers, and partners In addition, Board members must regularly scan for insights into how their organization inter-relates to other elements of the global marketplace.
Executives can assist Board members in this understanding through presentations, comparative or educational field trips and first-hand opportunities to experience the organization's products, programs and services. Board members also need to be regularly reading newspapers, journals, and internet sites so they can see trends, highlight issues, identify "value shifts" and more.
If executives do this work and Board members do not, there is an immediate knowledge - and thus power - imbalance. How can Board members ask good questions of management, develop policy, and establish priorities without a personal sense of these aspects? In this scenario, Board members must rely on the CEO and his/her executives to summarize their views, thus becoming dependent on executive insight and analysis. This is a sure recipe for unsettled feelings at the Board level, or worse, superficial discussion and analysis.
Where this Network
Scanning is done only by executive team members, they must ensure
they are given sufficient time to present to the Board, and then
answer questions.
The possibility of the reverse situation exists as well: Board
members who have done their due research and network analysis
only to encounter executive members who have been so focused
on all-consuming day-to-day operations that they have not taken
the time to step back and conduct a strategic review.
Future Relevancy & Community Engagement. Enterprises handle this component in various ways. Some Boards insist on developing the Vision, Mission, and Values, themselves using a Strategic Planning Committee or Board as a whole. Others use a more advisory approach, expecting the CEO and executives to develop draft Strategic Positions, Vision, Missions, Values, even Branding guidelines for their organization - to bring to the Board for review, comment and approval. Regardless which approach is utilized, Board members need to adequately prepare themselves for this strategic thinking process.
Engagement of the community the organization serves, is perhaps one of the most important elements of governance work there is. Board members need to make regular face-to-face contact with various constituencies served. They need to ask how the organization and its products, programs, or services are viewed by the membership and other stakeholders. A few well-honed questions, consistently asked by all Board members in a variety of forums, should bring important, comparable insight to the Board table. These insights can then be shared with executives, ideally before they develop the strategic guideposts for the organization with the Board.
Here, discussions of sustainability and relevancy at the community level (governance work), meets the strategy, competitive analysis, value-building & positioning work from the operational perspective. Equally empowered and informed in these areas, the Governance-Management exchange can be dynamic, creative, not always in agreement, yet balanced and respectful.
Oversight, Perspective and Ethical Reflection. Ask 100 Board members of various organizations, "what is the role of the Board?", and today likely 95 will first respond with: "financial and performance oversight"!
Of course, these are important areas of governance work; and the US Sarbanes-Oxley/ Securities Exchange Commission, the UK's Cadbury Committee/London Stock Exchange Guidelines, the Norby Committee/Copenhagen Stock Exchange recommendations, EU and other capital markets plus the OECD have focused huge attention on this area in the wake of Enron, and others. However, simple oversight is not enough. Perspective from the Board is also crucial. So executives report that you served X number of clients, averaged 8.5 out of 10 on program evaluations, delivered hundreds of thousands of dollars in net proceeds from the various country operations. What lies behind these statistics? What was required to achieve them? What unintentional side-effects did we create while achieving these results? Did we act ethically - following our Values statement? Did we actually advance toward the outcomes of the organization or the role we have in our industry or community?
Ethically, Board must ask/define: To whose standards to we hold ourselves? A global company that operates in several jurisdictions may have to report their financials/operations in different formats and answer to different standards. Can we establish one standard/approach that will meet all the varied, yet somewhat aligned requirements?
This area of Governance-Management
interaction also has the potential to be relatively undefined
- with many companies operating without clear Board or CEO goals
and few criteria-based measures of success established. In the
absence of clear outcomes and success measures, assessment of
the CEO and organizational performance becomes rather subjective.
How do you measure Ethical practices? Some organizations take
a minimalist approach, creating a Conflict of Interest Policy.
As long as you don't break this policy, it is assumed all is
well. Unfortunately, interpretation of the policy is often a
confusing experience! Others create a Code of Conduct, and expect
every Board member, the CEO and all executives to sign it. This
requires individual and team commitment to live by practices
described in the Code. The next level of ethical pursuit is the
establishment of a clear Values/ Principles statement, which
is well communicated and discussed with all Board members, staff
and suppliers. Annual Performance (or sub-contract) Appraisals
review performance against the values as much as performance
against operational targets. This moves beyond a minimalist/compliance
mentality into much more of a leadership mindset. Finally, the
highest level, is a public statement of transparency and accountability,
and the creation of a feedback, comment, and information process
accessible by staff, customers, suppliers and community at large.
Annual reporting of performance against clear outcomes and goals
is then provided to both network members and the public with
specific, meaningful measures cited.
Ultimately, the CEO is accountable to the Board for the achievement of results, financial reporting, and accomplishment of other critical success factors for the organization. In doing so he or she may choose to defer some elements in favour of others. The CEO may even prioritize or carefully "frame" their reporting in order to set the stage for important future projects or strategic insights they have to present to the Board.
Boards meanwhile are now enhancing the role of the Finance and Audit Committee to ensure integrity and transparency of their organization. Boards as a whole, Audit Committees, and/or the Board Treasurer often require direct and independent reports from plus access to the CFO.
Of course, in strong Executive teams, the CEO and CFO are "in synch" and transparent. They have aligned interests and performance objectives. They have shared insights with each other and reached common perspective to present to the Board. In dysfunctional situations, the CEO and CFO, may present things differently to the Board, destabilizing the Board's trust, and ultimately leading to more hands-on micromanagement by Board members. The Treasurer and/or Audit committee may even dip down into day-to-day operations in the name of transparency.
Risk Management. In addition to its concerns about sustainability, the Board must assess, balance, and prioritize the use of organizational assets to achieve its strategic goals. While the same holds true for the executive team, the Board must become adept at looking for indicators that the organization has both the ability and capacity to achieve its plans. They should ask good questions regarding the Strengths, Weaknesses, Opportunities, and Threats with respect to:
Executives must feel comfortable in raising concerns to the Board about their capacity to achieve Plan, and the potential risks they see lying ahead. Board members need to reflect on their role in finding additional capital or resources in order to achieve the organization's goals?
So, while it is
clearly governance work to assess risk and mitigate it through
prioritization or accessing additional capital; executive team
members have to be sure they can deliver on their plans,
ethically, and with the given assets.
Diplomacy/Influence Leverage. Board members have a lot
to offer in this governance work area. They can be extremely
credible with government, industry panels, and funders/investors.
Most often they are the best ambassadors with the general community
- assuming they are well informed and aligned with the agreed-upon
position of the Board.
Clearly, the CEO and senior executives also play important roles in providing technical knowledge or on-the-ground follow-up that helps leverage the influence of Board members.
Board members can provide advocacy to politicians, speak to media, and build relationships with key influencers and/or alliance partners. Indeed, this is high value, potentially high impact governance work. It also requires carefully coordinated support of staff providing effective technical and operational leadership, day-to-day interface with government employees, and development of policy or advocacy briefs, meeting arrangements, presentation preparation, research, and analysis.
Today's governing bodies are all looking for ways to continuously improve their practices and build trustful relationships with stakeholders and community. This calls for significant knowledge of the organization and the world around it. It requires a broad perspective and capacity to handle complexity and innovation. It calls forth awareness of sustainability elements, and a commitment to transparency and accountability. In turn, this calls for a willingness to be collaborative over being simply competitive.
However, these are challenging attributes to bring together in enough individuals to serve all the Boards in our communities across jurisdictions. And, it is certainly a challenge to the creation of systems and mechanisms to support the Board and its regularly changing composition of members. This is a supreme Knowledge Management challenge - and one we should put our minds to in this forum!
What are your suggestions for tackling this issue?
Four
Frames of Practice for Governanance Practice (PDF)
Governance & Strategic Leadership
'Systems' Model (PDF)
In support of this month's dialogue, here below are some helpful additional references. There are many reference sites around the world on this topic, what follows are some that I have (a) found, and (b) find helpful in advancing my own Governance perspective. Enjoy!
A thorough treatise on Corporate Governance & Accountability models by the Institute of Economic Affairs in UK. Click on the PDF version to get the full 122 page report. This provides both an historical and contemporary look at how our Corporate Governance systems & models have evolved. It addresses the Anglo-American approach, German/Japanese, and others.
Official website of John & Miriam Carver and their Policy Governance Model
Official website of John Por and Cortex Applied Research
Another view of looking at different approaches to Board Governance in the NFP sector
A look at potential models for Corporate Governance in Japan compared to those in Germany
London Stock Exchange - The Combined Code: Principles of Good Governance and Code of Best Practices (May 2000) -- PDF
The Same but Different: Hard Rules or Soft Principles? From a speech by Don Cruickshank, chairman of the London Stock Exchange (November 2002)
Hong Kong Laws and Regulations on Governance (May 2003)
Securities Exchange Commission of the USA: Approval of the NYSE and NASDAQ Amended Corporate Governance Rules (November 2003)
Ontario Securities Commission's newly proposed guidelines for Corporate Governance in Canada
OECD's Corporate Governance web-page. See in particular the Global Corporate Governance Guide 2004.
The California Public Employees' Retirement System (CalPERS) - the world's largest Pension Fund Investor guidelines for governance practices.
The Stewardship Project - an international not-for-profit organization dedicated to "the assumption of responsibility for the welfare of the world". Quite a thought-provoking site!
World Stewardship Institute - cultivates environmental stewardship in business, science and faith-based organizations.
A Canadian organization providing a "tip-line" and information input service by web or phone to Boards and corporations.
The Canadian Coalition for Good Governance
Further Articles from Banff Executive Leadership: All PDF files
Improving Governance Performance Rules-Based Vs. Principles-Based Approaches
Introduction
from 800
to 4,000. He led the development of dedicated programming areas
for Aboriginal Leadership and Management, as well as Community
& Not-for-Profit Leadership; in addition to enhancing both
Core Leadership & Management, and Governance & Executive
Leadership programming. He also invented unique competency profiling
and active learning processes. These initiatives positioned The
Banff Centre as Canada's leader in leadership development.