Governance & Boards for Companies & Not for Profits
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Transcript of Governance & Boards for Companies & Not for Profits
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Boards 101By Ruchir Punjabi
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An Agency of Shareholders
Shareholders / Members
CEO
Management
Board of Directors
Committees
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Brief History
Informal examples include : Governing councils & Parliaments East India Company
Formal : Courts in England recognised the
relationship between the shareholders and a Board in 1904
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The Board Governs and the Management Manages
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Purpose
Further interests of the Organisation
Define and assess strategy
Trade solvently
Drive financial performance
Hire, manage and fire the CEO
Manage legal, OH&S, compliance and all other risks (Australia)
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When?
Entrepreneur with Advisors (<$2Mn)
Advisory Board (<$15-20Mn)
ASX / Compliance Specialists (Post-listing Experience)
Statutory & Executive Board (Pre-Listing or >$20Mn)
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Ideal Board Size
Preferably always less than 10Preferably an odd number
Organisation / Board Ideal Number
Advisory Board 3 to 5
Listed Board / Large Organisation 5 to 9
Not for Profit 7 to 9
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A Good Board
Mix of Skills & Experience
Strategy
Financial Prudence
Compliance
Independence & Accountability
Credibility (inc. Fundraising for NFPs)
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Director’s Duties & Responsibilities
Fiduciary Duty Fiduciary duty is a legal duty to act solely
in another party's interests (in this case, the org)
Act in good faith for a proper purpose Avoid conflicts of interest and not misuse
information or position Act with care and diligence Specific duties related to laws
(insolvency, declaration of interests, etc)
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Role of the Chair
Single most important role in determining effectiveness of a Board of Directors
Key liaison between the Board and the CEO (inc Management)
mentor and sounding board for the CEO
Ensures that the information flow to the Board is comprehensive
Creates an effective environment for robust discussions
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The CEO Relationship
Single most important function of the Board is to hire, fire and manage the CEO
Enablement and Accountability of the CEO crucial to the organisation’s success
Create an environment for the CEO to leverage the Board to help the CEO and organisation reach their full potential
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Board Remuneration
Depends on stage of your business
A stipend + expenses normal
Vesting of shares over time also a common option
NFPs normally only cover expenses
A remuneration committee can help
Surveys available (similar to employee pay surveys)
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Independence of the Board
Executive v/s Non-Executive Managing Director v/s CEO
Different countries have different trends on independence Consistently however independence is
considered positive
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Board Operations
Role of the Agenda Planned agenda really useful Distribute papers in advance Focus on high-level discussions;
keep details for noting Secretary of the Board and/or Company
Committees
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Committees
Committees useful to “delegate” deliberations in key areas
A Board can never delegate responsibility i.e. committees only recommend – Board doesn’t have to adopt the recommendations
Example committees include Audit & Risk, Investment, Infrastructure, Appointments & Nominations, etc.
Also an opportunity to leverage expertise in different areas
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Questions?
It is easy to over cook the process Start incrementally and build on the
process Add people slowly over time – no
need to rush but key to get people and Board culture right
Chair and CEO roles and their relationship crucial to the success of the Board
?
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Thank You
[email protected], Melbourne,Ahmedabad, Bangalore,Hong Kong, Singapore
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