Managing a Board of Directors

Dr. Michael R. Burcham The Nashville Entrepreneur Center michael@michaelburcham.com

03.10.15 | CNM

Part 1: Conversation on Corporate Governance

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What is Corporate Governance?

Corporate Governance is a mechanism through which Boards and Directors are able to direct, monitor and supervise the conduct and operation of the corporation and its management in a manner that ensures appropriate levels of authority, accountability,

stewardship, leadership, direction and control.

Audit  Commi*ee  

Compensa0on    Commi*ee  

Governance  Commi*ee  

Board  Commi*ees  

Strategy  

Board  of  Directors  •     Achievement  of  strategic  objec0ves  and  value  crea0on  •     Fulfil  responsibili0es  and  du0es  in  law  and  prescribed  func0ons  

Board  Ope

ra0o

ns  

Chairman  

Board    Mee0ngs  

Repor0ng  &  Disclosure  

 Internal    Controls    

Execu0ve    Commi*ee  

 Internal  Audit   External  Audit   Management  

 Combined  Assurance  Model  

Governance  System  and  Controls  

Corporate  Policies  &  Procedures  

Board  Governance  Instruments  

Monitoring  and  Evalua0on   Key  Areas  o

f  Respo

nsibility  

CEO  &  Management  

Shareholders  

Inform

a0on

 and

 Com

mun

ica0

on  

Corporate  Secretary  

Board Governance Framework

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Chairman as Leader of the Board

Primary Role | Provide overall leadership to the board Function •  Principal link between board and CEO/management team •  Responsible for board agenda and work plan •  Work with board committee chairs •  Involved in selection and induction of new directors •  Counsel individual directors on their performance •  Participate in discussions with key stakeholders

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CEO as Leader of the Company

Primary Role | Lead the management team, Reporting to the board Function •  Work closely with board chairman •  Responsible for performance of management team •  Formulate corporate strategy, annual business plan and budget •  Responsible for corporate and financial objectives •  Formulate major corporate policies •  Ensure continuous improvement in services and products •  Manage relations with investors, major customers, regulators •  Responsible for company’s long-term sustainability

5 Key Roles for a Board

1.  Financial Oversight 2.  CEO Management 3.  Setting Long-term Strategy 4.  Succession Planning 5.  BOD Governance

To Build an Effective & Successful Organization Through:

THE Most Important Responsibility of the BOD

•  Attendance & Agenda •  Information Flow •  Focus on Mission & Strategic Issues •  Committee Work •  Accountability •  Decision Making •  BOD Evaluations •  Continued BOD Development These  are  ALL    

Peer-­‐to-­‐Peer  BOD  issues  

Hats of Nonprofit Board Members

•  Governance | Worn only when in a properly called meeting •  Volunteer | Worn when advising the CEO or ED, fundraising and

helping staff •  Implementer | Rarely worn, program implementation is usually the

responsibility of the staff

Part 2: Common Mistakes of Organizational Leaders

Common Mistakes of NFP Leaders

Over-Reliance on the Board For !Strategic Leadership

Common Mistakes of NFP Leaders

Leader with Inconsistent Board Interaction!Not Checking in Often Enough

Common Mistakes of NFP Leaders

Having the Board Meeting!At the Meeting | No Preparation

Common Mistakes of NFP Leaders

Meeting Becomes Updates!There is Nothing to Engage

Common Mistakes of NFP Leaders

Not Enough Executive Session!Teams Need Honest Conversation

Common Mistakes of NFP Leaders

Focus is Only on Fund Raising!Lose Sense of Purpose

The Board is not an ATM!

Part 3: How Can We Be More Effective?

All Board Fall Somewhere Between

Over Controlling

Out of Control

Micro Managing Rubber Stamping

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Instruments to Enhance Effectiveness

Board Charter setting out procedural rules •  Clarifies leadership roles and core responsibilities •  Reserves matters specifically reserved to board •  Sets management delegations and reporting arrangements Comprehensive induction for new directors •  Legal and regulatory obligations •  Financial structure of business, budgets and KPIs •  Understanding of strategic priorities and current status •  Familiarize with business operations, e.g. site visits Annual board work plan •  Meetings and budget cycle, annual reporting Code of ethics or statement of business principles •  Defines corporate values and conduct of staff and directors

When Properly Governed the Board Can Be An Incredibly Valuable Strategic Resource

Expertise Experience Network Perspective

Best Practices

Leadership •  Effectiveness | BOD best practices and board effectiveness •  Relationships | BOD and ED/CEO should have a strong relationship Legal •  Audit | Fulfill the requirements of audit each year. •  Duty of Loyalty | Look out for best interest of the organization •  Compliance | All federal, state and local compliance issues •  Laws | Aware of follow current laws and policies Financial •  Audit | Annual audit by an outside firm •  Resources | Link vision and plans to financial support

Best Practices

Money •  Charity | Donate time and money to the organization •  Fundraising | Raise funding and resources for the organization Meetings •  Frequency | At least Quarterly meetings •  Documentation | Minutes, Decisions, Presentations Policies •  Policies | Conflict of Interest & Whistle Blower Policy •  Independence | Primarily volunteer •  Results | Measure progress toward mission in quantifiable ways •  Culture | Transparency, Consistency and Accountability •  Strategy | Focus, Consistent with Mission, Vision, Values, the “Dream”

Traps to Avoid

Board Failure:

•  Weak recruitment, orientation, on-boarding of new members •  Not really tied to mission •  Weak CEO or Executive Director •  Not having strong governance policies in place •  Not managing personal issues or special cases, which can

impact governance process •  Not knowing what is expected of them •  Not agreeing to what is expected of them

Part 4: Managing A Board | Pre & Post Meeting

MANAGING A BOARD THOUGHTS FOR THE CEO

1.  THE MEETING: NEVER have the board meeting "at" the board meeting.  ALWAYS call every director a few days before the meeting and run every important issue by them to get their input. Update them on company performance, especially the bad news, and let them "beat you up" privately. The meeting can then focus in a constructive fashion on problem-solving and building the Company for the future. 

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2.  THE DISCUSSION: Maximum PowerPoint should be about 4

slides from any presenter, especially yourself. This should be the limit of director interest in detail.  Boards engagement should be strategic – not tactical.

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3. ACCESS: Provide complete access for the board to everyone and

everything in the Company. They will rarely use it, but it's a great comfort to them to know you are not trying to hide anything. 

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4.  PRESENTATION: Have your key team members do almost all the presentations. It gives them exposure and allows you to make sage comments along with the rest of the board. A perfect board meeting is when 10% of the talking is done by the CEO, 60% by the team, and 30% by the directors. 

Managing a Board of Directors 10 Rules

5.  NOTES: Carefully consider every director's input and take good notes at the meeting. These people have lots of experience and many great contacts. But you make the final decisions (and if you don't, they will start to look for someone who will). 

Managing a Board of Directors 10 Rules

6.  ENGAGEMENT: Give the Directors projects in their areas of expertise. It's free consulting and they usually do a good job. It provides a way to contribute to the business that is meaningful and provides a way for them to “buy in” to the overall strategies.

Managing a Board of Directors 10 Rules

7. DECISIONS: Get in front of the board on tough decisions like top management changes, including changes to your own role. If it's going to happen, make it your idea. 

Managing a Board of Directors 10 Rules

8.  COMMUNICATION: For VC directors, try to picture how they are describing your Company to their partners, and what questions their partners are asking. Your job is to make each director a hero to their partners (or corporate boss). 

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9.  PRIORITIES: Remember it's Company first, team second, you last. You win when everybody wins, not when just you win. If you ever fail to understand these priorities, you will compromise your decision making and your position.

Managing a Board of Directors 10 Rules

10. RELATIONSHPS: Try to make a friend of every board member. Send them interesting deal ideas you turn up, learn about their interests, make the board a "look forward to" experience for everyone. 

Managing a Board of Directors 10 Rules