Board member development by Frank Calberg

Board member development

Question # 1 What values do board members have?

All parties, but especially CEOs, should acknowledge different points of view and work to minimize the conflicts that inevitably arise from them. This requires high-level listening skills, the ability to see situations from the other personâ&#x20AC;&#x2122;s perspective, and the wisdom to understand the basis for the different points of view. http://www.billgeorge.org/page/board-governance-depends-on-where-you-sit http://www.mckinsey.com/insights/leading_in_the_21st_century/board_governance_depends_on_where_you_sit

Board members need to understand and trust each other. Only when they can have candid conversations will they ultimately reach a consensus that has positive and farreaching implications for the company. Trust becomes even more important when meetings are conducted by telephone, which is often the case in crises. http://www.billgeorge.org/page/board-governance-depends-on-where-you-sit http://www.mckinsey.com/insights/leading_in_the_21st_century/board_governance_depends_on_where_you_sit

Further inspiration https://www.teacherspayteachers.com/Product/Questions-to-discover-your-values-1329394

Question # 2 To what extent do board members work to fulfill the company purpose?

The board of CVS decided to stop selling cigarettes a USD 2 billion annual business. Larry Merlo, chairman of the board at CVS: â&#x20AC;&#x153;It is the right thing for us to do for our customers and our company to help people on their path to better health. Put simply, the sale of tobacco products is inconsistent with our purpose.â&#x20AC;? http://www.strategy-business.com/article/The-Mindful-Board

Further inspiration https://www.teacherspayteachers.com/Product/Questions-to-discover-your-purpose-1438787

Question # 3 How different are board members?

Board diversification is an increasingly important topic inside boardrooms.

http://www.heidrick.com/~/media/Publications%20and%20Reports/Boards-and-the-permanent-revolution-in-governance.pdf

Aspects of diversity  Skill / knowledge diversity.  Gender diversity.  Nationality diversity.  Experience diversity.  Age diversity. http://www.heidrick.com/~/media/Publications%20and%20Reports/HS_EuropeanCorpGovRpt2011.pdf

http://www.mckinsey.com/Insights/Organization/Why_diversity_matters

Survey shows that boards with a higher level of racial diversity pursued more breakthrough product improvements.

http://www.strategy-business.com/blog/The-Advantages-of-a-Diverse-Board

Research from multiple sources has shown that competive advantage, innovation, and increased shareholder value, among other benefits, are linked to a diverse board of directors. http://www.heidrick.com/~/media/Publications%20and%20Reports/Boards-and-the-permanent-revolution-in-governance.pdf

Being around people who are different from us makes us more creative, more diligent and harder-working. http://www.scientificamerican.com/article/how-diversity-makes-us-smarter/

Boards that look more like their target market have a better understanding of their target market. https://hbr.org/2012/04/geting-the-most-out-of-your-bo/

Non-national directors on boards - Europe

http://www.heidrick.com/~/media/Publications%20and%20Reports/HS_EuropeanCorpGovRpt2011.pdf

Companies targeting significant growth in emerging markets benefit from having

board members from those countries. https://hbr.org/2011/11/board-diversity-and-global-age/

http://www.heidrick.com/~/media/Publications%20and%20Reports/HS_EuropeanCorpGovRpt2011.pdf

Proportion of women on the board

17% of S&P 500 directors are women, up from 12% in 2002.

http://hbr.org/2014/03/the-boardrooms-quiet-revolution/ar/3

Over time, advocates of quotas hope that a sudden large increase in the number of women in leadership will change attitudes.

They point to the results of a law passed in 1993 in India that reserved positions for women in randomly selected village councils. A decade later women were more likely to stand for, and win, elected positions in those villages that had by chance reserved positions for women in the previous two elections. http://www.economist.com/blogs/economist-explains/2014/03/economist-explains-14

Further inspiration https://www.teacherspayteachers.com/Product/Gender-diversity-1416477 https://www.teacherspayteachers.com/Product/How-diverse-is-the-group-2005865

Question # 4 How much time do board members invest in their work?

Board members are increasingly devoting 2-3 days per month of work, plus extra hours for conference calls, retreats, and other check-ins.

http://www.mckinsey.com/business-functions/business-technology/our-insights/adapting-your-board-to-the-digital-age

Time that board members invest per year working on company matters Region Board members of North American companies.

Days invested 22 days.

Board members of European companies.

29 days.

Board members of Asian companies.

34 days.

http://www.mckinsey.com/Insights/Strategy/Improving_board_governance_McKinsey_Global_Survey_results

Number of days a year board spends

http://www.mckinsey.com/insights/strategy/High-performing_boards_whats_on_their_agenda http://www.mckinsey.com/Insights/Strategy/Improving_board_governance_McKinsey_Global_Survey_results

http://www.heidrick.com/~/media/Publications%20and%20Reports/HS_EuropeanCorpGovRpt2011.pdf

Board meetings per year

Private equity directors spend, on average, 54 days on their roles. Directors at public companies spend on average 19 days on their roles. Even in the bigger FTSE 100 companies, the average commitment is only 25 days a year.

In both models of ownership, directors spend 15-20 days a year on formal meetings. Private equity non-executives devote an additional 35-40 days to hands-on, informal interactions, for example field visits, ad hoc meetings with executives, phone calls, internet communication, while nonexecutive directors at public companies only spend 3-5 days a year on hands-on, informal interactions. http://www.mckinseyquarterly.com/Corporate_Finance/Capital_Management/The_voice_of_experience_Public_versus_private_equity_2245

We need not another layer of legal procedures but a new culture of governance, one in which professional directors view their role as their primary occupation. http://hbr.org/2010/12/the-big-idea-the-case-for-professional-boards/ar/6

If a potential director canâ&#x20AC;&#x2122;t put in 300 to 350 hours a year, she shouldnâ&#x20AC;&#x2122;t take the job. David Beatty

http://www.mckinsey.com/insights/corporate_finance/Are_you_getting_all_you_can_from_your_board_of_directors

Only 43% of the nonexecutive directors of public companies believe they significantly influence strategy. For this to change, board members must devote much more time to their roles.

4-5 days a month obviously give a board member much greater understanding and impact than the 3 days a quarter (of which two may be spent in transit) devoted by the typical board member of a public company. http://hbr.org/2011/03/capitalism-for-the-long-term/ar/4

Most effective factors for improving overall board performance

http://www.mckinsey.com/insights/leading_in_the_21st_century/governance_since_the_economic_crisis_mckinsey_global_survey_results

How can companies achieve the right degree of commitment?

What does actually help is a board environment that encourages participation and allows board members to derive meaning, inspiration, and satisfaction from their work. http://www.mckinsey.com/Insights/Strategy/Building_a_forward-looking_board

Board members educate themselves more

http://www.pwc.com/us/en/corporate-governance/annual-corporate-directors-survey/assets/pdf/pwc-annual-corporate-directors-survey-full-report.pdf

Question # 5 What tasks do board members invest their time on?

Traditional board agenda

http://www.mckinsey.com/Insights/Strategy/Building_a_forward-looking_board

Board members understand the respective companyâ&#x20AC;&#x2122;s financial position better than its strategy

http://www.mckinsey.com/insights/strategy/tapping_the_strategic_potential_of_boards

Additional forward looking board activities

http://www.mckinsey.com/Insights/Strategy/Building_a_forward-looking_board

Many board members want to invest much more time on strategy

http://www.pwc.com/us/en/corporate-governance/annual-corporate-directors-survey/assets/pdf/pwc-annual-corporate-directors-survey-full-report.pdf

Percent of time that board currently spends on issue

http://www.mckinsey.com/insights/leading_in_the_21st_century/governance_since_the_economic_crisis_mckinsey_global_survey_results

Ensuring that a company has a great strategy is among a boardâ&#x20AC;&#x2122;s most important functions.

http://www.mckinsey.com/insights/strategy/tapping_the_strategic_potential_of_boards

Engaging in strategy and resource allocation is really where boards can help the most to create value. http://www.mckinsey.com/insights/strategy/rethinking_where_to_compete_an_interview_with_the_ceo_of_pentair

To better prepare for succession, boards should have multiple discussions each year to identify the companyâ&#x20AC;&#x2122;s next generation of leaders. http://www.billgeorge.org/page/board-governance-depends-on-where-you-sit

Question # 6 How do board members develop technology competence?

Missing skill among many board members: Knowledge about technology.

https://hbr.org/2013/07/joining-a-board-who-you-know-m

5% of board members in non-technology companies have digital competencies. Denmark and Spain rank lowest (2%). Sweden ranks highest (8%). http://www.amrop.com/digitization-boards-amrops-2016-report

Digital is so far-reaching - think e-commerce, mobile, security, the Internet of Things (IoT), and big data that the knowledge and experience needed goes beyond one or two tech-savvy people on the board. http://www.mckinsey.com/business-functions/business-technology/our-insights/adapting-your-board-to-the-digital-age

At the board level, there is a need for knowledgeable, independent directors with experience and perspective in putting technology to use.

http://www.strategy-business.com/article/Your-Next-Board-Member-Should-Be-a-Geek

Consider involving a technology entrepreneur to your board who can help educate other board members. https://hbr.org/2015/09/all-boards-need-a-technology-expert

Open and transparent interactions with the CIO can help the board stay current on the fast-changing nature of technology and its impact on the company.

http://www.strategy-business.com/blog/Bringing-Tech-Insight-to-Corporate-Boards

Question # 7 How can board members evaluate IT performance?

Question # 1: How well does technology enable the core business? Examples of numbers used to measure: ď&#x201A;§ Percentage of business processes that have been automated. ď&#x201A;§ Minutes used to do business process x.