Exec's Program #4: Strong Corporate Governance - the Board

THE EXECUTIVE’S PROGRAM STRONG CORPORATE GOVERNANCE: THE BOARD

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PURPOSE AND LEARNING OBJECTIVES Purpose: To learn about governance, and why and how top executives build and use their boards.

Learning Objectives: Executives will be able to explain • Why corporate governance is important for success • What good corporate governance looks like • How to set up and manage a board, and use the board to achieve break-out results

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AGENDA 1. Recap and orienteering 2. What: What is Corporate Governance?

3. Why: Why Does Governance Matter?

4. What: What Does Good Governance Look Like?

5. How: How to Strengthen Governance 6. Summary and next steps

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ASSIGNMENT 1.

Use your calendar: Set your three I Musts for the week and map all your time to your calendar. Set one of the I Musts to work ON the business.

2.

The ON the business I Musts: Set aside 3 hours to prepare or update your AMP.

3.

For the next session: Be prepared to share at the next session.

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Topic 1 Recap and Orienteering

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RECAP: SESSION 1 THE 5 HABITS Mindset Mindset

Practice Practice

Your Your morning morning routine routine

Learn Learn   do do   teach teach

Feedback Feedback

Focus Focus

Coaching Coaching

Your Your plan. plan.

Time Time Management Management Your Your calendar calendar

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ORIENTEERING • Session 1: The Personal Habits of top performing executives – Mindset, Practice, Feedback, Focus and Time Management – become business disciplines.

• Session 2: Strategic planning: the Focus habit.

• Session 3: Annual planning: the Focus habit.

• Session 4: Corporate Governance and Boards: the Feedback habit.

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RECAP: SESSION 2 THE PLAN TOOL FRAMEWORK 3 2

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4

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How to be “strategic” when planning.

Touchstone Consulting Group 8

RECAP SESSION 2: THE PLANNING & EXECUTION SYSTEM 20 years Guiding Statement Vision, Mission, Strategy, Values, Business model, Operating model Used during onboarding, input to the strategic plan, to read in the morning to get you energized

5 years

Annual

Quarterly

Monthly

Weekly

Daily

Strategic Plan Annual Management Plan & Budget Quarterly Board Report, OKRs

Annual Planning Meeting All Hands Meeting

Co m

mu nica

tion s

Quarterly Board Meetings

Monthly Mgt. Reports

&R e po rtin

g

The Weekly Legend

Monthly Mgt. Meetings

Daily Calendar The Monday Legend & Friday WIR Team Meetings 9

EXAMPLE OF A CASCADED GOAL Annual Objective: Grow the IAN and strengthen the IAN’s brand as the largest network of investors that are engaged and passionate about empowering entrepreneurs in Africa.

Annual Company-wide

Annual Key Result (1 of 3): Increase IAN engagement in RENEW’s key activities as measured by participation on calls, trips, the International gathering and deals.

Q1 Investor Management Objective: Designing and implementing a new engagement strategy that creates connection between IAN members and their companies.

Quarterly Team OKR Aligned

Q1 Investor Management Key Result: Test new IR format with video walk-throughs of companies.

Week of Feb 4 Investor Management Activities: Send our IRs for all companies including new video walk-through format with 3 and measure open-rate.

Week of Feb 4 Laura I Musts: 1) Work with Matt to prepare walk-through video, 2) Help Erin send our IRs and measure open rate. Send report to IC for feedback - check if we have baseline metric to see whether engagement improved.

Week of Feb 4: Work on videos with Matt. 4-5pm on Monday. Purpose, outcomes and agenda in invite.

Weekly Legend

Daily Calendar Check 10

POWER OF PRACTICE Critical Success Habit

Use a calendar to manage all of your time.

Time Management Habit

09/02/2022

FOOTER GOES HERE

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LAST SESSION Q&AS

Questions & Answers Rapid Fire

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Topic 2 What is governance?

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WHAT IS CORPORATE GOVERNANCE? Definition:

Shareholders

• Is the set of rules, controls, policies and resolutions put in place to dictate corporate behavior; • It provides the framework for attaining a company's

Board (or directors)

objectives; and, • It encompasses practically every sphere of

Managing Director / CEO (O = officers)

management, from action plans and internal controls to performance measurement and corporate disclosure.

Source: Investopedia

Management Team (other officers)

Employees

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Governance is about accountability Source: Dreamcast Pinocchio

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Topic 2 Why governance is so important for growth

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IF YOU BRING ON AN INVESTOR

Shareholder

Owner

Board member

Executive

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WHY CARE ABOUT GOVERNANCE? • Get a higher value for your company: Institutional investors said they would pay 30% premiums to own well-governed companies in Africa. 2002 McKinsey survey

• Get a better performing company: In Brazil, firms with above-average corporate governance had returns on equity that were 45% higher and net margins that were 76% higher than those with below-average governance practices. ABN AMRO study

Source: World Bank Study “Better corporate governance: More value for everyone” 18

WHY BOARD’S ARE IMPORTANT • Holds management accountable.

• Advises the CEO on how to win!

• Helps the CEO not feel alone.

• Sets a natural rhythm for corporate governance (Board meetings) • Provides a legal forum and document (minutes) for decisions.

• Pushes diverse and strategic thinking and discussions.

• Replaces poor management and rewards top performers.

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GOVERNANCE AGREEMENTS Hierarchy GENERAL

Commercial Code / Company’s Act

MOST AUTHORITATIVE

Memorandum of Association

Articles of Association

SPECIFIC

Resolutions

MOST DEFERANT

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GOVERNANCE AGREEMENTS (CONT.) Memorandum of Association • The main formation, operations and governance documents for a company • Memorandum of Association (MoA): is the document governing the formation of the company (PLC) – Initial shareholders – Company name, location and business purpose – Initial share capital, limited liability of shareholders, and initial management of the company

• These tend to leave a lot of matters to the shareholders/members/managers to decide later on (through the articles of association and various resolutions)

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GOVERNANCE AGREEMENTS (CONT.) Articles of Association • Articles of Association (AoA): are an amendment to the MoA, and set forth in greater detail how the company will be run and managed.

• AoAs include details about: – Frequency of meetings of members – Specific voting thresholds for certain actions (transfers of shares, replacement of managers, etc.)

– Powers and limitations on authority of the general manager – Fiscal year of the company – Policies on the distribution of profits

• Also, the MoA/AoA will set out particular actions which the shareholders must vote upon - that vote will be conducted via resolution

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GOVERNANCE AGREEMENTS (CONT.) Resolutions • Resolutions: are written evidence of agreements made by the members of the company to cause the company to take or not take a specific action • These are typically the more specific decisions that a company must take (and that cannot practically be specifically provided for in the MoA/AoA) – for example: – Removing a general manager of the company – Approving the incurrence of a loan – Approving a move from one office to another office – Agreeing not to execute a particular plan until certain conditions are met 23

RESPONSIBILITIES OF THE BOARD OF DIRECTORS • Holds management accountable.

• Establishes corporate values and governance structures for the company; • Ensures that all legal and regulatory requirements are met and complied with fully and in a timely fashion; • Establishes long-term strategic objectives for the company; • Establishes clear lines of responsibility and a strong system of accountability and performance measurement;

• Hires the chief executive officer, determine the compensation package, and periodically evaluate the officer’s performance; • Ensures that management has supplied the board with sufficient information for it to be fully informed and prepared to make the decisions that are its responsibility, and to be able to adequately monitor and oversee the company’s management; • Meets regularly to perform its duties; • Acquires adequate training.

Copyright © 2013 CFA Institute 24

Topic 4 What does good governance look like?

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CORE ATTRIBUTES OF AN EFFECTIVE CORPORATE GOVERNANCE

Clearly defined manager and director governance responsibilities

Identifiable and measureable accountabilities

Delineation of rights of shareholders and other stakeholders Fairness and equitable treatment in dealings

Transparency and accuracy in disclosures

Copyright © 2013 CFA Institute 26

BAD GOVERNANCE Subtle Signs • Executive shows a lack of discipline: late for meetings, unorganized (not calendar), doesn’t know their numbers, doesn’t take notes during meetings, doesn’t follow up after the meeting, etc.

• Executive does not openly share information: They get defensive if challenged or questioned.

• Executive makes excuses about performance: They do not get something in on time, miss a meeting, do not come prepared. Always someone or something else's’ fault.

• They do not live by the expectations they set for their team and company.

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BAD GOVERNANCE (CONT.) Less Subtle Signs • There are no plans for the company (Strategic plan, AMP, budget) that are created, sign-off on and regularly evaluated.

• There is no formal board or members’ meeting, that meets regularly to review management performance against the plans.

• There are no documented minutes showing discussions, voting and decisions.

• The company does not make available to shareholders, quarterly/monthly finance statements and management commentary. Statements contain errors. The company lacks financial controls.

• Staff do not know the company’s values. Staff are guarded and nervous when questioned.

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GOOD GOVERNANCE (SCORECARD) Criteria (simplified)

Score 1-10

A competent and diversified Board that meets no less than quarterly Board reviews bylaws (AoA, MoA, resolutions) no less than once a year Board appoints an outside auditor to the company and the company has passes audit with an unqualified opinion Board materials are prepared and sent out 3 days before meetings Board minutes are sent out within 3 days of the meeting and signed at the next board meeting Board has a stated ethics and gender diversity policy that all directors and officers (executives) have signed Board approves an annual management plan and budget The company has a clear organizational structure Management compensation is set by Board and aligns management interest with shareholder Management meets regularly (no less than monthly) to evaluate implementation of the AMP and budget (TvA) Financial statements are prepared monthly with management commentary Management has clearly defined roles, responsibilities and KPIs for each unit and member 29

WHY HAVE A GENDER SMART BOARD

The Boardroom Africa promotes exceptional female talent to boards across the continent.

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GENDER SMART GOVERNANCE SCORECARD • Example: SEAF Gender Equality Scorecard

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GENDER SMART GOVERNANCE SCORECARD Example: SEAF Gender Equality Scorecard - Calculating metrics

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GENDER SMART GOVERNANCE SCORECARD Example: SEAF Gender Equality Scorecard - Calculating metrics

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GENDER SMART GOVERNANCE SCORECARD Example: SEAF Gender Equality Scorecard - Calculating metrics

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GENDER SMART GOVERNANCE SCORECARD Example: SEAF Gender Equality Scorecard - Calculating metrics

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GENDER SMART GOVERNANCE TOOLS Gender smart communication in all governance documents

Link to toolkit 36

THE BOARDROOM AFRICA NETWORK Video:

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GENDER SMART INVESTORS SEEKING COMPANIES IN EAST AFRICA • The Gender-Smart Enterprise Assistance Research Coalition (G-SEARCh) comprises a group of 6 investors active in East Africa: 1.

AlphaMundi

2.

Acumen

3.

SEAF

4.

Root Capital

5.

AHL Venture Partners

6.

Shell Foundation

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GENDER SMART INVESTORS SEEKING COMPANIES IN EAST AFRICA Gender-Smart investment examples • Kentaste Products Limited (Kentaste) focuses on processing retail food products (oil, cream, and mil) from coconuts and sources its coconuts from brokers and smallholder farmers in Kenya.

• With support from G-SEARCh, Kentaste will co-develop a gender commitment statement and policy and increase women's participation in non-traditional workplace roles and leadership positions.

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GENDER SMART INVESTORS SEEKING COMPANIES IN EAST AFRICA Gender-Smart investment examples •

Twiga Foods is the largest distributor of fresh produce in Kenya, working to connect informal vendors with higher quality, fresh, and processed food from farmers and food manufacturers. The company leverages their technology enabled food distribution platform, Soko Yetu, to source quality produce and efficiently and transparently deliver produce to local vendors.

•

With support from G-SEARCh, Twiga will analyze market data for product development with a gender lens to further its gender commitment efforts.

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GENDER SMART INVESTORS SEEKING COMPANIES IN EAST AFRICA Gender-Smart investment examples • Apollo Agriculture provides small-scale farmers with customized packages of seed, fertilizer, farming advice, credit and insurance.

They use satellite data and agronomic machine learning to enable better credit decisions and provide customized advice.

• These farmers work with Apollo's agrodealers, who are key touchpoint for women farmers. With support from GSEARCh, the company will assess women agrodealers' needs and provide them with tailored support.

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GENDER SMART INVESTORS SEEKING COMPANIES IN EAST AFRICA • 2X Challenge: 18 DFIs and MDBs investing directly into gender-smart companies and via local financial intermediaries (fund and financial institutions). They have collectively invested more than $ 4.5 billion in gender-smart businesses in only 2 years.

• East Africa is a key investment geography.

• For example: The European Investment Bank (EIB) has launched SheInvest, a new initiative to boost gender equality and female economic empowerment in Africa. The aim is to invest EUR 1 billion into gender-smart companies.

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GENDER SMART INVESTORS SEEKING COMPANIES IN EAST AFRICA Video: Food Concepts 2X investee, DPI fund manager

“We decided we wanted to be a gender-equal company and that’s where we are today: 51% female and 49% male.”

David Butler, managing director of Food Concepts PLC. Thanks to the Nigerian company’s gender-equality policy and 2X members support through the fund manager Development Partners International (DPI), women are able to increase their own opportunities.

Video: PEG 2X investee, responsAbility fund manager

“A more gender-balanced leadership team makes better decisions and a more gender-balanced staff creates better products for its market.”

Stefan Issler, head of direct investments at responsAbility Investments AG on PEGAfrica, an off-grid solar company in Ghana.

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GENDER SMART INVESTORS SEEKING COMPANIES IN EAST AFRICA

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GENDER SMART INVESTORS SEEKING COMPANIES IN EAST AFRICA

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Topic 5 How to strengthen governance

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6 STEPS TO BUILDING GOOD GOVERNANCE 1.

Read and understand your corporate agreements.

2.

Write down your plans, and use (Sessions 2, 3).

3.

Organize a board or advisory group or peers you respect. Have an odd number. Reminder: Pay advisors. Board members invest.

4.

Begin holding quarterly or monthly meetings. Take them seriously.

Prepare.

5.

Ask your board or advisors for feedback. Use their feedback.

6.

Start building your SOPs (later sessions)

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READING

READ THIS Document: 4. Good Governance Running Board Meetings

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BREAKOUT GROUP ACTIVITY • Provide a 3 min update on how your AMP and planning discipline is going • Question 1: Do you have a board?

– If Yes, how will you strengthen it?

– If No, what advice do others have to help you organize a board?

• Question 2: How can you use your board to attract capital and increase the value of your business?

• Question 3: What do you commit to doing after this session to strengthen your governance?

Write down your answer to question 3.

Did you do what you said you would do from last session?

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Topic 6 Summary and Assignment

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SUMMARY: GOVERNANCE • Corporate governance is about accountability. Main tool of the feedback habit.

• Evidence shows companies with strong corporate governance are more successful and valuable.

• Know and read your corporate governance documents.

• A diverse and strong board is an indicator of good corporate governance.

- The board is the group elected to represent shareholders and is the group the executive (or management) team reports to.

- The board holds management accountable to executing the company’s plan.

- Regular board meetings are important. Investors look at the minutes when valuing a company.

• Top performing executives use and value their boards; like coaches. Do this!

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ASSIGNMENT 1.

Use your calendar: Set your three I Musts for the week and map all your time to your calendar. Set one of the I Musts to work ON the business.

2.

The ON the business I MUST: Take three hours to evaluate your company’s governance document (see slides) and produce three ideas to strengthen your corporate governance. Continue working on your Q2 2021 OKRs.

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REFLECTION TIME

• Please take 5 minutes to fill out your module questions: – What did you learn?

– What will you immediately apply to your company?

• Please take 5 minutes to complete the feedback form

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Thank you! www.renewstrategies.com

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WEEKLY BATTLE RHYTHM: THE WEEKLY LEGEND • What is it: The company’s weekly project management tool. Activities are designed and executed each week that are aligned to the quarterly/monthly KRs • How it’s Organized: Company wide goals at the top, Manager’s I Musts, Unit project plans that are being executed to accomplish the KRs

• How it’s used: 1.

On Friday, all managers meet with their teams to review their progress for the week, and set their goals for the coming week

2.

On Sunday, the CEO or COO review the managers’ plans and outlines the company-wide goals, and puts those at the top of the Legend

3.

On Monday morning, each team member/manager sets their weekly 3 “I Musts” before 9am, and then shares those during the 9am Legend call

4.

Wednesday mid-week check in at 9am. Status update – standup meeting

5.

Friday, end of day Week In Review meeting. TvA on all company-wide goals, I Musts and project (go back to #1)

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Legend Guiding Statements (20+ Years)

Annual Objectives for YEAR

Success for the Week

Values:

Objective 1: AAAA

1.Department 1: 2.Department 2: 3.----

Vision: Mission: Strategy:

I Musts 1. CEO: 1) 2. COO: 1) 3. CFO: 1) Department 1 Q1 Objective: 1.

KR 1 Activity 1 2.

KR 2 Activity 2:

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EXAMPLE CALENDAR

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OKR TIMELINE

Q1 OKRs

Q2 OKRs

Q3 OKRs

Q4 OKRs

Source: https://www.tanics.io/tanics-blog/okrs-101-the-basics 58

Source: John Doerr

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