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Didier Cossin

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Beschreibung

"Didier Cossin's High Performance Boards covers aspects of culture and organisational design that are foundational to any successful institution. This comprehensive study captures real-world insights on quality governance and effective leadership. It connects his four- pillar methodology for gauging and improving board effectiveness, learning from both failure and success and boardroom best practice. It is a valuable tool for present and future directors."
Mark Tucker, Group Chairman of HSBC Holdings plc

"Recent developments in the financial services industry dramatically illustrate the intimate link between good governance and a company's success or failure, particularly in times of crisis. In his latest book, Didier Cossin sheds light on the design principles and practice that underpin good governance. A catchy and comprehensive textbook for those in charge!"
Sergio Ermotti, Group CEO and President of the Executive Board of UBS AG

The most up-to-date version of the gold standard in board governance

In the newly revised second edition of High Performance Boards: A Practical Guide to Improving & Energizing your Governance, author Didier Cossin delivers an incisive and practical roadmap to board governance best-practices. Accessible to professionals from a variety of backgrounds, the book lays out the foundational and advanced concepts you'll need to understand to effectively govern a for-profit firm, non-profit, or government entity.

You'll learn to manage risk, increase the impact of your board, consider and evaluate the importance of ESG metrics, take into account geopolitics, and supervise your organization's culture. You'll also discover:

  • Extensive revisions to existing chapters, including new methods of cyber-risk management and stakeholder management
  • Strategies for avoiding the common pitfall of ‘greenwashing’
  • Increasingly common new activism techniques undertaken by boards and investors to shape the behaviour of organizations

An indispensable resource for board members and directors serving on boards at organizations of all kinds, High Performance Boards will also earn a place on the bookshelves of corporate lawyers, board secretaries, and students of corporate governance. For additional materials to the book, please see didiercossin.com.

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Seitenzahl: 689

Veröffentlichungsjahr: 2024

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Table of Contents

Cover

Table of Contents

Endorsements Page

Title Page

Copyright

About the Author

Acknowledgements

Preface

PART I: The Four Pillars of Board Effectiveness

Joanne Marker and Board Service

CHAPTER 1: The Four Pillars of Board Effectiveness

The First Pillar: People Quality, Diversity, Focus, and Dedication

The Second Pillar: Information Architecture

The Third Pillar: Structures and Processes

The Fourth Pillar: Group Dynamics and Board Culture

CHAPTER 2: Governance Challenges around the World

Scientific Lessons from Natural Selection

What is Transformational Leadership?

Should We Trust Leaders?

The Governance DNA

Notes

CHAPTER 3: The Successful Director: Values and Character

Duty of Care

Duty of Loyalty

Duty of Compliance (or Obedience)

Integrity: A Key Characteristic of Board Directors

Note

CHAPTER 4: The First Pillar: People Quality, Diversity, Focus, and Dedication

Quality and Diversity

Focus

Dedication

Notes

CHAPTER 5: The Second Pillar: Information Architecture

How Complete is Your Information?

CHAPTER 6: The Third Pillar: Board Structures and Processes

Processes

Committee Structure

Board Secretary

Lead Director or Vice Chair

Notes

CHAPTER 7: The Fourth Pillar: Group Dynamics and Board Culture

Understanding Group Dynamics

Coalitions Within a Board are Inevitable – and they Feed into Politics

Boards Fall into Traps

Drawing Strength from the Board's Potential

Developing Self-awareness

Board Culture

Summary Table to Part I: The Four Pillars of Board Effectiveness Toolkit

Checklist on People Quality, Diversity, Dedication, and Focus

Checklist on Information Architecture

Checklist on Structures and Processes

Checklist on Group Dynamics

Notes

PART II: Board Failures and Challenges

CHAPTER 8: Four Areas of Board Failure

Notes

CHAPTER 9: Risks and Ensuring the Right Board Risk Philosophy

Note

CHAPTER 10: A Board Member's Practical Guide to Risk Thinking

The Physical Health Check: Technical Risks

The Mental Health Check: Behaviours

The Strategic Risk Check

The Governance Risk Check

Notes

CHAPTER 11: Elements of Advanced Risk Techniques for Board Members: From Quants to Cyber

The Why and How of Quantitative Risk Assessment for Boards

Integration of Risks

The Outcome of Risk Assessment

Cyber Risk

Notes

CHAPTER 12: Crisis Management

Crisis as a Turning Point

There is Work to be Done in Peaceful Times

Communication Principles

Another Powerful Weapon: Gathering Information

A Crisis Will Shed Light on Boardroom Fissures

Procedure vs Authenticity

Communicate Your Way to Rebuilding Trust

Note

CHAPTER 13: The Four Tiers of Conflicts of Interest

Tier-I Conflicts: Individual Directors vs Company

Tier-II Conflicts: Directors vs Stakeholders

Tier-III Conflicts: Stakeholders vs Other Stakeholders

Conflicts of Interest within a Group of Stakeholders

Tier-IV Conflicts: Company vs Society

Notes

CHAPTER 14: High-level Fraud and Active Board Oversight

Why Does High-level Fraud Happen?

How to Create an Effective Oversight Environment

Tools for Anti-fraud Activities: Assessment, Prevention, Detection, and Investigation

Notes

PART III: Board Leadership

Joanne Marker and Board Values at Comfre

CHAPTER 15: Board Leadership and Values

Quality Boards Live and Breathe Integrity

Which and Whose Values?

Board Values vs Organisational Values

Family Values in Business

Note

A New Board Arena for Joanne Marker: Chairing the Board

CHAPTER 16: Becoming the Chair

The Role of the Chair

Effective Chairs are Active

Transitioning into the Role of the Chair

Chairs as Transformational Leaders

Making the Right Decisions about Chairmanship Roles and Styles

Managing the Transition

Leaving a Lasting Organisational Impact as Board Chair

Appendix 16A – Checklist: Board Chairs as Stewards

Notes

Joanne Marker Enters the Chair Arena

CHAPTER 17: The Chair–CEO Relationship

Chair–CEO Dynamics – the Hallmarks of a Productive Relationship

Tests of the Chair–CEO Relationship

The Ideal Attributes of a Chair to be a Secure Base to the CEO

Joanne Marker Confronts Failing Board Culture

CHAPTER 18: The Board–Management Relationship

Supervision

Support

Blurring the Board–Management Relationship

Writing Governance Codes is Easier than Changing Behaviours

Note

CHAPTER 19: Effective Diversity

Diversity is Good … But Why; and When?

Diversity as a Considered Choice

We Have Embraced Diversity … Now What?

The Chair's Role in Building and Nurturing Diversity

Notes

CHAPTER 20: Stewardship from the Board

Building Upon a Rich Cross-disciplinary Legacy of Thought

Psychological, Organisational, and Cultural Influences on Stewardship

Steward Leaders Build on their Unique Strengths to Drive Stewardship

Steward Leaders Deliver Long-lasting, Meaningful, and Inclusive Impact

Becoming a Steward Leader: What it Takes

Stewardship Risks

Boards are Key to Fostering Stewardship

Note

PART IV: Board Best Practices

CHAPTER 21: The Board as a Strategic Asset

Five Definitions of Strategy

Clarifying the Board's Role

Taking Context into the Mapping Process

The Impact of Context on Strategic Views and Roles of the Board

The Board's Ultimate Strategic Significance

Notes

CHAPTER 22: Is the Board a Team?

Fundamentally, the Board is

Not

a Team

Boards Must Allow for Controlled Instability and Dissent

Convictions can be the Fuel in a Board's Teamwork

The Overarching Objective is to Make Boards Cohesive and Potent

Ways to Nudge a Board up the Maturity and Potency Curve

Effective Board Teams are Adept at Juggling Competing Priorities

Potent Boards Know When to Converge and When to Diverge – and Value Both

Appendix 22A: Characteristics of a potent board checklist

Appendix 22B: Board members’ cultural and cross-cultural competences checklist

Notes

CHAPTER 23: A Primer on Finance Essentials for Directors

Reading Financial Reports

Understanding Ratios to Analyse Operating Strategies

Interpreting between the Lines of Financial Statements

How to Identify Red Flags in Financial Statements

Implementing Desired Capital Structure

Understanding Valuation Fundamentals

Making Better M&A Decisions

Overseeing Risk

CHAPTER 24: The Intricacies of Subsidiary/Holding Governance

Structures

Culture

CHAPTER 25: Fostering Entrepreneurship from the Board

‘Best Practice’ Governance vs Entrepreneurship

Boards Should Actively Encourage Entrepreneurship

Notes

CHAPTER 26: The Board's Oversight Framework for M&As

Creating a Deal-making Mindset

Seeing the Bigger Picture

Staging Deals with Maximum Precision

Integration

Confronting Litigation Involving M&As

Acknowledgement

Notes

CHAPTER 27: Boards and Oversight of KPIs

KPIs are a Language – and are Indispensable for Boards

KPIs Need to be Credible to be Useful

Zooming in on the KPIs that Matter – and that Tell a Story of How the Company Creates Value

KPIs Should Measure What is Critical

A Keen Focus on Value Creation

KPIs Help Diminish Substantial Business Risks Linked to ESG

KPIs and Human Capital

A Dynamic Approach to KPIs

Hi-tech Display and Review of KPIs

A Renaissance of the Balanced Scorecard

KPIs for Board Members

Appendix 27A

Notes

CHAPTER 28: The Talent Pipeline

The Board's Responsibility for Talent Management

The New Talent Dynamic: Culture, Values, Community

Notes

CHAPTER 29: Human Capital Evolution for Boards

Board Responsibility for Human Capital

Growing Stakeholder Demands for HCM Disclosure

Culture as the Safeguard of Long-term Value Creation

Staying Current with Emerging Expectations of the World of Work

Notes

CHAPTER 30: Boards and Social Media

JP Morgan's Failed Foray into Twitter Q&A

Why Boards Should Understand Social Media

What Boards Should Do

Notes

CHAPTER 31: Boards and Investors

The Move Toward Increasing Shareholder Engagement

The Surge in Shareholder Activism on Boards

Notes

CHAPTER 32: Managing Stakeholders

Shareholders vs Stakeholders: A Definition

How to Identify a Company's Key Stakeholders

The Board can be Instrumental in Shaping the CEO–Stakeholders Conversation

The Process of Stakeholder Engagement

Anticipating Stakeholders’ Influence and Impact

Notes

CHAPTER 33: Board Oversight of Geopolitical Risks and Opportunities

Geopolitical and Geoeconomic Resilience has Moved to the Forefront of the Board's Agenda

Geopolitical Competence is Now a Muscle that Boards Must Develop

A Toolkit for Addressing Geopolitics

Overseeing Management's

Action

in Tackling Geopolitical Risk

Appendix 33A: Business dimensions affected by geopolitical risk

Appendix 33B: Evaluating the board's geopolitical competence

Appendix 33C: Gauging management's preparedness to handle geopolitical risks

Appendix 33D: Overseeing management's actions in dealing with geopolitical risks

Notes

CHAPTER 34: ESG Oversight in the Boardroom

Compliance with ESG Requirements

ESG Governance Oversight: Shifting from Compliance to Proactive Governance

ESG Metrics: Understanding which ESG Factors are Salient

Disclosure Oversight: Managing the ESG Narrative

Appendix 34A: ESG Questions for the board to reflect on

Notes

CHAPTER 35: Assessing and Benchmarking Governance Performance

HPB Director Survey 2012–2023

People Quality, Diversity, Focus, and Dedication

Information: Designing Board Intelligence

Structures and Processes: Architecting Governance Excellence

Group Dynamics and Culture

Conclusion: Orchestrating Governance Excellence

Conclusion

Index

End User License Agreement

List of Tables

Chapter 3

Table 3.1 Behaviours of Successful Directors – A Checklist

Chapter 4

Table 4.1 Traditional Board Competencies (Rating from 1 to 10, With 10 Full ...

Table 4.2 Example of Board Skill Map

Chapter 6

Table 6.1 Examples from Three Large Organisations

Chapter 7

Table 7.1 Red Flags

Table 7.2 Boardroom Discussion and Decision Styles

Table 7.3 NEO PI-R: NEO Personality Inventory – Revised (Adapted from Costa ...

Table 7.4 Reinforcing Board Culture

Chapter 8

Table 8.1 The Danger Zone: Board Failures

Chapter 13

Table 13.1 Director's Independence Questionnaire

Chapter 19

Table 19.1 The Board History Exercise

Chapter 29

Table 29.1 HCM metrics are shifting from inputs to outputs and outcomes

Chapter 34

Table 34.1 Sample ESG Rating Agencies

Table 34.2 ESG Disclosure Channels

List of Illustrations

Chapter 1

Figure 1.1 Governance Excellence Rests on Four Pillars

Chapter 2

Figure 2.1 Transformational Leadership Principles

Figure 2.2 Components of S&P 500 Market Value

Figure 2.3 The Governance DNA

Chapter 3

Figure 3.1 Reinforcing Board Culture

Figure 3.2 The Roots of Good Judgement: Mapping One's Strengths and Weakness...

Chapter 4

Figure 4.1 The Roles of the Board

Figure 4.2 An Example of Typical Board Tasks

Figure 4.3 A Board Action Plan from a Sovereign Wealth Fund

Chapter 5

Figure 5.1 Mapping Board Information Completeness

Figure 5.2 Facilitating the Role of the Board at Steering Long-term Strategy

Figure 5.3 Best-in-class Board Information

Chapter 7

Figure 7.1 Path to a Functional Board

Figure 7.2 Mapping Board Alliances

Chapter 10

Figure 10.1 Example of Risk Appetite Statement 1

Figure 10.2 Example of Risk Appetite Statement 2

Figure 10.3 The Dunning–Kruger Effect

Figure 10.4 Strategic Risk Assessment for Boards

Chapter 12

Figure 12.1 Mapping Influencers for Rebuilding Trust

Chapter 13

Figure 13.1 The Four-tier Pyramid of Conflicts of Interest

Chapter 14

Figure 14.1 The Fraud Triangle

Figure 14.2 Fraud Risk at Board Level

Figure 14.3 Creating an Effective Control Environment

Figure 14.4 Corporate Governance Framework of Industrial and Commercial Bank...

Figure 14.5 The Evolution from Compliance to Conduct and Integrity

Figure 14.6 Compliance and Integrity – Yesterday and Today

Figure 14.7 Fraud Factor Assessment

Figure 14.8 Preventive Activity

Figure 14.9 High-level Fraud Detection

Chapter 16

Figure 16.1 Five Golden Rules Inspired by Great Chairs (such as Risto Siilas...

Figure 16.2 The Choices Made by Active Chairs

Figure 16.4 Extraordinary Conversation Topics Initiated by Board Chairs

Figure 16.5 Tuning How You Work with Management as a Chair

Figure 16.6 Chairs Choose and Navigate Styles across Contexts

Chapter 19

Figure 19.1 Diversity at the Board Level

Figure 19.2 Cultural Iceberg.

Figure 19.3 Individual NEO Profiles of a Board

Figure 19.4 The Impact of Diversity on Board Performance

Chapter 20

Figure 20.1 Stewardship's Three Dimensions

Figure 20.2 The Stewardship Landscape

Figure 20.3 The Relationship of the Key Actors in the Stewardship Ecosystem...

Chapter 21

Figure 21.1 The Role of the Board in Strategy is Affected by Context

Chapter 22

Figure 22.1 Teams vs Boards

Figure 22.2 What are a Board's Team-like Qualities?

Figure 22.3 Navigating between Agreement and Disagreement

Figure 22.4 Mature Boards Increase in Potency

Figure 22.5 How Diversity Impacts Performance

9

Figure 22.6 Board Team Dynamics Paradoxes

Chapter 24

Figure 24.1 Holdings Governance Map

Chapter 25

Figure 25.1 Entrepreneurial Orientation from the Board

Chapter 26

Figure 26.1 M&A Board Orientation

Figure 26.2 A Board M&A Process

Chapter 27

Figure 27.1 A Value Creation Flywheel for a Manufacturer

Figure 27.2 Financial Driver Mapping

Figure 27.3 Board-level Oversight of KPIs

Chapter 30

Figure 30.1 Social Media Comment and Response Protocol

Chapter 31

Figure 31.1 Boards and Investors

Chapter 32

Figure 32.1 Stakeholder Mapping

Figure 32.2 Stakeholder Key Concerns and Interests

Figure 32.3 Materiality Matrix Example

Chapter 33

Figure 33.1 Three Stages of Overseeing Geopolitical Risks

Figure 33.2 A Board that is Governance-ready to Answer Geopolitical Question...

Figure 33.3 The PESTLE Framework of Macroeconomic Factors

Figure 33.4 The Levers Boards can Apply in Overseeing Action on Geopolitical...

Chapter 34

Figure 34.1 ESG Compliance Oversight: Laying the Foundation for ESG Practice...

Figure 34.2 Industry Sectors that Talk the Most about the Environment are no...

Figure 34.3 Environmental Disclosure in Annual Reports Varies in the Utiliti...

Chapter 35

Figure 35.1 Participants of IMD's High Performance Boards Programme (2012–20...

Figure 35.2 Participant Demographic by Age

Figure 35.3 How Board Members Perceive Board Effectiveness

Figure 35.4 Board Composition and Diversity

Figure 35.5 Level of Board Member Preparation for Meetings

Figure 35.6 Preparation Time for Board Meetings

Figure 35.7 Future Orientation of Board Meetings

Figure 35.8 Design and Focus of Information Package

Figure 35.9 Information Adequacy regarding External Matters

Figure 35.10 Board Meeting Time Devoted to Management Team Presentations

Figure 35.11 Board Risk Identification and Assessment Effectiveness

Figure 35.12 Board Engagement in Reputation Crises

Figure 35.13 Board's Strategy Process

Figure 35.14 Board Chair's Ability to Foster Successful Board Culture

Figure 35.15 Board–Management Working Relationship Quality

Figure 35.16 Inefficiencies Experienced by Board Members during Meetings

Guide

Cover

Table of Contents

Endorsements Page

Title Page

Copyright

About the Author

Acknowledgements

Preface

Begin Reading

Conclusion

Index

End User License Agreement

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“It is a reasonable assumption that successful boards will share some common characteristics, as will failing boards. The challenge is to identify these factors before success or failure occur. This book, evidently based on Didier Cossin’s years of experience with boards around the world, goes a long way in doing so. The Four Pillars of Board Effectiveness will be an inspiration for many boards and their directors, as they consider how they can further strengthen their governance, enhance their effectiveness and ensure their success.”

– Paul Bulcke, Chairman of the Board of Directors, Nestlé S.A; Vice‐Chairman, Board of Directors, L’Oréal; Member, J.P. Morgan International Council

“Didier is one of the true leaders in academia on governance, with extensive practical experience from his engagement with many management teams and boards across the world. His Four Pillars of Board Effectiveness offers a simple yet practical approach to making the most out of the boardroom.”

– Robert Maersk Uggla, Chairman of A.P. Møller ‐ Maersk A/S, AP Moller Capital P/S and Maersk Product Tankers A/S, CEO of A.P. Møller Holding A/S

“This is the bedside book any board member should read and reread. Every page calls into question one’s practice and pushes each of us to avoid biases and revisit his/her ways of thinking for the ultimate benefit of the company.”

– Barbara Dalibard, Chair of the Michelin Group Supervisory Board

“Recent developments in the financial services industry dramatically illustrate the intimate link between good governance and a company’s success or failure, particularly in times of crisis. In his latest book, Didier Cossin sheds light on the design principles and practice that underpin good governance. A catchy and comprehensive textbook for those in charge!”

– Sergio Ermotti, Group CEO and President of the Executive Board of UBS AG

“Professor Cossin has got it spot on. His four‐pillared ‘temple’ of board effectiveness is brought to life with the boardroom adventures of Joanne Marker. One hopes that rightminded and passionate directors or would‐be directors will read this book and say ‘I want to be a John or Joanne Marker when I grow up!’”

– Teo Swee Lian, Chairwoman, CapitaLand Integrated Commercial Trust; Independent non‐executive Director HSBC, former Member at Corporate Governance Council of MAS, former Independent Non‐Executive Director at AIA Group Ltd., former Deputy Managing Director Monetary Authority of Singapore

“Effective governance is the cornerstone of quality group decision‐making, founded on respect for individual views and freedoms, in their full diversity. Didier’s book is an essential read for any organization—be it for‐profit, philanthropic, investment, or otherwise— looking to improve its governance practices.”

– Alex Soros, Chairman of Open Society Foundations

“An important distillation of Didier Cossin’s insight and expertise on effective governance. As a long‐time follower of his work, I am glad to see Prof Cossin publish this comprehensive guidebook to governance that transcends both geography and sectors. From stewardship of strategic objectives, to managing and structuring risk, the importance of board diversity and more, the lessons are at once practical and essential for any board member.”

– Peter Maurer President of the Board of the Basel Institute on Governance, former President of the International Committee of the Red Cross, Independent Director of Zurich Insurance Group AG

“The foundation of High Performance Boards is set in the Values and Character of its members. Didier brings this critical point front and center.”

– Ann M. Fudge, former Chairwoman and CEO, Young & Rubicam Brands; Board Member of Northrop Grumman Corporation

“A masterpiece written by an authority in the field. Impressive, complete dive, and focused. It covers every aspect of governance in a deep and compelling way. I recommend it to every board member.”

– Khaled Al Sultan, Chairman of Center for Governance, PIF; Chairman of Saudi Electricity Company

“This book offers a complete and enlightening review of current board governance practices and challenges. The approach and framework it offers are as pertinent in the east as in the west in establishing high performing boards.”

– Hsieh Fu Hua, Chairman, ACR Capital Holdings Pte Ltd; Chairman, Eastspring Investments Services Pte Ltd, Board Member of GIC, Singapore and MOH Holdings Pte Ltd.

“Professor Cossin has developed the concept of board effectiveness based on his latest research. Intellectually stimulating, this book provides practical guidance to cope with unique challenges associated with governance of institutions. This book is therefore a must‐read for board directors of companies, governmental organizations and NGOs.”

– Kumiko Matsuura‐Mueller, Former CFO and Director, Division of Financial Management and Administrative Services, UNHCR, Director Board of Directors at United Nations Federal Credit Union

“I have known Didier Cossin for 14 years. He has always been close by during my executive and supervisory careers. The experience he has built, through academic research and real‐life sharing with likes of “Joanne Marker,” myself and others, have allowed him to develop and expand a top‐of‐the‐class, practical and applied science of Corporate Governance. The IMD Global Board Center is today ‘the’ governance reference for current and potential board members, and this is Didier’s greatest achievement. Having managed a number of serious crisis during my supervisory career, I can only recommend Didier’s book which is a very up‐to‐date inventory of the skills required to be an impactful board member or chairperson in today’s challenging world.”

– Michel Demaré, Chair of Astra Zeneca; Board Member of Vodafone, Board Member of Louis Dreyfus Company, Chair of the Supervisory Board, IMD

“Didier Cossin brings huge direct experience to bear in his fascinating analysis of what makes a good board. Integrity, hard work, collegiality and independence of judgment matter hugely as personal attributes of board members as does a collective ability to focus on strategy, management support and risk in all its forms matters at the board level itself. And if that sounds easier said than done, read this book. This board member felt wiser and more daunted by the end.”

– Lord Mark Malloch‐Brown, former President of Open Society Foundations, former Deputy Secretary General and Chief of Staff, United Nations; former Minister of State in the Foreign Office

“Board work is demanding. Good governance requires a personal sense of accountability and responsibility from all involved. Didier’s work with boards of different organizations in many jurisdictions has helped him author this practical guide that will be of great support to chairs, board members and board secretaries alike.”

– Beat W. Hess, Chairman, LafargeHolcim (Switzerland); Vice Chairman Sonova, Chairman of the Compensation Committee, Nestlé S.A

“Didier Cossin’s book explains how Governance can be a key factor for companies’ success. It’s a must‐read for all board members!”

– Lorenzo Bini Smaghi, Chairman, Société Générale; Chairman of the Board of Directors of Italgas, Board Member, TAGES Holding

“What impressed me most is the comprehensive coverage of every aspect of board work in a way that is solidly grounded in every day’s practice in boardrooms around the world. As such, the book is a must read for every aspiring board member, but also has a lot to offer for even the most seasoned board member with a curiosity for learning and continuous improvement.”

– Gerard Kleisterlee, Independent Director IBEX LTD, Former Chairman, Vodafone Group Plc; former Deputy Chair and Senior Independent Director, Royal Dutch Shell; former Chairman, ASML

“Creating a culture of exchanges and constructive challenges among the board remains one of the most inspiring roles for a Chairman. Making sure that members feel accountable for the sustainable success of the firm must be the overarching purpose guiding this inspiration.”

– Michel M. Liès, Chairman, Zurich Insurance; Vice Chairman, Institute of International Finance (IIF)

“The book is a comprehensive and practical guide to key issues relevant for all boards aiming to improve their decision‐making processes. There are many useful takeaways on how to increase the dynamics in the boardroom.”

– Olaug Svarva, Chairwoman, DNB ASA (Norway); Chairwoman, Norfund; Board Member of Investinor and Institute of International Finance (IIF)

“Thank you, Dr Cossin. Board members needed this book for a long time. This work will assist board members to understand their responsibilities better.”

– H.E. Dr. Mohammed bin Hamad bin Saif Al Rumhy, Former Minister of Energy and Minerals (MEM) Sultanate of Oman; former Chairman Oman Oil Refineries and Petroleum Industries Company (ORPIC)

“This book offers valuable insights on what it takes to be an effective board. It facilitates a deeper understanding of the range of challenges and dilemmas that boards are faced with and offers guidance and best practices for how these might be addressed. Didier’s elucidation of board structures, processes and culture as key elements of quality board interaction and decision‐making is timely and instructive. The checklist at the end of each chapter is a useful reminder of the many dimensions of board effectiveness and provides a quick tool for self‐evaluation. This book is essential reference for boards navigating through today’s era of uncertainty and greater operational complexity, with the attendant new areas of potential risks and accountabilities.”

– Tan Sri Zarinah Anwar, Chairwoman, Institute of Corporate Directors Malaysia, Advisory Board Member at Securities and Commodities Authority (SCA), former Chairwoman, Securities Commission of Malaysia

“The free market system has created the largest aggregate economic growth in human history. However, the serious problems created by its excesses and structural limitations have become painfully apparent. Prof. Cossin’s granular understanding and insights on enterprise governance, contemporary risks and challenges and, most importantly, his perspective on stewardship are extremely valuable in achieving the maximisation of long‐term stakeholder value – the ‘holy grail’ of modern enterprise. This book is borne out of Prof. Cossin’s extensive experience across sectors and geographies – a must‐read for committed enterprise directors and trustees.”

– Francis Estrada, Chairman of CIBI Information, Inc, Chair of Institute of Corporate Directors

“High Performance Boards is the most insightful book I’ve ever read on corporate governance. It is a brilliant, comprehensive and thorough practical guide that shows how boards do function, but it is also much more than that: it describes with vivid accuracy and real company cases and real‐life anecdotes how boards should really function. A must‐read for anyone who wants to look behind the curtain and learn about the actual dynamics in the boardroom and, in particular, about the relationship between the Chair and CEO – one of the most important aspects of Corporate Governance.”

– Pierre Vareille, former Chairman of the Board, BIC S.A.; Board Member of Vallourec SA and Verallia SA; Co‐Chairman and Founder, The Vareille Foundation

“High Performance Boards is ‘the companion’ – the guide you need. Of course, you will find in this book all the dos and don’ts for your daily board work. Professor Cossin takes you well beyond the checklist. More than anything else you will be inspired by the leadership dimension – the moral compass. What you will see in these pages are your values in action as you serve in the boardroom.”

– Diane de Saint Victor, Board Member of C&A, former Chairwoman of Compensation Committee, Altran and former Chairwoman of Nomination Committee, Natixi

“Educational and refreshing to the brain, where page after page relate to something one has experienced. The themes are wrapped up and packaged in a very practical way. Overall, it is not a book to read once then shelve, it is something that directors need to read from time to time to ensure protection from drifting with personal habits.”

– H.E. Abdulsalam Mohammed Al Murshidi, President of Oman Investment Authority

High Performance Boards

A PRACTICAL GUIDE TO IMPROVING & ENERGIZING YOUR GOVERNANCE

 

Second Edition

 

 

 

Didier Cossin

 

 

 

 

 

 

 

 

This edition first published 2024© 2024 John Wiley & Sons Ltd

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About the Author

Didier Cossin is chaired professor of governance at IMD, Switzerland. He is the founder and director of the IMD Global Board Center, the originator of the Four Pillars of Board Effectiveness methodology, and an advocate of Stewardship.

Prof. Cossin currently works with sovereign wealth funds, large corporations, non-profit organisations, families, and institutional investors on governance and stewardship issues. He is an advisor to governments, central banks, regulators, and international organisations across the world.

As an investor, he works with prominent asset owners, and uses governance as an engine of investment performance across asset classes and organisations while regularly engaging directly with investee companies and investment committees. The four pillars and the content of this book are then the model used for board engagement. He also has developed a parallel methodology for governance of investments in complex portfolios that is implemented by institutional investors. He is the author of other books such as Inspiring Stewardship, book chapters (such as Governance Risk: A Guide for Investors) and articles in the fields of governance, investments, risks and stewardship. He is also principal author of a proprietary methodology of investment selection on governance that is used in a number of funds.

Prof. Cossin holds a PhD in Business Economics from Harvard University (Robert C. Merton chair), is a former Fulbright Scholar from the Massachusetts Institute of Technology, and is a graduate from ENS, rue d'Ulm, Paris, as well as of Sorbonne University and EHESS.

Acknowledgements

Many have contributed, directly and indirectly, to my work and to this book. Of those that contributed directly, I am particularly indebted to Sophie Coughlan. Sophie, as a leadership specialist, and associate director of the IMD Global Board Center, has helped many of the board interactions I lead and has supported me across many chapters. Abraham HongZe Lu has decades of studies and work with me and has also contributed to the substance of this book, bringing sometimes analytical and mathematical flair to what too many see as soft issues only. This book would not be here without their contribution. I am also grateful for the many others that contributed directly or indirectly to this work: Quentin Dufresne, associate director, who has been a key driver of many programmes at the origin of my board practice, notably the High Performance Boards programme, Martin Kralik, Yukie Saito, Jurgita Domeikaite, Philip Whiteley, Loic Frank, Francesca Vitucci, Julie Poivey, and Richard Eames. And for a personal collaboration that has amplified the performance aspect of governance across portfolios of sophisticated investors on four continents, hence reducing waste and optimising wealth creation for future generations, I am grateful to Elisabeth Bourqui, herself a prominent board member and co-founder of PNYX Group.

Of those that contributed indirectly, I owe a particular debt to the real actors of the governance world, board members, directors, government officials, and investors that have peopled my words and my ideas, for the better or for the worse! They probably are just as happy to not see their name mentioned here, as a chair of one of the largest financial institutions in the world wryly remarked once: ‘Being in Didier's writings tells you it's time to go!’ I suppose that my critical eye has helped a few towards self-awareness J. For many though, they have been an inspiration of how to drive true governance, and many of them are chairpeople or board members of influential and powerful organisations. I am grateful for all those who shared intimate and confidential situations that make the reality of good and bad governance. Without them, I could not contribute to governance improvements that I know impact the world for the better (and sometimes dramatically and publicly so). The dedication, integrity, and altruism of many is commendable. Some are famous, some are unknown, and all support us towards a better governed world. And indeed I have rarely met individuals that did not want to do better, in all senses of the word better. We, as society, should always support the development and improvement of those that govern us and our organisations, and I hope that through my words, their contribution will be heightened. I am in many ways a go-between, putting in words and concepts what the very best-in-class are naturally doing. This book maps and synthesises what some gifted and dedicated individuals have endeavoured to bring to society through their personal judgement skills. It also introduces key elements of evolution for great governance in a complex and conflicted world.

Preface

Governance, or the quality of decision-making at the very top of organisation, has become central to success. But although an effective board can be a huge asset in this regard, boards often fail their organisation – typically in the areas of risk oversight, strategy, the selection and support of the CEO and senior management, and integrity. Making boards more effective, therefore, is crucial to improving governance around the world.

My own interest in the subject began more than 30 years ago, when I studied the governance of risk. I was fortunate to have many inspirational teachers, including five Nobel Prize winners – one of whom, Robert C. Merton, chaired my PhD committee. In parallel with my mathematical work, I quickly became convinced that the human element is crucial to effective governance, and my interest in psychology, philosophy, and ethics increasingly shaped my approach.

In the decades since, I have worked with boards across the globe to assess and improve governance – in large global companies, sovereign wealth funds, government bodies, international organisations, non-profits, family businesses, and tech start-ups. Over the years, I have developed a systematic approach to increasing a board's effectiveness that rests on four pillars: the quality, diversity, focus, and dedication of individual directors; sophisticated information architecture; well-functioning structures and processes; and healthy group dynamics and board culture. By focusing on continuous improvement across all four dimensions, my methodology has repeatedly shown its ability to transform boards for the better.

Diagnosing governance problems is often relatively straightforward, although in some rare cases the causes can be deep and hidden, especially with integrity failures. Improving governance, on the other hand, is often a longer-term process, requiring a gradual, sustained effort over several years. The growing complexity and conflicted nature of the global geopolitical, social, and economic context means that more than ever, boards need to adapt their own governance practice to anticipate and confront the challenges that lie ahead, to be able to steer the organisation with clarity. This has led to a corresponding shift in board practices, necessitating a shift in emphasis from divergence of views solely to convergence and conviction on dividing or ambiguous topics where useful. Board choices (notably of strategy and CEO) are harder than ever and they need to align with strong and decisive action that benefits the organisation over the mid- and longer term.

This book covers both the diagnosis and treatment of governance problems, and aims to provide directors with a practical guide to making their boards more effective. Part I introduces the Four Pillars of Board Effectiveness methodology that my team and I use to assess governance health. Readers may wish to think of this section as a check-up process. Part II addresses the most common areas of governance failure, and how boards can guard against these. In Part III, we look at the importance of board leadership and the role of the chair in ensuring quality governance. Finally, Part IV is a compendium of best-in-class governance practices, with each chapter covering a specific aspect of board work, and drawing on the insights and discussions on this topic that we have had both inside and outside the classroom.

My colleagues at IMD business school, and especially the team at the IMD Global Board Center, have contributed hugely to the content of this book. So, of course, have the thousands of board members whom I have had the pleasure of working with. I pay tribute to them in this book by describing the board experiences of a character called Joanne Marker (not her real name). The real Joanne, an exceptional woman of great energy and dedication, has softly (and sometimes not so softly) impacted the governance of three of the world's most iconic large-cap companies and one of its most influential philanthropic organisations.

As Joanne's experiences illustrate, good governance is about balance, responsibility, and genuine personal accountability. I therefore hope the following chapters will inspire you and your organisations to even better governance and further success.

Didier Cossin

Lausanne, May 2024

PART IThe Four Pillars of Board Effectiveness

Joanne Marker and Board Service

At age 62, Joanne Marker had been a senior independent director for over 20 years on the boards of many different companies and public organisations.

The previous year, Joanne had taken early retirement from her job as a senior leader at Connect, a major US telecommunications company, where she had worked for more than two decades. Hers had been a rewarding and challenging career, of which she was proud.

Joanne now derived a different kind of satisfaction from her board service at three very different companies: Connect, international pharmaceutical company Ziogen, and engineering multinational SNB. In recent months a few other organisations had extended invitations, and she was currently evaluating each of them.

One morning, an email from her nephew Thorsten popped up on her screen.

Dear Aunt Joanne,

Exciting news! I just received an invitation to be on the board of Kloetzel & Brothers! First board meeting is next month. I wanted to pick the brain of my favorite board member! Can I take you to lunch at Mario's when you're in town next week?

Yours,

Thorsten

Thorsten was an ambitious, capable, and educated young man working in investment banking on Wall Street. Joanne had no doubt that he would make a fine board director; his knowledge of the financial markets and banking regulation would certainly be helpful to Kloetzel, a global financial services company. He was bright, energetic, and hardworking – and from what she had heard, had earned a reputation in banking as a name to watch. Still, she found herself remembering a few incidents that made her wonder whether he had the maturity and self-possession needed for boardroom discussions. She checked her calendar and emailed Thorsten, confirming the lunch.

***

Joanne cast her mind back to a chilly March afternoon 19 years earlier. She had been in her office thinking about how to improve a distribution partnership for WeCare, the multinational consumer goods company she worked for at the time, when her phone rang.

It was her old friend from business school, Burt Goodman, who was now a mover and shaker at GCD, a major consulting firm. Goodman invited Joanne to join him for the Henry Street Settlement dinner in New York City. ‘I'm just not cut out for big gala events, Burt’, she had protested.

‘Oh come on, it will be good for you’, Goodman said. ‘Sometimes even an MBA and over 20 years of experience in a major multinational can't match the magic of one lucky dinner conversation.’ So Joanne decided to go.

At the dinner, she was seated next to Jordan Wise, the CEO of Amsterdam-based Virtuous Ventures, a major international conglomerate. Their conversation touched upon Joanne's family and career journey to date, and Wise asked her advice on the pros and cons of joint ventures in different emerging markets. Joanne shared her key learnings about each market, as well as the main strategic and industrial dimensions that needed to be considered.

‘But doesn't it depend on your partners in the end?’ Wise wanted to know. Joanne described the different partnerships that WeCare had developed locally, depending on the distribution channels in place (or not) in different markets.

Two days later, Wise called her with a proposal that took her by surprise. ‘How would you like to be on the Virtuous board, Joanne?’ he asked her. She had always aspired to board service at some point in her career – but she was only 43, surely far too young to be a director.

Wise explained: ‘We're expanding internationally into a new retail business, and we need your international marketing expertise. You can bring in solid knowledge about distribution networks and consumer insight too.’ Now Joanne's interest was piqued. She began to ask questions. Wise soon ran out of answers.

Her first meeting with Virtuous Ventures’ Chairman Gerald Grossheim was over lunch at the famous Charlie Trotter's restaurant in Chicago's Lincoln Park. Over their first course, Grossheim explained how the company's 11-member board worked, how often it met (four times a year), and his relationship with Jordan Wise (almost daily contact, yet with a certain necessary distance). He also discussed other members of the top team.

Grossheim asked Joanne about the kinds of challenges she had encountered when negotiating with local distributors during international expansions, and about how she had developed an understanding of customers in different markets. Joanne happily described her extensive travels in India, Bangladesh, Thailand, China, and Egypt to talk to WeCare's local sales teams. She had accompanied them on visits, discussing their frustrations and where they saw opportunities, in order to get a sense of the reality on the ground.

Joanne had some questions of her own. While Grossheim sipped his coffee, she asked him:

Who was on the Virtuous board? How dedicated were they? What did each bring – and what was his or her unique contribution?

How did board directors ensure they had the information they needed to make decisions? What were the board briefing papers like? Were there other sources of information?

What kind of processes and structures did the board have in place to ensure it was doing things efficiently and professionally? How did it ensure directors have a sufficient board-level view of risk? (Here, Joanne recalled the WeCare board's inability to understand how their growth strategy had exposed her own company to key vulnerabilities.)

What was the Virtuous boardroom culture like? What kind of dynamics were at play? How would the other directors view the contribution of a much younger woman?

Together, they formulated questions for Grossheim to ask Virtuous Ventures’ President of Marketing, including what additional information he could ask for that would be helpful in assessing the company's current global marketing plan.

Outside, they shook hands and agreed to speak again in the coming weeks. ‘I hope to be seeing a lot more of you, Joanne’, Grossheim said, smiling at her.

Three months later, after a series of discussions and a formal panel interview by the nominations committee, Joanne was appointed as an independent director and began eight years of board service with Virtuous.

***

The following Tuesday, Joanne walked into Mario's and kissed her nephew Thorsten on the cheek. It had been 18 months since she had last seen him. While Joanne sipped her iced tea, Thorsten told her how his favourite professor from business school, Sam Cragnolino, was on the board of Kloetzel and was approaching retirement.

As a member of the nominations committee, Cragnolino had seen the board's needs analysis, which had identified a gap in the area of finance – and investment in particular. The head of the committee had developed a skills and competency matrix, which specified that the candidate should also be young (between 30 and 40), and had then issued an invitation to executive search firms. He also asked the other board members if they had any candidates to nominate. Sam had recommended Thorsten.

James Caspar, Kloetzel's chair, had also screened the candidates proposed by the search firms, and invited Thorsten for a panel interview. The young man's expertise in securing and structuring deals with a series of major clients had attracted Caspar's attention as being something missing from the board's existing skillset – and something they very much needed. Thorsten had made the shortlist and passed the due diligence process, and then met the full board. He had been impressed by the ambition of its members to contribute to transforming Kloetzel.

‘I really like what they're doing’, Thorsten said to Joanne. ‘James seems active and engaged, yet not overbearing. Everyone I talked to seems serious about really building something.’ Joanne smiled at his enthusiasm.

‘That's great, Thorsten’, she said. ‘Board service is one of the most rewarding experiences any professional can have during their career, and I think you stand to gain a lot. But tell me’, Joanne said, putting down her fork and looking intently at the young man, ‘what is it about your experience that leads you to think you could make a meaningful contribution to Kloetzel?’

‘I know how companies are thinking about the costs and benefits of major transactions’, Thorsten said. ‘I could help Kloetzel think about whom they could approach and with what messaging to expand in major markets, which is part of their strategy.’

Joanne asked him about Kloetzel's current performance, and whether there were discrepancies across major markets. Thorsten shook his head. He didn't know the details. He dug in his pocket for a pen to make a note.

She pointed out the difference between board service and an executive director role. ‘You're not there to tell management how to do their job’, she said. ‘You're there to challenge them on the strategy to make sure it's a good one, and to help them to get what they need to be able to do it, and then to check that they actually do it.’

Then Joanne asked Thorsten the following questions:

People: Who were Kloetzel's current board members? What kind of skills, background, personality, and expertise did they have? How many other independent, non-executive directors were there? What kind of diversity and breadth of experience did they have? And how committed were they?

Information architecture: What kind of information did he have access to that would help him to support Kloetzel in delivering its strategy and monitoring its risks? Who in his network could help? What kinds of social media was he following?

Structures and processes: What kind of structures and processes did the Kloetzel board have in place? How were these helping it to stay ahead of regulation trends in the financial services industry? Did the board have a risk committee? An investment committee? Would Thorsten be able to serve on either of these?

Dynamics: Had he spent enough time with the chair of Kloetzel? Did he like him and his style? What about the other directors? How were the interactions? How did the board engage with the firm's senior executives? And how much passion about the firm could he feel?

‘With all due respect Aunt Joanne, aren't you ahead of yourself?’ Thorsten asked. ‘Won't I have time to figure this out once I'm on the board?’

Joanne thought back to a board she had sat on – an Indian tech company, where she had submitted her resignation after just six months. She wished she had done her due diligence exercise better before joining that board.

‘Fundamentally, Thorsten, it comes down to two questions’, Joanne said. ‘The first is: is this a good board which I want to be part of?’ He nodded with vigour. ‘The second is: am I good for this board?’

Joanne smiled at the young man. ‘Saying no to the wrong board appointment is just as important as saying yes to the right one’, she said. ‘If you don't think you will be able to usefully contribute, do yourself a favour and save yourself from a world of frustration and pain.’

‘Thanks Aunt Joanne’, Thorsten said, slumping a little in his chair. ‘I guess I have some homework to do.’

CHAPTER 1The Four Pillars of Board Effectiveness

Over the past decade, we have witnessed dramatic and unprecedented developments in business, politics, and society. The main upshot of this has been the growing realisation that governance is the determining factor behind the success and failure of organisations. And with fresh evidence of abdication of duty in the corporate and policy-making spheres emerging on a weekly basis, there are growing demands for better governance in different countries, and for all types of organisations – businesses, governments, NGOs, and many others.

When we refer to governance, we mean the quality of decision-making and implementation at the top of organisations – and the processes to ensure these. Increasingly, boards are seen as having a key responsibility and role as the ‘owner’ of governance in an organisation. It is their competence, structures, and integrity, and their interactions with CEOs and management teams, that shape the governance DNA of organisations.

Until a few years ago, governance and boards were considered to be well understood, and operating along standard and predictable lines. As a result, the subject attracted relatively little attention from researchers. But the situation changed significantly as more stories of corporate malfeasance appeared in mainstream media, industry publications, and academic journals, inevitably accompanied by the question ‘Where was the board?’

Indeed, events during the past decade have made it clear that boards can fail in various ways. They have failed to manage risks, failed to contribute proactively to firm strategy, failed to identify the ‘right’ team and, in some cases, failed to deal with integrity issues and possibly outright fraud. We will discuss board failures and challenges in more detail in Part II.

Partly as a consequence of these much-publicised and damaging failures, today's boards are eager to improve their performance and to continually fine-tune their effectiveness. They have become more cognisant than ever of their role in supporting their organisations’ long-term success by aiming for world-class governance.

So, if business as usual is not an option for boards, what are the main dimensions to target when trying to make a board function better? How do we distil the key factors that contribute to board effectiveness?

In our work over the years inspiring the boards of organisations around the world toward greater success, my team and I have identified four discrete pillars of board effectiveness (see Figure 1.1). These are people quality, focus, and dedication; information architecture; structures and processes; and group dynamics and board culture. We will explore each of these pillars in detail in Chapters 4 to 7.

This simple framework for assessing a board's effectiveness has a deep-rooted underlying rationale, and its practical application has helped to transform boards for the better in many different contexts. These include large publicly traded companies, family-owned businesses, non-profit organisations, governments, and other bodies, across all geographies, and in both developed and developing contexts.

The four-pillar methodology, focusing on systematic and continuous improvement along each dimension, has proven to be a strong asset for all types of organisation.

Figure 1.1Governance Excellence Rests on Four Pillars

The First Pillar: People Quality, Diversity, Focus, and Dedication

A boardroom is a social place, as is business in general. Therefore, the first of the pillars that support a board's effectiveness consists of the people who socialise, interact, learn, make sense of situations, and reach decisions in the boardroom. Their quality, diversity, focus, and dedication are often what makes or breaks a board's ability to perform effectively.

The quality of the board's composition and functioning is crucial. For starters, members of the board and its committees are expected to have the necessary and relevant knowledge. Boards are typically composed of experienced, accomplished individuals from a variety of backgrounds, including top managers, public officials, and education experts. Yet these backgrounds do not automatically give them the knowledge they need to contribute effectively to the work of a specific board.

As we have seen time and again in recent years, having limited knowledge hinders a board member's effectiveness. Whenever a major corporate initiative has run aground, the board members’ technical and other specialised knowledge has come under scrutiny. Effective boards therefore ensure that performance and knowledge standards are articulated and tailor-made for individual directors, with the help of matching learning modules and other opportunities. Board members’ performance can then be evaluated against those standards.

The quality of the board is further enhanced by its diversity of gender, personality, and opinion. (For a fuller discussion of diversity, see Chapter 19.) In particular, high-quality boards are typically successful at managing their mix of personalities. How many times have we read news stories attributing boardroom confrontations, showdowns, and dramatic exits to a ‘clash of personalities’, ‘incompatible personalities’, or, to use a euphemism, ‘strong personalities’? The example of Steve Jobs being fired by the board of Apple is just one of many such cases.

To avoid becoming one of these headlines, a board needs to map out, understand, and learn to work with the range of personalities on it. As in all such exercises, this requires tools or ‘cognitive handles’ that help to capture not only the composition of personalities and the risks involved, but also the configurations that, with a bit of planning and effort, can help to infuse the board with additional vibrancy and strength of performance.



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