Korn Ferry 2014 PPT Template

© 2014 Korn Ferry. ALL RIGHTS RESERVED.

GOVERNANCE MATTERS Performance evaluation of the Board of Directors including

Independent directors

Bombay Chartered Accountants' Society

25th February 2015

© 2014 Korn Ferry. ALL RIGHTS RESERVED. 1

1. The simple truth

2. What can go wrong with Boards

3. The right things to do

4. The right skills and mindset

5. Staying accountable for high performance

Table of Contents


A blue ribbon commission of the National Association of Corporate Directors set

out to answer that question. Their conclusion:

Boards that are committed to self-evaluation,

which expect to be held accountable with the goal

of achieving high performance, deliver superior

shareholder value over the long term.

What distinguishes a high-performing corporate boards from

the also-rans?


1. The simple truth





Table of Contents


Our Perspective

Common issues in under-performing boards

Disruptions

Poor Process

Management

Implications

• Board members who are unclear on their roles and what their fellow board members expect of

them are ineffectual

• Role ambiguity amongst board members slows decision making processes and can cause in-

fighting amongst members

• Poor meeting preparation, meeting management and communications lead to poor decision

making and slow reaction to issues facing the organization

• Lack of clarity on and alignment with the strategy causes board disruption, and sends damaging

messages to investor markets

• When strategy alignment is not clear, board members to lose focus and default to tackling only

regulatory and compliance issues

• Lack of board leadership can lead to in-fighting and power struggles amongst board

members

• Because a board is theoretically made up of a group of peers, individual board members

often fail to provide feedback to one another

• New challenges for the corporation often require new perspectives and skill sets from its

individual board members

• Boards often lack the ability to reevaluate their makeup to determine if they have the right people

at the table

Lack of Role

Clarity

Alignment with the

Strategy

Poor Team

Dynamics

Wrong Board

Makeup


1. The simple truth





Table of Contents


The 3 things that Boards cannot be wrong about

• Strategy, capital allocation

• Financial goals, shareholder

value, shareholder balance

• Risk appetite

• Resource allocation

• Talent development

• Culture of decisiveness

• Be sure that the central idea is

clear and compelling & every

Board member understands it

• Selection of CEO

• Board competence,

architecture and modus

operandi

• Compensation architecture

When to

take

charge

When to

partner

When to

stay out of

the way

• Execution

• Operations

• Delegated executive

responsibility

• Non strategic decisions

• Excluded by Board charter


Click to edit Master title style, Arial 32pt.

7

– Board aligns NEDs with the

company’s 5yrs objectives

– Normally sector experience for

either Chair or ID

– Chair able to devote a third to

half of his/her time to the role

– NEDs could spend up to 30-

35 days on role

– International / M&A

experience to help growth

– Exposure to new business

models

– High IQ and EQ NEDs, able to

be forensic on arguments and

engage positively with others

– Talent focused, mentor execs

– Global mindset & global

networks

– Strong track record of growth

– Combination of strategic and

operational

– Board skill gaps and

succession regularly

addressed

– Works as team

– World-class insights

– In-depth knowledge on best

practice but relentless focus

on tomorrow

– Candid on development needs

– Diversity of views

– Lives the values

Basic Compliance Future Proofing

Basic Compliance

Basic Compliance

High Performance

Future Proofing

Basic Compliance

Future Proofing

High Performance

Strategic Asset

FOUNDATION BOARD DEVELOPED BOARD ADVANCED BOARD STRATEGIC BOARD

Process

driven

Behaviour

driven

Right Choices – beyond compliance

– Listed companies to have at least

1/3rd of total number of directors

as IDs

– ID to be appointed for two terms

of up to five years each and are

not required to retire by rotation

within the term

– Code for IDs containing detailed

guidelines for professional

conduct, roles and responsibilities

provided

– One of the directors in a company

shall be a person who has stayed

in India for 182 days or more in

the previous calendar year

– Listed and prescribed class of

companies to have at least 1

woman director


Right choices - A “talent centric” view

1. Composition and Diversity

2. Team Effectiveness

3. Director Effectiveness

– Does the Board have the aggregate strengths to ensure

effective decision making to support the company strategy?

– Have we developed director profiles that support the

strategy of the company?

– Is our Board composition diverse across the 4 key

dimensions: geography, gender, race, and experience?

– Is each individual Board member

contributing to his or her full potential?

– Is there a mechanism for Board members

to both give and receive constructive

feedback to other members?

– Do Directors have ample opportunities to

reflect on their contributions and further

develop their individual effectiveness?

– Do Board members communicate

effectively with one another?

– Are all Board members clear on their

individual roles?

– Do Board dynamics support collaboration?

– Are our Board debates healthy and

productive?

Composition &

Diversity

Team

Effectiveness

Director

Effectiveness


Right things to do - The “Gold Standard”

1 Ensure the right tenor at the top

2 Be clear on the Board decision making – when to take charge, partner or stay out of the way

3 Guide and review the “central idea” and the alignment of strategy and direction

4 Dealing with dysfunction or under performing Directors and holding self and each other accountable

5 Recruit Directors who build value through rich, diverse and open contributions to the Boardroom and also to

the Executive suite as required

6 Keep CEO succession, retention or support as a standing Board agenda item to ensure a multi-layered,

multi-generational process that are driven by business strategy



Education on key business issues and governance issues is prioritized by

boards, with two-thirds undertaking training at least once a year. 1

5

Institutional Shareholder Services ranks companies higher for assessing

individual directors.

After Audit & Risk, Industry & competitor data asked for the most frequently

by Boards

4

3

2 Integrated reporting that includes responsible statements to create a

deliberate and serious understanding of its approach to sustainability

Increased usage of secure computing devices for the purpose of Board

communications; 52% use Board portals; reduction in paper; destroying

sensitive documents important protocol

Right direction forward - some current trends


1. The simple truth





Table of Contents


These times are different –

Smart growth governance

needs different mindset & skills

maturity The individual leader’s ability to operate effectively at the appropriate level of complexity, ambiguity and risk and bring order, meaning, and composure to the business

agility

The individual leader’s ability to operate effectively with un-known un-knowns, speed and volatility and drive transformation, innovation, change impacting

results of the business


maturity The individual leader’s engagement & ability to filter experience to operate effectively at varied levels of complexity, ambiguity and scale and bring order, meaning, and composure to the business at high speed

COGNITIVE MATURITY

EMOTIONAL MATURITY

The ability to work with and navigate through the organization and its stakeholders

The ability to sense and respond to trends, information, data and insights with logic & reason

The ability to stay in the most effective emotional state to get the best out of self and others

ORGANIZATION MATURITY


PEOPLE AGILITY

CHANGE AGILITY

Operates across domains, interested in unrelated areas and connects the dots to solve problems

Reads people well, adapts to diverse groups and shows astute interpersonal judgment

Not afraid to challenge the status quo, introduces new thoughts and gives courage for change

MENTAL AGILITY

agility

The individual leader’s ability to operate effectively with un-known un-knowns, speed and volatility and bring

transformation, innovation, change and results to the business

RESULTS AGILITY Is able to drive outcomes in diverse challenges, prioritizes quickly, mentors to help set and achieve goals in good and bad situations

SELF AWARENESS Reflective about self and open to feedback, genuine interest in learning about and developing self


1. The simple truth





Table of Contents



16

REVIEW “ELEMENT” DESCRIPTION

Review of effectiveness of Board

structure, process, alignment,

engagement and dynamic.

“The core” of a typical Board review. Normally combination of questionnaire and

interview. Increasingly “fire side chat” approach less acceptable and questionnaire

based “evidence” supporting interview based insight becoming standard. May also

include direct observation.

Review of individual Board member

performance.

Peer review of the content and style of contribution of each Board member. Can be

open, anonymised, aggregate, individual etc..

Benchmarking against other “Peer”

Boards

Specific review of the structure, process, competence and dynamic of a target group of

competitor or comparable Boards. Desk research plus confidential interviews with

members of peer Boards.

Strategic review of Board composition Review of appropriateness of board competence and skill given medium term strategic,

operational and organisational context. Normally conducted ahead of a period of Board

rotation.

Specific review of committee

effectiveness

Review of selected committees to assess effectiveness and engagement with / reporting

to main Board.

What can Boards review?


What can be covered in a “Core” Board Effectiveness Review?

Answers to these

questions will

provide a clear

picture of the

Board’s overall

effectiveness

Examples of Typical Discovery Areas

• Is Board composition compliant with market regulations?

• Does Board have aggregate strengths to ensure effective decision making

and support company strategy?

• Is Board governance and structure in line with regulation and industry

benchmarks and best practices?

• Does Management engage the Board sufficiently and early enough in

debate on key issues?

• Does the Board challenge management sufficiently ?

• Do Directors invest enough time in understanding company issues ?

• Does the Board address company and industry risks rigorously ?

Composition and

structure

Engagement with

company issues

• Are critical operational Board processes effective?

• Does Board culture allow for review and change of Board process?

• Does the Chairman lead the Board effectively?

• Are committees managed effectively?

• Is the interface between committees and Board effective?

• Is the overall Board dynamic effective in supporting challenge and debate?

Processes and

Effectiveness of

Interactions

• Do Board members have a shared vision of Board’s role and value-add?

• Do Board and management team have a shared vision of role of the Board?

• Is there common understanding of the operational interface between Board

and management?

• Are Board members aligned with each other and management on strategy?

Strategic

Alignment and

Direction


How intense does it get?

Review of Board structure and

processes:

Review of Board in aggregate

Minimum time commitment of

Board members

Main Board only, no engagement

with committees or executive team

• Questionnaire on overall Board

effectiveness to each Board member

• Structured discussions with Board

members

• Consideration of best practices from

other boards

• Primarily report based and to the

Chairman

• Observations and recommendations

on structure effectiveness

• No behavioural feedback

Review of Board structure, process,

behaviour and contribution (in

aggregate):

Review includes focus on Board

and committee dynamic and

interaction

May include members of wider

executive team

• Questionnaires and interviews

covering main Board and selected

committees

• Each director to complete

questionnaire covering contribution of

each colleague

• Review specifically addresses

conversational dynamics

• Board and committees may be

physically observed

• Report back to Chairman and to Board

• Aggregate View of Board behaviour

and culture

• Recommendations on development

actions including team based

behavioural input

• Chairman given specific feedback on

directors for annual one to one review

sessions

Review of Board structure, process

and contribution of each Board

member:

View of Board in aggregate and of

individual Board members

Key non-board members of

executive team included in review

• Questionnaire, interviews and

assessments

• Each director to complete

questionnaire covering contribution of

each colleague

• Individual technical assessment and

behavioural interviews of each Board

member

• Possible Psychometric assessment

• Report back to Chairman, Board and

to individuals

• Confidential developmental feedback

reports for each Board member

• Specific feedback on interactions

between Board and management

team and intra Board

If appointed, we will tailor scope of the review, methodology and feedback to your needs

LIGHT

MEDIUM

DEEP

What is done How is it done What is the nature of feedback

© 2014 Korn Ferry. ALL RIGHTS RESERVED.

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Korn Ferry 2014 PPT Template