Embed Size (px)
Citation preview
Trends and Challenges in the Boardroom Hotel d’Angleterre 14th June 2016
AGENDA
8.15am: Arrival and Networking
8.45- 9.15am: Breakfast
9.15- 9.55am: The Nordic Corporate Governance model and the variance
between the countries,
Professor, Dr. Eythor Jonsson, Center of Corporate Governance at University of
Iceland
9.55 – 10.05am: Break
10.05 – 10.45am: Cybersecurity: Is your board leading by example?
Fredrik Wingren, Diligent
10.45 – 11.25am: Enhancing Board Effectiveness through Board Evaluations
Jakob Stengel, Board Network
11.25 – 11.30am – Wrap up
Dr. Eythor Ivar Jonsson - [email protected]
Copehagen Business School
University of Iceland – Center for Corporate Governance
Why important?
Proximity of Nordic countries
CG Model in Practice
Variations and implications
Further discussions
Social Liberalism
Parliamentary System
Constitutional Monarchy
Denmark, Sweden, Norway
Constitutional Republic
Finland, Iceland
European Union Members:
Denmark, Finland, Sweden
EEA members:
Norway, Iceland
High GDP per Capital ($41 – 67K)
High equality (Gini 22 – 28)
Small nations
Sweden 9,7 m
Denmark 5,6 m
Finland 5,5 m
Norway 5,1 m
Iceland 0,3
State an important participant in the economic system
Nordic social model has the following main features (Alestalo, Hort, & Stein, 2009; Andersen et al., 2007): A large government sector
providing universal access to health care, child care, education etc.
Significant income transfers including pensions and unemployment benefits - High tax rates to finance these expenditures
Strong labor unions
Low economic and social inequality
Focus on technology infrastructures
Focus on high education
Network readiness (WEF)
Finland, Sweden, Norway
Denmark, Iceland
Innovation index
Iceland (4), Finland (7), Sweden (10), Denmark (11), Norway (18)
Nordic countries are similar in terms of three norm systems: statutory regulation in form of company
law and other mandatory rules issued by the government or official authorities.
Civil law – Nordic Civil, German Civil, French Civil and Baltic Civil and Common Law, (Cicon et al., 2010)
Self-regulation defined and enforced by the business sector itself.
Governance Codes - Global Governance Practices (Czech Rep, Greece, Hungary, Norway, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden) Cicon et al. (2010).
Informal norms and practices that influence how corporate governance is carried out in practice.
Business culture
Environmental Performance Index (Yale University)
Finland (1), Iceland (2), Sweden (3), Denmark (4), Norway (17)
Ownership structure in the Nordic countries is concentrated and highly dependent on blockholders. Stock market capitalization to
GDP (WorldBank 2012) Norway 51%, Finland 62%, Denmark 70%, Sweden 103% US / UK 115%
Concentrated ownership
Blockholders
Foundations
Public State
Pension funds
Families
Other institutional investors
0
10
20
30
40
50
60
70
80 Denmark 74%
Finland 60%
Sweden 65%
Norway 75%
France 40%
Germany 25%
Italy 65%
Spain 46%
Netherlands 48%
UK 15%
US 20%
Presence of significant shareholders (> 20%)
among ~20 largest listed companies
Sources: EU countries: European Commission Study
on Proportionality between Ownership and Control,
2007 US, Norway: La Porta, Lopez-de-Silanes &
Shleifer: Corporate Ownership Around the World, 1999
Ownership
level
Oversight and
control level
Executive
level
General Meeting
Chair
&
CEO
One-Tier Model
General Meeting
CEO
General Meeting
Supervisory Board
Management Board
Nordic Model Two-Tier Model
Board
Board Chair
Economies
Size and focus
Ownership
Different type of blockholders
Structure
Employees representatives
Role of board
Supervisory board vs. Strategic focus
Larger Small Sweden?
Iceland?
Innovation driven
Resources drien
Denmark?
Finland?
Norway?
Active Passive
Family
(Wallenberg)
Pension funds
(Iceland)
Directing
Controlling
Independ
ence
Executi
ves
Compa
ny
Busines
s
Relatio
ns
Owners
Executives Non -
Executives
Employee
reps
Stewardship Agency
Stakeholder
Shareholder
Denmark?
Iceland?
One of the key reasons for providing a Nordic perspective on corporate governance is the tidal wave of EU-level regulations on corporate governance (Lekvall, 2014). The harmonisation efforts have made visible the considerable diversity of corporate governance systems in place among the EU member states (Lekvall, 2014). Attempts to harmonize various national corporate
governance models are not recent but a recurrent theme for decades within the EU (Cernan, 2004).
It implies that there is not much change in attempts to harmonize various national corporate governance models, some practices seem to be converging to UK practices while other diverge (Cicon et al., 2010) which implies that the hybrid model and different models still exist in the European context.
Nordic
Corporate
Governance
Model
Political
Economical
Social
Technological
Legal
Environmental
S&P-500 = 80% owned by institutional investors
Blackrock $4.600 billions
Horizontal ownership
7 largest owned 60% in UA 2013 - 2015 owned also 27,5% in Delta, 27,3% in JetBlue and 23,3% in Southwest.
Less competition
Higher prices
Icelandic Pension funds = 40% of listed companies
Insurance market – 20 largest = 43,7% in TM, 34,3% in Sjová, 39,1% VIS (Magnusson, 2016)
Real estate market – 20 largest = 47,7% in Reitir, 37,4% in Regin and 39,4% Eik (Mangusson, 2016)
Purpose & Role
Structure
Tasks
Directors
Processes
Dr. Eythor Ivar Jonsson - [email protected]
Copehagen Business School
University of Iceland – Center for Corporate Governance
General Meeting
CEO
Nordic
Model
Board Non-executive
directors
General Meeting
Non-executive
directors
Executive
directors
UK/US
Model
Board
CEO and other
senior mgmt
Auditor Auditor
Need for Audit Committe to protect integrity of the board
No need for Audit Committe to protect integrity of the board - rather a matter of effective organisation of the board’s work
Cybersecurity: Is your board leading by example? Fredrik Wingren 14th June 2016
Fredrik Wingren Sales & Business Development Director
Nordics
AGENDA
Diligent Boards Security Features The Four Myths Cyber Threat Landscape
Our board of directors
understands the security risks to the
organisation
Source: Defining the Gap: The Cybersecurity Governance Study, Ponemon Institute, June 2015
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
ITS BOD
Agree
Strongly Agree
32%
38%
21%
22%
Or do they?
30% 57% Disagree
Why cybersecurity governance is not on the board’s agenda
Source: Defining the Gap: The Cybersecurity Governance Study, Ponemon Institute, June 2015
Security governance is best handled by the company’s management
Concerns about director liability
Lack of directors’ expertise and knowledge about cybersecurity
Lack of resources
Not considered a priority issue
Other
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
79%
51%
25%
15%
13%
3%
But we disagree!
Why does it even matter?
Last year 90% of large Nordic
Companies had a data
breach
Cybersecurity in the News
39
40
The real-time picture
Source – NORSE ATTACK MAP
http://map.norsecorp.com/
The biggest security threat?
US!
People account for
nearly 90% of all security incidents
Myth No.1vs FACT
My work email
account is a quick,
easy and secure way
to share materials.
FACT
You lose control of email once its sent
No ability to pull it back or delete it
You cannot stop someone sending it on once it’s received
Myth No.2 vs FACT
Password protected
PDFs adequately
secure my sensitive
materials Quick search on google >2m web links on how to unlock an Adobe PDF that has been password protected
2,380,000 results
Myth No.3 vs FACT
I provide an
electronic copy. This
means it’s always an
electronic copy.
FACT
Once you have sent a document electronically, you lose control of what people do with it.
300 page board packs can be printed and shared.
Printed documents can easily be lost or stolen
People still LOVE paper!
Myth No.4 vs FACT
Data needs to always
be stored in-house to
be secure
FACT
Employees remain the most cited source of compromise (63%) *
Third party cloud security providers have the expertise, facilities, resources, analytics, real time monitoring, testing processes, advanced authentication, access, control and archive management
Third party providers can provide the 24/7 support needed by execs and teams to service clients, respond to incidents, threats and issues quickly, efficiently and effectively
49
What does a secure process look like?
50
51
Diligent Boards Security Features
Secure Sign-In
Touch ID
Security Questions
Device Authorisation
Controlling User Roles and Access
Hiding Documents from Certain Users
User access by Date
Preventing Further Distribution
Control access to data
How Diligent Boards Can Help
Data encrypted in transit and on all devices
Does not track Director’s electronic footprint
Regular, repeated third-party audits and penetration testing
Local redundancy, data back-up and recovery
********
Diligent by the numbers
62
Founded in
2001 12
Offices word-wide: HQ in NYC
5 International data centers in Germany, United States
and Canada
Over
4000 companies
62
Client retention rate
97%
Over
120,000 Board members, executive
and administrator users
72+ Countries
THE FUTURE OF BOARD LEADERSHIP
BOARD EVALUATION When Good is the Enemy of Great
TRENDS AND CHALLENGES IN THE BOARDROOM Copenhagen, June 14th, 2016
JAKOB STENGEL Global Head of Board Practice, Case Rose / InterSearch
Founder & Chairman, Board Network – The Danish Professional Directors Association
Jakob Stengel
• Founder & Chairman of Board Network – The Danish Professional Directors Association
• Managing Partner of Case Rose / InterSearch since 2012. Global Practice Leader of InterSearch’s Board Practice Group
• InterSearch is a global top 10 Executive Search firm with 95 office in 50 countries
• Previously 5 years with 3 other major global Executive Search firms
• Earlier career includes 10 years in senior management positions in international financial services
• Serving as Non-Executive Chairman on 3 different Boards of Directors in Danish companies
• External lecturer at CBS’ MBA-program and INSEAD’s board program for more than 3 years
• Editor-in-chief of Board Perspectives, and co-author of a number of management books
• Master of Law
It is the #1 most effective means to articulate and address the Board’s inter-dynamics
AND
Hence the most effective tool to enhance board effectiveness
Board Evaluations – why?
I can’t think of a single work group whose performance gets assessed less rigorously than corporate boards. This lack of feedback is self-destructive… people and organizations cannot learn without feedback. No matter how good a board is, it's bound to get better if reviewed intelligently.
Jeffrey Sonnenfeld, Senior Associate Dean, Yale School of Management, 2003
2003 Annual reviews required (Higgs Report)
Similar provisions across Europe (Tabaksblat, Cromme, Bouton)
- Denmark was actually one of the first movers (Nørby) in 2002
Similar provisions across all Nordic countries incl. Iceland (ref. 2.9 in the Code)
2009 UK: External reviews recommended at least every three years
- expected in the 2017 revision of the Danish Code
UK is – as usual – a leader in CG
• Growing use of external facilitation
• Highly fragmented marketplace
• Impact of / satisfaction with evaluations is mixed
Board Evaluations – some
observations
• How many? 47%
– 77% every year
– 15% every other year
– 8% every three years or less
• How?
– 50% as a self-evaluation
– 10% by external consultants
– 15% as a combination of the two
– 14% varies between the three
– 11% are unsure
Board Evaluations – some of the latest
data
Source: Global Board Survey 2015 by InterSearch and Board Network
Wrong intent
Wrong approach Wrong facilitation
Wrong focus
Why Evaluations might fail to add
value
• A focus on enhancing the Board’s added value
• A tailored approach, reflecting client needs
• Anchored in the right fundamental questions – quantitative AND qualitative
• Centred around individual structured interviews
• Independent judgements, robustly expressed
• Providing a solid basis for increased inter-Board dialogue
• Resulting in specific actions with clear follow-up
Key features for best practice for
board evaluations
Stage Details
1. Preparation • Explore context and objectives with Chairman, a.o.
• Agree scope, approach and timetable
2. Assessment • Complete initial questionnaires as desired
• Conduct individual confidential interviews
• Attend Board meeting if appropriate
• Complete targeted analysis as required
3. Recommendations • Synthesise key insights and recommendations
• Pre-syndicate with Chairman
• Present conclusions to full Board
• Share individual feedback as appropriate
4. Action • Agree concrete action plan
• Review progress at appropriate intervals
The process
How to ask the right questions?
Quantitative Deteriorating Improving 1. Is the company’s health improving or declining... a. compared to the last two years? 1 2 3 4 5 6 7 b. compared to the competition? 1 2 3 4 5 6 7 c. compared to the external environment? 1 2 3 4 5 6 7 Definitely not Definitely yes 2. Is the company fully capturing potential opportunities? 1 2 3 4 5 6 7 3. In your assessment, does the board as a whole expect the company to perform well... a. this year? 1 2 3 4 5 6 7 b. over the next three years? 1 2 3 4 5 6 7 4. Do you yourself expect the company to perform well... a. this year? 1 2 3 4 5 6 7 b. over the next three years? 1 2 3 4 5 6 7 5. In your view, does the board as a whole concur with the company strategy? 1 2 3 4 5 6 7 6. Do you yourself concur with the company strategy? 1 2 3 4 5 6 7 7. In your view, does the board as a whole believe the company has the right balance between short-term and long-term goals? 1 2 3 4 5 6 7 8. Do you yourself believe the company has the right balance between short-term and long-term goals? 1 2 3 4 5 6 7
How to ask the right questions?
Qualitative
• Please describe the company’s strategy in your own words • What are the 3 major risks facing the company? • What was the 3 most significant decisions the board made in the
past year? • What do you see as the board’s 3 most important priorities in the
coming year? • If the company was going to add one new board member, what
background/skill set should that person bring? • If you could change one thing about the company’s board, what
would it be? And why?
Competency mapping in an
Evaluation
Competency mapping in an
Evaluation
Examples from companies which subsequently changed things: Desired, but lacking competencies Female, consumer behaviour (FMCG) Growth plan targetted at BRICS (service) IT / Technology / E-commerce (financial services) Supply-chain (retail) International experience from the industry (industrial) Experience from procument in public sector (technology)
When Good is the Enemy of Great
Because too often, Boards become complacent with their own performance and effectiveness - and thus set an invisible bar for how
much the company will be able to grow.
Will your shareholders thank you for that?
Board Evaluations – why the headline?
Contact details
Jakob Stengel
BOARD NETWORK
The Danish Professional Directors Association
Grønningen 25
DK-1270 Copenhagen K
www.boardnetwork.dk
+45 21 28 28 82
Thank you!
