Boards that Work – How CEO’s Find Them and Flourish

Provided by: Jim Jensen – CEO, ClearWater Group

NACD, UTC and MWCN meeting on January 21, 2010 in Salt Lake City, Utah

PERFORMANCE QUESTIONS FOR A “BOARD THAT WORKS”:

1. What does it mean to have a “Board the Works” – works for whom?
2. What can you do if your Board isn’t working? Or isn’t working hard enough/ smart enough?
3. Why does a private company need a functioning board of Directors? What is the role of the Board in a Utah closed Corporation?
4. The CEO may be vitally interested in the candidates / membership of the Company Board. Is it the CEO’s Board?
5. What is the optimum number of Directors for a corporate board? For:
   1. Start-up
   2. Early revenue
   3. Small public
   4. V.C. backed
   5. Family owned
   6. Distressed
   7. Mid-sized public
6. What is the optimum ratio of inside/affiliated Directors to independent Directors for the same foregoing Boards.
7. Where can you “pick-up” a good Director (the local bar, church and the bingo hall answers are already taken):
8. What are the benefits/challenges of asking the following persons to sit on your Board?
   1. your company lawyer (other lawyer)
   2. your company banker (other banker)
   3. your company accountant (other accountant)
   4. management from your biggest customer
   5. management from your key supplier
   6. a current or former judge (other than in Texas)
   7. a CEO, CTO, CFO, CLO or CTO from a similar but non-competitor company
   8. a University professor
   9. a sports celebrity
   10. a founding executive from other company in the community
   11. a director you met and observed while serving on the Symphony or other not-for-profit company board
   12. a retired director from one of the foregoing, and active in community and investments
9. What are the risks & rewards of getting on your Board an otherwise highly qualified person (on paper) whom you don’t know?
10. How can you get diversity (age, gender, background) on the Board and why do you want it; and why do you not?
11. If you can add only one new Director, how do you choose between experience, diversity and technical know-how?
12. What personality/temperament/style makes an independent director?
    1. Likely to be successful
    2. Likely to be problematic
13. Offer one key bit of advice for conducting a campaign to add one or more Directors.
14. My friend wants to serve as an independent Director for a start-up company. What can he/she can do to procure an invitation.
15. Offer your highest ranking recommendation to improve effectiveness of an underperforming Board—with no loss of blood.
16. Assume that you overheard a CEO say, “The directors just don’t understand our business. They can’t be here every day.” And assume that you believe this statement is accurate.
    1. Who should do what to whom?
    2. How will you tell if the thing that the someone did to the other someone is working?
    3. Will there be blood?
17. Does the ratio of work contrasted as “contributing” or “oversight” change as the company grows? at various stages?
18. What can be done to teach management and the Board their separate roles?
19. What issues/questions get in front of the Board? Who decides?
20. What can a CEO (or other director) do to get more useful contribution from the Board?
21. How do you keep the directors informed without inviting them to meddle?
22. How should directors respond to transactions that pose an inherent conflict of interest— such as sale of a division to an affiliate of a director or agreeing to pay a finder’s fee to a director for a completed deal?
23. What correlation, if any, is there between Board minutes and (a) Board performance? (b) a law suit against the Board?
24. How frequently should the Board meet? For what period of time?
25. Will the agenda for an effective Board change over time? How and why or why not?
26. What implications do you see from a pattern where one, but only one director meets with the CEO periodically between Board meetings?
27. How much do you pay a director in cash? In stock? Can you minimize the tax impact?
28. Assume that you are a director and your chairperson/CEO calls you frequently. What should be your response if:
    1. the call contains a request for strategic advice.
    2. the call contains complaints about other directors.
    3. the call contains an offer to become a paid consultant to help the company prepare for the strategic presentation for the up-coming Board meeting.
29. Assume that one of the GC, CFO, CTO (or other management) comes to you, a director, at a break in a Board meeting with a complaint about the CEO. What should you do if:
    1. the complaint has not already been aired with the CEO (i.e. is outside the chain of command).
    2. the complainant says, “The CEO won’t let me do my job.”
    3. the complainant says, “I introduced the CEO to a very interested potential buyer of the company and nothing came of it.”
    4. the complainant says, “After frequent requests, the CEO won’t make “officer A” stop his/her affair with his/her subordinate.”
30. When and how should directors seek/receive reports from:
    1. persons other than the CEO.
    2. outside the presence of the CEO.
31. What can directors do to measure their performance and take corrective action when poor performance is noted?

GROUP DYNAMIC QUESTIONS FOR A “BOARD THAT WORKS”:

1. Does your Board succumb to “Group Think” mentality??
2. Will your seasoned, “Type-A” CEO face too many challenges to be an effective Board Member?
3. Will the CEO’s power increase as the number of directors increases? (a board with only 4- 5 members may be a more equal partner with a CEO)
4. Is your Board about to cross the fine line between effective over-sight and micro- managing?
5. Can your Board face the challenges in finding and adopting effective group accountability standards?
6. Is the Board having challenges aligning Board work/expectations with available resources?
7. Is the Chairperson able to resolving conflicting vision expectations of several members of the Board?
8. Will your Board face challenges of tenure or turn-over (too frequent or too infrequent)?
9. Is the Board challenged to providing support for the company and the CEO while providing effective oversight?
10. Does the Board review conflict of interest matters regularly? Some directors (founders and VC’s, for example) may have multiple and/or conflicting agendas that should be brought into group awareness regularly and artfully

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