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”:
- What does it mean to have a “Board the Works” – works for whom?
- What can you do if your Board isn’t working? Or isn’t working hard enough/ smart enough?
- Why does a private company need a functioning board of Directors? What is the role of the Board in a Utah closed Corporation?
- The CEO may be vitally interested in the candidates / membership of the Company Board. Is it the CEO’s Board?
- What is the optimum number of Directors for a corporate board? For:
- Start-up
- Early revenue
- Small public
- V.C. backed
- Family owned
- Distressed
- Mid-sized public
- What is the optimum ratio of inside/affiliated Directors to independent Directors for the same foregoing Boards.
- Where can you “pick-up” a good Director (the local bar, church and the bingo hall answers are already taken):
- What are the benefits/challenges of asking the following persons to sit on your Board?
- your company lawyer (other lawyer)
- your company banker (other banker)
- your company accountant (other accountant)
- management from your biggest customer
- management from your key supplier
- a current or former judge (other than in Texas)
- a CEO, CTO, CFO, CLO or CTO from a similar but non-competitor company
- a University professor
- a sports celebrity
- a founding executive from other company in the community
- a director you met and observed while serving on the Symphony or other not-for-profit company board
- a retired director from one of the foregoing, and active in community and investments
- What are the risks & rewards of getting on your Board an otherwise highly qualified person (on paper) whom you don’t know?
- How can you get diversity (age, gender, background) on the Board and why do you want it; and why do you not?
- If you can add only one new Director, how do you choose between experience, diversity and technical know-how?
- What personality/temperament/style makes an independent director?
- Likely to be successful
- Likely to be problematic
- Offer one key bit of advice for conducting a campaign to add one or more Directors.
- My friend wants to serve as an independent Director for a start-up company. What can he/she can do to procure an invitation.
- Offer your highest ranking recommendation to improve effectiveness of an underperforming Board—with no loss of blood.
- 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.
- Who should do what to whom?
- How will you tell if the thing that the someone did to the other someone is working?
- Will there be blood?
- Does the ratio of work contrasted as “contributing” or “oversight” change as the company grows? at various stages?
- What can be done to teach management and the Board their separate roles?
- What issues/questions get in front of the Board? Who decides?
- What can a CEO (or other director) do to get more useful contribution from the Board?
- How do you keep the directors informed without inviting them to meddle?
- 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?
- What correlation, if any, is there between Board minutes and (a) Board performance? (b) a law suit against the Board?
- How frequently should the Board meet? For what period of time?
- Will the agenda for an effective Board change over time? How and why or why not?
- What implications do you see from a pattern where one, but only one director meets with the CEO periodically between Board meetings?
- How much do you pay a director in cash? In stock? Can you minimize the tax impact?
- Assume that you are a director and your chairperson/CEO calls you frequently. What should be your response if:
- the call contains a request for strategic advice.
- the call contains complaints about other directors.
- 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.
- 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:
- the complaint has not already been aired with the CEO (i.e. is outside the chain of command).
- the complainant says, “The CEO won’t let me do my job.”
- the complainant says, “I introduced the CEO to a very interested potential buyer of the company and nothing came of it.”
- the complainant says, “After frequent requests, the CEO won’t make “officer A” stop his/her affair with his/her subordinate.”
- When and how should directors seek/receive reports from:
- persons other than the CEO.
- outside the presence of the CEO.
- 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”:
- Does your Board succumb to “Group Think” mentality??
- Will your seasoned, “Type-A” CEO face too many challenges to be an effective Board Member?
- 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)
- Is your Board about to cross the fine line between effective over-sight and micro- managing?
- Can your Board face the challenges in finding and adopting effective group accountability standards?
- Is the Board having challenges aligning Board work/expectations with available resources?
- Is the Chairperson able to resolving conflicting vision expectations of several members of the Board?
- Will your Board face challenges of tenure or turn-over (too frequent or too infrequent)?
- Is the Board challenged to providing support for the company and the CEO while providing effective oversight?
- 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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