High Performance Boards

About the Author xi Acknowledgements xiii Preface xv Part I: The Four Pillars of Board Effectiveness 1 Joanne Marker and Board Service 3 Chapter 1 The Four Pillars of Board Effectiveness 9 The First Pillar: People Quality, Diversity, Focus, and Dedication 11 The Second Pillar: Information Architecture 13 The Third Pillar: Structures and Processes 14 The Fourth Pillar: Group Dynamics and Board Culture 16 Chapter 2 Governance Challenges around the World 19 Scientific Lessons from Natural Selection 21 What is Transformational Leadership? 22 Should We Trust Leaders? 23 The Governance DNA 24 Chapter 3 The Successful Director: Values and Character 27 Duty of Care 29 Duty of Loyalty 30 Duty of Compliance (or Obedience) 31 Integrity: A Key Characteristic of Board Directors 31 Chapter 4 The First Pillar: People Quality, Diversity, Focus, and Dedication 35 Quality and Diversity 35 Focus 38 Dedication 39 Chapter 5 The Second Pillar: Information Architecture 43 How Complete is Your Information? 44 Chapter 6 The Third Pillar: Board Structures and Processes 51 Processes 52 Committee Structure 53 Board Secretary 54 Lead Director or Vice Chair 54 Chapter 7 The Fourth Pillar: Group Dynamics and Board Culture 57 Understanding Group Dynamics 59 Coalitions Within a Board are Inevitable – and they Feed into Politics 62 Boards Fall into Traps 64 Drawing Strength from the Board’s Potential 67 Developing Self- awareness 68 Board Culture 69 Summary Table to Part I: The Four Pillars of Board Effectiveness Toolkit 72 Checklist on People Quality, Diversity, Dedication, and Focus 72 Checklist on Information Architecture 73 Checklist on Structures and Processes 73 Checklist on Group Dynamics 75 Part II: Board Failures and Challenges 77 Chapter 8 Four Areas of Board Failure 79 Chapter 9 Risks and Ensuring the Right Board Risk Philosophy 83 Chapter 10 A Board Member’s Practical Guide to Risk Thinking 87 The Physical Health Check: Technical Risks 87 The Mental Health Check: Behaviours 93 The Strategic Risk Check 96 The Governance Risk Check 98 Chapter 11 Elements of Advanced Risk Techniques for Board Members: From Quants to Cyber 101 The Why and How of Quantitative Risk Assessment for Boards 102 Integration of Risks 105 The Outcome of Risk Assessment 105 Cyber Risk 107 Chapter 12 Crisis Management 111 Crisis as a Turning Point 114 There is Work to be Done in Peaceful Times 114 Communication Principles 115 Another Powerful Weapon: Gathering Information 116 A Crisis Will Shed Light on Boardroom Fissures 118 Procedure vs Authenticity 119 Communicate Your Way to Rebuilding Trust 120 Chapter 13 The Four Tiers of Conflicts of Interest 123 Tier-I Conflicts: Individual Directors vs Company 124 Tier-II Conflicts: Directors vs Stakeholders 126 Tier-III Conflicts: Stakeholders vs Other Stakeholders 132 Conflicts of Interest within a Group of Stakeholders 136 Tier-IV Conflicts: Company vs Society 137 Chapter 14 High-level Fraud and Active Board Oversight 143 Why Does High-level Fraud Happen? 145 How to Create an Effective Oversight Environment 153 Tools for Anti-fraud Activities: Assessment, Prevention, Detection, and Investigation 159 Part III: Board Leadership 165 Joanne Marker and Board Values at Comfre 167 Chapter 15 Board Leadership and Values 169 Quality Boards Live and Breathe Integrity 169 Which and Whose Values? 171 Board Values vs Organisational Values 173 Family Values in Business 174 A New Board Arena for Joanne Marker: Chairing the Board 175 Chapter 16 Becoming the Chair 179 The Role of the Chair 179 Effective Chairs are Active 181 Transitioning into the Role of the Chair 182 Chairs as Transformational Leaders 185 Making the Right Decisions about Chairmanship Roles and Styles 187 Managing the Transition 190 Leaving a Lasting Organisational Impact as Board Chair 193 Appendix 16A – Checklist: Board Chairs as Stewards 194 Joanne Marker Enters the Chair Arena 195 Chapter 17 The Chair–CEO Relationship 197 Chair–CEO Dynamics – the Hallmarks of a Productive Relationship 198 Tests of the Chair–CEO Relationship 201 The Ideal Attributes of a Chair to be a Secure Base to the CEO 202 Joanne Marker Confronts Failing Board Culture 205 Chapter 18 The Board–Management Relationship 207 Supervision 207 Support 209 Blurring the Board–Management Relationship 209 Writing Governance Codes is Easier than Changing Behaviours 211 Chapter 19 Effective Diversity 213 Diversity is Good . . .  But Why; and When? 213 Diversity as a Considered Choice 214 We Have Embraced Diversity . . .  Now What? 221 The Chair’s Role in Building and Nurturing Diversity 222 Chapter 20 Stewardship from the Board 225 Building Upon a Rich Cross-disciplinary Legacy of Thought 227 Psychological, Organisational, and Cultural Influences on Stewardship 227 Steward Leaders Build on their Unique Strengths to Drive Stewardship 227 Steward Leaders Deliver Long-lasting, Meaningful, and Inclusive Impact 228 Becoming a Steward Leader: What it Takes 231 Stewardship Risks 231 Boards are Key to Fostering Stewardship 232 Part IV: Board Best Practices 233 Chapter 21 The Board as a Strategic Asset 235 Five Definitions of Strategy 236 Clarifying the Board’s Role 238 Taking Context into the Mapping Process 241 The Impact of Context on Strategic Views and Roles of the Board 241 The Board’s Ultimate Strategic Significance 242 Chapter 22 Is the Board a Team? 245 Fundamentally, the Board is Not a Team 245 Boards Must Allow for Controlled Instability and Dissent 246 Convictions can be the Fuel in a Board’s Teamwork 247 The Overarching Objective is to Make Boards Cohesive and Potent 249 Ways to Nudge a Board up the Maturity and Potency Curve 250 Effective Board Teams are Adept at Juggling Competing Priorities 254 Potent Boards Know When to Converge and When to Diverge – and Value Both 254 Appendix 22A: Characteristics of a potent board checklist 255 Appendix 22B: Board members’ cultural and cross- cultural competences checklist 256 Chapter 23 A Primer on Finance Essentials for Directors 257 Reading Financial Reports 257 Understanding Ratios to Analyse Operating Strategies 259 Interpreting between the Lines of Financial Statements 261 How to Identify Red Flags in Financial Statements 262 Implementing Desired Capital Structure 263 Understanding Valuation Fundamentals 264 Making Better M&A Decisions 265 Overseeing Risk 267 Chapter 24 The Intricacies of Subsidiary/Holding Governance 271 Structures 273 Culture 275 Chapter 25 Fostering Entrepreneurship from the Board 277 ‘Best Practice’ Governance vs Entrepreneurship 278 Boards Should Actively Encourage Entrepreneurship 278 Chapter 26 The Board’s Oversight Framework for M&As 283 Creating a Deal-making Mindset 284 Seeing the Bigger Picture 285 Staging Deals with Maximum Precision 285 Integration 290 Confronting Litigation Involving M&As 291 Acknowledgement 293 Chapter 27 Boards and Oversight of KPIs 295 KPIs are a Language – and are Indispensable for Boards 295 KPIs Need to be Credible to be Useful 296 Zooming in on the KPIs that Matter – and that Tell a Story of How the Company Creates Value 297 KPIs Should Measure What is Critical 297 A Keen Focus on Value Creation 298 KPIs Help Diminish Substantial Business Risks Linked to ESG 299 KPIs and Human Capital 301 A Dynamic Approach to KPIs 301 Hi-tech Display and Review of KPIs 302 A Renaissance of the Balanced Scorecard 304 KPIs for Board Members 304 Appendix 27A 305 Chapter 28 The Talent Pipeline 309 The Board’s Responsibility for Talent Management 309 The New Talent Dynamic: Culture, Values, Community 311 Chapter 29 Human Capital Evolution for Boards 315 Board Responsibility for Human Capital 316 Growing Stakeholder Demands for HCM Disclosure 318 Culture as the Safeguard of Long-term Value Creation 320 Staying Current with Emerging Expectations of the World of Work 321 Chapter 30 Boards and Social Media 323 JP Morgan’s Failed Foray into Twitter Q&A 324 Why Boards Should Understand Social Media 324 What Boards Should Do 326 Acknowledgement 330 Chapter 31 Boards and Investors 331 The Move Toward Increasing Shareholder Engagement 332 The Surge in Shareholder Activism on Boards 334 Chapter 32 Managing Stakeholders 337 Shareholders vs Stakeholders: A Definition 337 How to Identify a Company’s Key Stakeholders 339 The Board can be Instrumental in Shaping the CEO–Stakeholders Conversation 340 The Process of Stakeholder Engagement 340 Anticipating Stakeholders’ Influence and Impact 343 Chapter 33 Board Oversight of Geopolitical Risks and Opportunities 347 Geopolitical and Geoeconomic Resilience has Moved to the Forefront of the Board’s Agenda 347 Geopolitical Competence is Now a Muscle that Boards Must Develop 350 A Toolkit for Addressing Geopolitics 354 Overseeing Management’s Action in Tackling Geopolitical Risk 358 Appendix 33A: Business dimensions affected by geopolitical risk 362 Appendix 33B: Evaluating the board’s geopolitical competence 363 Appendix 33C: Gauging management’s preparedness to handle geopolitical risks 363 Appendix 33D: Overseeing management’s actions in dealing with geopolitical risks 364 Chapter 34 ESG Oversight in the Boardroom 365 Compliance with ESG Requirements 366 ESG Governance Oversight: Shifting from Compliance to Proactive Governance 367 ESG Metrics: Understanding which ESG Factors are Salient 370 Disclosure Oversight: Managing the ESG Narrative 373 Appendix 34A: ESG Questions for the board to reflect on 380 Chapter 35 Assessing and Benchmarking Governance Performance 383 HPB Director Survey 2012–2023 384 People Quality, Diversity, Focus, and Dedication 385 Information: Designing Board Intelligence 389 Structures and Processes: Architecting Governance Excellence 392 Group Dynamics and Culture 394 Conclusion: Orchestrating Governance Excellence 397 Conclusion 399 Index 401