Corprate Governance USA & today's FT article

A very interesting article in the Harvard Business Review this month; some highlights:

"When the world's largest financial institutions had to be rescued from insolvency in 2008 by massive injections of governmental assistance, many blamed corporate boards for a lack of oversight"

Mastery of the understatement there then! And:

"The Citigroup board was filled with luminaries from many walks of life. Yet in early 2008 only one of the independent directors had ever worked at a financial services firm"

The Harvard cartoon had added poignancy when I read, therefore with hightened interest, an article in today's FT: "Citigroup looks to revive European presence"

The Harvard article went on with the following:

"The model for corporate governance is broken. Despite having boards crammed with eminent independent directors following detailed procedures, many of the world's largest financial institutions had to be rescued from insolvency in 2008....yet all the firms that failed were SOX (Code) compliant."

The article overall is making a plea (and a good case) for the introduction of "Professional Boards" and I hope we are moving, however slowly, toward that. In the interim, it highlights further the need for excellent external board performance evaluation and an end to a "tick-box" approach. Well, you have to have a dream!!!

There was certainly some irony in both these landing on my desk on the same day!

The Changing Role of 21st Century Chairmen

If you are, or are thinking of becoming, the Chairman of a board, the following paper is probably an essential read! I have included a few snippets as well as a link to the full paper.

Recommended read: Heidrick & Struggles insightful paper on the changing role of 21st Century Chairmen:

http://www.heidrick.com/PublicationsReports/PublicationsReports/HS_PurposefulPartners.pdf

"Chairmanship is a totally different job to anything that one might have done up to that time-it is distinct from any other form of senior business leadership"

'The 'safe pair of hands' mentality is not good enough any more"

The role of chairman is often seen as a prestigious-but gentle-way to complete a distinguished business career: the chairman is a respected name who oversees board meetings and reassures shareholders while the executive team gets on with the real business of running the company. Recent high-profile failures have highlighted the complexity and risk of running a large listed multinational business, prompting calls for tougher corporate governance.

Do you have any thoughts or observations to add? If so please comment.

External Board Performance Review - What does it look like?

External Board Performance Review Research

The Corporate Development Directorate of De Montfort University (DMU) wishes to develop an External Board Review methodology that adds real value to the Board whilst also satisfying the requirement of the Corporate Governance Code June 2010.

Approaching this research from first principles and then by comparison with existing methodologies, DMU has developed the following outline:

1. Introduction and presentation of process to Board

· Arrange Non-disclosure agreement

2. Analyse a selection of agendas, papers, and minutes from Board and Board Committee meetings

· Feed back findings/comments to Chairman (/Senior INED)

· Gain approval for next phase

3. Observe Board and Committee meetings

· Feed back findings/comments to Chairman (/Senior INED)

· Gain approval for next phase

4. Interview all Board members

· Feed back findings/comments to Chairman (/Senior INED)

· Gain approval for next phase

5. Write and present 1^st draft of report to Chairman and agree (iterative process)

6. Finalise report and present to Board

(Questionnaires may also be used at various stages where appropriate)

To allow completion of the process within a three-month time frame it should, if possible, be planned to take place at a phase in the cycle where the Board and all its Committees are scheduled to meet within such a period.

By engaging in this research the Board of the host organisation will have gained much beneficial insight into its operation and should have a report that it could use as an External Board Assessment Report should it wish to do so.

Sir David Walker - Annual External Board Performance Reviews?

The Chairman of a City firm I met last week referred to comments made by Sir David in a dinner speech earlier this year. It was reported to me that Sir David would have liked to have recommend that external board performance reviews were undertaken annually but that there were not sufficient (in number and or quality?) suppliers in the market to undertake this work.

In some senses this was music to my ears as we undertake the research and development to allow us to offer this service!

We are currently offering a no-fee external board review as part of the research. One organisation has already taken us up on this offer and we are looking for two more. If your organisation would be interested, or if you know of an organisation that might be interested, please get in touch.