Corporate GovernanceGovernance Structure & Board Evaluation

South Africa | July 2019

How to Build A Better andAn Efficient Boardroom

The board of directors is a fundamental element of corporations worldwide. Often, though, “best practices” for boards remain undeveloped, poorly implemented, and sometimes even subverted. Where do corporate directors, chairmen, company secretaries and legal staff turn for advice on the real-world concerns that turn up inside the boardroom? Corporate Governance revolves around balancing the interests of a company’s stakeholder, such as customers, management team, suppliers, shareholders, government and the community by keeping in view the rules, practices, and processes by which the company is directed and controlled. Due to the board taking the majority of the decisions, it is natural for conflicts to arise. Thus, it is important to look at the causes of board and executive conflict

and find solutions to them.

This eBook will find solutions to the above problems and will focus on the elements of an effective board and governance structure, dispute Resolution Skills for Board Directors and how to

evaluate the board efficiently.

Key Points ofCorporate Governance

1The Elements ofAn Effective Board &Governance Structure

2Dispute Resolution Skills forBoard Directors

3How to EvaluateThe BoardEfficiently

1. The Elements ofAn Effective Board and Governance Structure

The structure of Corporate Governance within an organization depends upon the regulatory environment, management stewardship, legal policies, values and culture. While creating a governance review, following things should be kept in mind:

1. Finding out whether the governance structure contributes some kind of positive value or is acting as a road block for the organization.

2. Determining whether the review is in sync with the national and international codes and standards.

3. Learning whether an issue like board meeting agenda or board minutes are addressing a specific issue of concern with the current governance structure.

4. Practicing the leading governing policies and procedures.

Let’s talk in detail about the components of a governance operating model.

Illustrative Governance Operating Model

• Role of The Board

• Board Structure

• Role of The Individual Directors

• Role of The Chair

• Role of The Company Secretary

• Role of The CEO

Defining Governance Roles• Strategy

• CEO

• Monitoring

• Compliance

• Risk Management

• Policy Framework

• Networking

• Stakeholder

Communication

• Decision Making

Key Board Functions

• Board Meetings

• Board Meeting Agenda

• Board Papers

• Board Minutes

• Board Calendar

• Committees

Improving Board Processes• Board Evaluation

• Director Remuneration

• Director Selection

• Director Induction

• Director Development

Board Effectiveness

Organizational design and reporting

structure

Committee(s)structure

and charters

Structure

Board oversight and

responsibilities

Managementaccountabilityand authority

Committee(s)authorities andresponbilities

OversightResponsibilities

Performancemanagement and

incentives

Business andoperating principles

Leadershipdevelopment andtalent programs

Talent& Culture

Policiesand

procedures

Reportingand

communication

Technology

Infrastructure

The four major components of a governance operating model are as follows

a. Determine the skills and knowledge required to execute its oversight responsibilities, and to examine its composition against those needs.

b. Seeking the information for exercising governance and risk oversight by engaging with the management.

c. Affecting the governance style by guiding management on policies that influence the former

d. Amplifying the efficiency of the programme by rigorously analysing the governance activities that happen at different stages of the organization.

a. Bring the investments, events, and risks to the knowledge of the committee.

b. Defines in detail the charter that relates the committee with the board of directors and the executives.

c. Making the process of reporting any scrupulous matter to the concerned committee easy and convenient.

a. Institute the conventions and norms of the control functions of risk, legal, compliance, audit and finance.

b. Create a sound and easy governance structure that is understood by the internal and external stakeholders alike.

a. Create a robust process that can help in solving disagreements and also assign the responsibilities and authority for respective roles to create a tandem between the regional and global strategies.

b. Expound the decision rights and power with respect to each and every individual so that they know exactly how much powers they can exercise and the limits of their authority.

a. For striking a balance between asset preservation and risk taking, incentives must be aligned.

b. For creating the desired corporate culture, prescribe qualifications and evaluations needed for that

Some of the essential features of an efficient Corporate Governance system within the above stated major components will compose of the following:

Structure

This consists of the structure of the committee, the

charters, the reporting structure and the

relation between the control and support

functions.

OversightResponsibilities

This defines the responsibilities of the board, management,

committee, management hiring and

firing authority.

Talent &Culture

This component talks about the policies

regarding promotion, incentives, the operating policies of the business, accurate measurement of

programs viz. training management, leadership

etc. going inside the organization.

Infrastructure

This component mentions about the procedures, reports,

measures and metrics and also talks

about the IT and communication

support.

1. Board Oversight & Responsibilities:

2. Responsibilities & Authorities of The Committee

3. Organizational Design & Reporting Structure

4. Defining Clearly The Authority & Accountability of The Management

5. Performance Management & Incentives

2. Dispute Resolution Skills for Board DirectorsThe chairperson must manage disputes and encourage productive board discussions by acting as a facilitator and a guide. They need to constantly check that shareholder’s interests are met out in the given deadline, and disagreements are resolved at the earliest. This creates an environment where the directors encourage team spirit, treating everybody equally and without dominating discussions. The chairperson should appoint a trustable director who can act as a peacemaker and settle disputes between other directors at times when the chairperson is absent. The board directors need to adapt and have the will to learn to mediate without the need to find a common ground. This can be achieved if they strive to improve communication, bring clarity, and re-focus attention on the company’s interests.

Following are few things that directors must keep in mind while mediating:

Effective Communication That Includes Active Listening & Assertive

Expression

Inculcating Confidence

& Trust

Taking Into Consideration The Cultural Sensitivities

Constructing A Consensus

Learning How to Disagree

Constructively

Learning Agility

Self-Motivation Collaborating Effectively

Efficient Decision Making After

Communicating effectively is another important skill that directors need to learn. Effective communication facilitates constructive dialogue, positive engagement, and minimizes obstacles. Moreover, it helps prevent misunderstandings and avoids the director’s statements and opinions from getting misconstrued. Directors should learn to use the right lexicons as they have the ability to create persuasive messages, and engage deeply with the key stakeholders. Directors should also focus on various blocks to effective communications, and remember not to commit them consistently.

Few of such blocks are mentioned below:

Avoid Interrupting While Others Speak1

Argue Unnecessarily2

Being Moralistic5

Avoid Acting Like A Snob3

Being Judgemental6

Dominating Conversations4

Being Judgemental7

Dispute Resolution Dynamics

In A Conflict People Can Use

Increases

Reduces

Making Possible

Which Blocks

Where

Can be Clearly

Can be Clearly

Results in

Generating

Which Causes

Causes

Which Allows Them to

So That The

Antipathy Co-Operation

Vexation | Panic | Security

Rigorousness Conflict - Resolution Process

Communication | Approval

Joint Problem Solving

Engrossments | Attitudes | Perspectives

Defined | Understood

Benchmark

Constructive Negotiation

Formal Arrangement

Define | Allot | Amalgamate

Build Bond

Document Information

Build Assurance

Find Choices

Guide Negotiation

Framework for A Board Evaluation

1.Define

The Objectives

2.DefineWho

Will be Evaluated

3.DefineWhat

Will be Evaluated

4.DefineWho

Will be Asked

5.Define The Techniques

That are Going to be

Used

6.Define Who

Will Perform

The Evaluation

7.Define

What is to be Done With The Results

a. First of all it’s mandatory to define the goals that the board wants to achieve. This enables the board to set standards to evaluate the board members.

b. The goals that are taken into consideration are stage of the organizational life cycle, size and composition of the board etc.

c. The scope of the review i.e. the number of people involved, the time involved, the money required will be ascertained by the seriousness of the issue being faced by the board and the resources available to bring that to a conclusion.

1. Define The Objectives

a. While evaluating, boards need to keep a focus eye on three groups viz. the board as a whole, the directors on an individual basis and all those with designated governing powers.

b. This step requires elaborate discussion on whom to evaluate. Whether the whole board should be evaluated or should the evaluation be limited to individual directors only.

c. The best way of gaining an objective view of the performance of the director is peer evaluation.

d. Peer evaluation helps to get a holistic view of the pros and cons of the director and their contribution to the effectiveness of the board.

2. Define Who Will be Evaluated

a. In most of the cases it is the CEO who is seen as a source of all information and is thus the only one who is evaluated. This leaves other potential sources of information on the outset that may have the required information.

b. Thus the examiner should take care of 3 points while deciding whom to ask:

i. Should know who has the correct information relevant to the assessment.

ii. Should be aware of the amount of experience and the openness that the board, which is to be evaluated, has.

iii. Should be acquainted with the resources at their helm for accumulating the required information.

4. Define Who Will be Asked

a. Once the objectives and those who will be evaluated have been decided, the objectives need to be clubbed under different themes.

b. These themes clarify and locate the main cause of the problem and find the most suitable governance solutions.

3. Define What Will be Evaluated

3. How to Evaluate The Board Efficiently

a. There are two techniques for evaluating the objectives viz. qualitative and quantitative techniques.

b. Quantitative data projects information in the form of numbers that depict either ‘how much’ or ‘how many’.

c. On the other hand qualitative data asks questions such as ‘what’, ‘how’, ‘why’, ‘when’ etc.

5. Define The Techniques That are Going to be Used

a. Once the technique is decided, it is imperative to decide who will perform the evaluation.

b. To maintain impartiality, it is important to delegate this duty to a non-executive or lead director.

c. Sometimes external evaluators such as professionals with expertise in Corporate Governance are also hired for the purpose of evaluation.

6. Define Who Will Perform The Evaluation

a. The objectives of the evaluation process should be the deciding factor while determining whom to release the result to.

b. In normal cases, the findings of the evaluation will be reviewed by the CEO and the company secretary and the results are not shared with anyone else.

c. In cases where the evaluation result is focused on a particular director, the facilitator discusses the result individually with the director.

7. Define What is to be Done With The Results

Today, there are myriad programmes on Corporate Governance but unfortunately, most of them are devoid of tools that can train Board directors how to drive transformational change in their organization’s performance by transforming their board’s performance. In our 4 day workshop, Ralph Ward will teach you how to sail your way through the nitty-gritties of Corporate Governance, through real life case studies, Role-Play Board Meetings, Conflict escalation models, and interactive presentations to enhance the strategic transformational capability of your board, to make you understand the roles of investors, CEOs and other board members. The masterclass will also focus on how family businesses can select governance best practices to improve results, ease tensions, and shape succession policies. We urge you not to miss this opportunity, and take-home expert corporate governance skills to help you to know how to engage with boardroom dispute and handle crisis in a more efficient manner.

for More Details Contact upendra@questmasterclass.com