volume 14 | issue 02 | september 2014

Volume 14 | Issue 02 | September 2014

TRANSFORMING FAMILY-OWNED BUSINESSES

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BEYOND ACCOUNTING AND BALANCE SHEET MANAGEMENT

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WHY COMPANIES

MUST INVEST IN LEADERSHIP

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THE SECOND ANNUAL MEMBERSHIP MEETING

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BOARD GOVERNANCE DEPENDS ON WHERE YOU SIT

SLID NEWS P.12

NEW MEMBERS P.13

TRANSFORMING FAMILY-OWNED BUSINESSES: WHAT DOES IT TAKE?

The recent seminar on Family Owned Businesses conducted by the Sri Lanka Institute of Directors at the

Cinnamon Grand was a total sell out. The participation was unprecedented, and many enthusiastic inquiries had to be turned down as space was limited. The event featured a keynote address by Ceylon Biscuits Chairman Mineka Wickremasinghe, followed by a panel discussion including Jetwing Holdings Chairman Hiran Cooray, Hemas Holdings Group Director Abbas Esufally, Hirdaramani Group Director Vinod Hirdaramani, Brandix Lanka Director Aslam Omar, with Managing Director/CEO, Amana Bank Faizal Salieh as moderator. The evening covered a variety of topics pertinent to the theme at hand – transforming family businesses, creating growth, balancing all stakeholders in the business, and managing conflict. SLID President Pravir Samarasinghe in his welcome address said “the topic was relevant in today’s context, as the engine of growth has been the private sector, with family-run businesses on numerous scales. Today we showcase five major players who are in the largest league of businesses in Sri Lanka. While they are predominantly companies with proprietary family interests, Hemas is publicly listed.” KEYNOTEMineka Wickremasinghe launched his keynote with a retrospective of his own professional path. He started his career with a short stint in planting and then tea brokering. He persuaded his father to join

the tea business along with his friend, with the deal being split one-third each. They purchased tea dust when the market went down, and waited indefinitely but the market never went up. It was necessary to pay off the brokers, and he had to drive around, selling to retail businesses. His father owned Williams’ confectionary, and wanted him to join the family business. “I went to England to learn about food technology and marketing. After a two years I had training at two biscuit factories which gave me an insight into how large companies managed their processes. On my return I was inspired by the imposing Maliban factory at Ratmalana. Yet, all attempts at expansion failed as the Government refused to give us the necessary licenses. The opportunity came when CARE wanted to discontinue giving buns and glass of milk to school children. This program was bound to fail due to the difficulty of monitoring 2,500 schools island wide. Sensing an opportunity, I accepted the challenge.”“After months of extensive Research and Development, I succeeded in producing delectable biscuits that had the nutritional value required by CARE and was given the pilot projects. After successful completion of the pilot projects at Maradana and Kuliyapitiya, the contract was given to me to manufacture biscuits for school kids. Tenders were called and we won it. The late Mr. M. J Perera who was the Secretary to the Minister requested that we give our competitors a part of it. We agreed and gave them one-third. The biscuit program

started with CBL doing the major portion. We sourced equipment and imported a biscuit and wafer plant for the domestic market. CBL expanded after the school programme ended, into other FMCG brands in other avenues. Our factory in the FTZ exported to various countries (52 countries at present) and testifies quality and innovation. Today, we have over 20 food technologists constantly safeguarding and improving our products and innovating systems and products. “Two things I strongly believe you have to have are unfailing commitment and dedication, and that business cannot be stagnant; it must either go up or come down. When there is a downward trend, you get alarmed and change things and when you are at the top be very cautious that a slide down is irrevocable. Successful businesses are never one-man operations. Even today, we call ourselves the “Munchee Family.” Even the most menial worker has access to the Chairman and Board.” PANEL DISCUSSIONWhat comes first – family or business?Amana Bank Managing Director/CEO Faizal Salieh kicked off the discussion with a lively debate on the critical success factors that each panelist attributed to their company’s growth. Esufally emphasized that there is “no right or wrong way” – one has to tailor the model to what suits the family and the business. Hemas a family-owned company went through a shareholder separation about 15 years ago. The remaining four of

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us were educated, looked at the business figuring out what options existed. Many family companies don’t get past the third generation. There were two or three key unique things that happened to us; firstly,

we made a call to stay united and grow together, secondly we decided on which came first - family or business? We had external resource personnel to assist us, and we decided that business came first. As

family unity was critical, we built institutions to address the family’s needs and foster our core values. This helped the process of divorcing family and business, attracting non-executive directors to bring in a culture of accountability, good governance and compliance. In 2003, the company listed for several reasons. Incentives to list, to go down the path of compliance, to attract top people and not have any glass ceilings and finally the need for funds. Attracting top people was considered important - the first Chairman of Hemas was a non-family member, Deshamanya Lalith de Mel. Omar: My father started off in 1969 with Rs. 100,000 capital. My brothers, sisters and I were young and in school. When he started off, in an Islamic manner, the three boys got 16% of the share ownership, and the three girls got 8% each. It was agreed that whatever we did was to be done for the company and that no one would have businesses of their own. My brothers and I subsequently got into the holding company, and have no other personal business. We started our life to earn money, but we’ve managed to avoid being focused on that. All earnings go back into the kitty. We had an ownership structure that still remains. We each get the same salary, and same ownership, and dividends are equal. All the money is in the holding company. Salieh: These are interesting insights on how the company has separated personal interests from the running of the business, which has probably driven Brandix to its present structures. I know they follow some of the values and practices that top global companies maintain, such as risk management strategies. Let’s hear from the fourth-generation Vinod. Hirdaramani is one of those “ostrich” companies, which manages to keep a low profile. Hirdaramani: I’m the eldest of the fourth generation, having been in the business for 23 years. I started in the 200 garment factory projects. The whole community of the area developed from the grassroots level. Passion and drive is important and unique in our business. Different experiences get shared. Vision and entrepreneurship is very important. One of our values is humility. We employ about 40,000 people throughout the region and loyalty is key. Specially during trying times, it’s great to see family come together. We’re at that stage Abbas was at 10 years ago, where we as a family have to decide on whether we put family or the business first.Cooray: Back in 1973, my father started the hospitality business in Negombo. A Swedish tour operator convinced my father

Mineka Wickremasinghe

Ranjith Fernando

Participants

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(then a building contractor) to open his own hotel. We never had a brand name, never thought of one. All these things happened accidentally. One thing that kept our business going was that our father treated my sister and I equally, and insisted on our education, giving us responsibility at a very early age. He trusted us, and appointed me at the age of 25 as the MD of the hotels side of the business. I told him it would be very difficult for me with just a paper qualification and his answer was if Castro could run a country at 29, you can run a small company at 25. He never decided who would take over from him, and when he passed away in 2008, we didn’t know who would take the helm. The vision he had and the way he brought us up and the trust he had put in us to run the company in the same way he did, in how we treat our people. Salieh: So the father took the risk of transferring responsibility to the children, which is fairly rare as founders tend to find it difficult to relinquish control. That is an interesting perspective in the Jetwing story. “What are your core business values?” he questioned the panellists.Wickremasinghe: The bonding of every person in the company. There should be no difference between any persons in the company.Cooray: Humility, tenacity and honesty.Hirdaramani: Being conscious of the legacy and history of the group, and living up to the values set by our forefathers.Omar: Trust and respect.Esufally: Integrity and responsibility, shareholders need to see us as trustworthy. In the governance model we have created for ourselves, these aspects are monitored via committees.Committees: help or hindrance?Salieh then initiated an integrated conversation, inviting the audience.

Ranjith Fernando (audience member): I’ve known each of you gentlemen and the generations before you personally. There have always been people who have taken decisions and risks. Someone who calculated his own rate of return etc, but the next generation tries to formalize these decisions via risk committees and other formal bodies. Do you think the founder ever saw these as hindrances that “blocked” decision making?Omar: My father was responsible for bringing in Ken Balendra, so he didn’t feel the constraint. More than the older generation, we feel constrained sometimes. Sometimes taking decisions on our boards can be very difficult.

Wickremasinghe: The founder carries more weight, but the next generation has more management techniques.Cooray: If all the rules and regulation worked, I wouldn’t be here. It is gut feelings that brings people to their decisions. When I was about 29, I recall telling my Dad not to buy something as I didn’t feel we could afford it. Now of course, we have different advisors and committees. But at the end of the day the gut feeling needs to govern you sometimes. If you’re bogged down by committees, the business cannot grow. Esufally: We have a different approach. While we encourage entrepreneurship within our company, it has to be properly evaluated for feasibility. We have a structured way of going through new businesses and acquisitions.Hirdaramani: A lot of things in the early day were based on gut and emotion. Public companies and families are two different things, and we’re trying to find a happy medium. The gut feeling is exciting, but rational decisions must be made. Keeping the passion aliveRanjith Fernando (audience member): You all have a great passion for the business, but as the company grows with outsiders, can the passion be retained?

Wickremasignhe: There may be seconds that can take over the mantle, but it is difficult.Omar: We have non-family members who are much more enthusiastic than some people in the family, so it’s really up to the individual.Cooray: No one will have the passion of the founder. My sister and I are passionate but we don’t share the passion of our father. The founder has gone through all the hard work, whereas we had a fairly cushy life. The next generation hopefully would also have some passion, although there is a chance they may not be interested in taking over the business

themselves!Salieh: They say that founder want to keep control because of his passion, the son gets rich because of it, and the grandson becomes poor!Riyaz (Harcourts, member of the audience): Talking about family governance, I feel that as a first-generational entrepreneur, there may be people I have worked with for years. There are people who make a difference in the organization, and there are loyal people who you may have to lose. Sometimes we have this fear, that when the new generation goes off to University abroad, they may try tactics that may not work in Sri Lanka. How do you go from being a process-based business to a people-based business?Wickramasinghe: Democratic principles need to apply for a successful business to work.Esufally: There should be no replacement of loyal people. But sometimes, when organizations grow, the job could get too big for the loyal person. I wouldn’t recommend losing them, but ensure they are in a job that has a good fit for them.The complications of governanceSalieh: Getting to governance: advisors and regulators are pushing for higher levels of governance in companies, pushing for



standards and policies and independent advisors. Governance in family business is more complicated. You can’t try and draw from a typical corporate setting because of the central role that family plays in ownership and management. In a family business, you can’t typically transform corporate governance as to who sits on boards etc. Is there a system in the family via which a sense of direction is formulated? What do you think of governance in a family setting?Hirdaramani: The operational boards are run by professional CEOs reporting to the relevant family members and we maintain visibility by circulating monthly accounts and quarterly board minutes with business updates.Cooray: In our case, it’s the role our mother plays, although she wasn’t actively involved in the business. If we took decisions without telling our father, we’d get a call from mother telling us off. It was a form of informal governance and balance in keeping the family together.Salieh: From what Hiran says, there are many emotional issues in a family which cannot be solved by taking a typical corporate approach. While you may have a professional family member, someone needs to be the “Chief Emotional Officer”, who puts things together at the right time, keeping the family governance balanced despite perhaps not being on the board. Esufally: Being in a listed environment, our family governance is run by the family council and family business board which looks after the family’s interests, but doesn’t get involved in the CEO or MD’s business decisions. But of course, we have someone who soothes ruffled feathers etc. We have the separation of the family and business, but we ensure that one message is sent out.Omar: Our unwritten rule, with just 6 of us, is that whatever disagreements we have, we discuss it in the evening. As a family rule, we talk to each other every day. Not a day goes by without things being resolved at the end, and the next day it goes back to business as usual.Hirdaramani: We too have structured family meetings once a week, discussing either business or personal aspects. No phones, no interruptions for one hour. A lot is achieved. Lalith (audience member): Good governance means good processes to optimize the optimization of wealth. So in projects, there will be hurdle rates. These processes remove gut feelings, these two cannot mix. As far as excellent family businesses are concerned, when are they willing to give up gut feel in order to bring in

governance?Wickramasinghe: Gut feeling doesn’t mean that you necessarily remove governance. Omar: We evaluate projects at a holding company level. Weight age is given to the gut feel, and to the hurdle rate. So there’s a two-tier mechanism. Esufally: When a business grows and comes to second and third generations, processes and good governance is required. For more mature businesses, the IRRs etc are required, and gut feel comes in at a later stage, after all the processes are clear.The science of conflict resolutionSalieh: You all must be managing conflicts on business decisions or strategy, or more personal issues such as divorce or new marriages which may affect concepts of ownership and such. How do you manage that?Esufally: Conflicts do happen. Some see things more conservatively than others. We have a written-down process for conflict resolutions within the family, with structured tiers and mentors. The core thing is keeping the family united. Omar: Family dimensions are different to business aspects. Work is work, and you go home and do whatever you want to do. We keep personal life different, as long as principles of morals and conduct are respected. The ultimate thing is an exit strategy. The final verdict of conflict resolution is taking your net worth and walking away, for which there is a process and structure.Wickramasinghe: Having external directors definitely helps, as sometimes you don’t see the manifestations of conflict when you’re too close to an issue. Cooray: While we don’t have anything written in stone, we have our arguments, but we try to keep business at office and family issues to a glass of wine at home.Esufally: it’s important to know that there is someone there to help resolve issues. We have a number of very eminent mentors and a set conflict resolution management model.Omar: Things need to be thought through and planned for before the possibility of anything happening arises.The possibilities of going public Lalith (audience member): What will convince family companies to go public?Omar: While our subsidiaries could go public, our holding company will not. We are thinking of going public with those companies that are in the public eye.Wickramasinghe: There should be a necessity to go public. Whether funds

etc. It all depends on each company’s requirements. Salieh: As family businesses grow, do you want to go public and have a lot of faceless shareholders?Hirdaramani: We need to see a need to go public. Last week we went public with Alumex a company we invested in with the Hayleys Group. Esufally: We took the step because we needed capital, and we realized the value of the share. We listed at Rs 50, and the share traded at Rs 100 within the day. In this environment, we can attract top talent and managers. Some external deals and foreign investors prefer to deal with listed companies.Salieh: The obvious reason is capital for growth. The other great reasons Abbas brought up is bringing in new employees. But there are aspects of family secrecy and glass ceilings. The other problematic situation is of hiring relatives for higher salaries which sometimes leads to underperformance. It was found that a CEO of a family business on average works fewer hours than a normal corporate’s CEO - perhaps due to the lack of incentive. These are the perspectives of employees at family-owned businesses. We must be aware that these perceptions exist.

Succession vs. secessionAngeline (audience member): For Aslam and Hiran – in your cases, the next generation may have equal ownership but some may not want to get involved with the business. How do you differentiate in terms of compensation between those family members who are directly involved and those who are not?Omar: For the second generation, at an executive level they are paid the correct market salary and we get the dividends into the holding company. There will always be one external director who is a non-family member. The key mechanism is the exit clause.Cooray: We’ve come to a clear understanding that they will own the shares, but get paid a normal salary depending on the job they do. If they choose to not get involved, they will have to wait till they get the dividends. Esufally: The next generation is not allowed to enter the company directly. First, they need to reach certain educational standards, and enter the company via normal application procedures. Perks and salaries are based on their job. A family member not in the company will not receive anything from the company barring dividends. Audience member: Assuming that your


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children want to join the business, what is the mechanism you would use if they do not perform?Esufally: For the sustainability of the company, you need to have the best person for the job. So normal HR procedures would apply.Omar: We have professionals running the business, so we ensure that no family members run the business in the highest tier of operation, which is band 6.Hirdaramani: We have family members responsible for different aspects of the business. We are getting to the stage of a having non-executive directors involved. Esufally: A lot of very clear criteria with the safety net of the family council. While we will look after our family members, there are still strong structures to ensure business comes first.Salieh: There is no “right” model here, just whatever works for the individual company.Audience member: With innovation, unless you’re really up there with new products, family-run businesses tend to become obsolete. How do you see European family-owned businesses which own stocks but are not involved at all in the day to day running of the business? Do you see that working here?

Cooray: If the children are capable of running the business, they should join in. Who knows what may happen in the future, they may be uninterested and sell off the business.Esufally: There’s a difference between family-run and family-owned businesses.Audience member: The next generation is often pushed into professionalizing and getting a MBA. Is there some way you have opened up paths for gut feel etc?Omar: We give family members the option to bring options to the table with new ideas, offering up to 3 million for a new project if it seems feasible.Esufally: We all believe that our family must be well educated. However, if they come back with an idea, we encourage it but it goes through the normal business process. The family business board supports entrepreneurial development and is a lot more lenient than the Hemas process.Audience member: How do you manage change? Each of the older generations has their right-hand people. Hirdaramani: You need to manage change by introducing things in a small way. You need to have belief and conviction and prove that it works.Audience member: How have you been

able to grow your business in such a small economy without drawing too much attention to yourself?Hirdaramani: It’s never been important to us to be in the limelight. It’s in our DNA to talk less and do more. Salieh: These corporate types have a perception of family business. What do you think of the corporate types that you compete with?Hirdaramani: We’ve taken the view that we respect them and partner with them where we can. It was very important for our younger family members to see how corporate boards operate, especially with our dealing with big publicly listed groups like Hayleys in recent times.Wickramasinghe: Family businesses take decisions much more quickly, which is a positive.

The discussions were of a very high caliber, and were exceptionally interesting. It turned out to be a learning experience for many of the participants. Cinnamon Grand, Colombo was the Exclusive Hospitality Partner, whilst the sponsors were Capital Alliance and the Colombo Stock Exchange.

By - Kinita Shenoy



21st Century CFOThe role of the CFO in the 21st century business environment is one that has generated much discussion and deliberation by business leaders worldwide. In a paper by Princeton University Dirk M. Zorn, entitled “Here’s a Chief there is Chief,” the rise of the CFO in the American firm, the evolution of the CFO’s role is charted as having moved from “book keeping and monitoring debt and capital structures, overseeing tax reporting and preparing financial statements, creating the budget- typically well after production decisions had been made” to that of “enhanced visibility and power critical say in key strategic and operational decisions from evaluating business unit perfomance, inventining new ways to leverage capital,managing acquisitions and divestitures, and fending off hostile takeover attempts.”

Furthermore, Zorn upholds that the 21st century CFO serves as the company’s primary ambassador to investors and financial analysts.

The Strategic CFO Forum was targeted at addressing this shift in the role of today’s CFOs, under the SLID’s vision which aims “To contribute to the professional advancement of directors and to foster leadership characteristics which are beneficial to companies, their stakeholders, the community and the nation.”

The first item on the agenda was the keynote address by Axiata Group Berhad CFO Chari TVT. In his address TVT delved into his vast experience in finance and operational management from the numerous countries he has lived and worked in to provide the audience with a

BEYOND AccOUNTING AND BALANcE SHEET MANAGEMENTCourtesy Mirror BusinessThe Sri Lanka Institute of Directors (SLID) brought together some of the country’s top financial managers for an intense panel discussion on the topic “The Strategic CFO” recently at Cinnamon Grand Hotel.

The distinguished panel included Axiata Group Berhad Group Chief Financial officer Chari TVT, Hemas Former Chairman Lalith De Mel, Lion Brewery Ceylon PLC Director/CEO Suresh Shah, Aitken Spence Group PLC Chief Financial Officer Nilanthi Sivapragasam and was moderated by Trade Finance and Investment PLC Director Imran Furkan.

Beyond Accounting


Chari TVT.

realistic insight into the challenges faced by the telecommunication industry.

He stressed the necessity for CFOs to fully understand the nuances of the business they are working for, emphatically stating “if you don’t understand the business you cannot drive the commercial aspects.”

He went on to speak about the continued evolution of the CFO’s role from the 1980s to the late 2000s using pertinent examples from industrial heavyweights such as Kodak as well as from his own personal experience in the telecommunication and other sectors. He also noted that the CFO’s role is moving from an “involved single function to involved multiple functions” stating the modern CFO has four new faces, namely those of a catalyst, strategist, steward and operator.

In addition to these, the CFO must be able to “take action well in advance” to predict and shape the future of his/her company, be skilled in risk management and conduct stress tests, enhance company performance and value extraction as “benchmarking against competitors is important” and redefined key performance indicators (KPIs) to name just a few.

Role of CFOFollowing this informative presentation the panelists were invited to commence the interactive discussion segment of the event.

The discussion was kicked off with Moderator Imran Furkan directing focused questions at each of the panelist on the role of a CFO from their own perspectives.

Hemas former Chairman Lalith De Mel spoke about the role of the CFO elucidating the CFO’s threefold role as being firstly “responsible for finance,” secondly that “the CFO along with the CEO must propose the KPIs or parameters to be used in the business, thirdly stating that the CFO’s role must be geared to create an understanding, right across the organization of what flies and what does not” the latter of which he remarked “This in my experience, very few CFOs do.”

In the light of above, Aitken Spence PLC Group CFO Nilanthi Sivapragasam was asked whether today’s CFOs play this threefold role, to which she replied by iterating that a CFO has so many roles

to play. “You have a stewardship role, compliance, and at the same time you have to be a strategist.”

Citing her own experience interacting with established and budding CFOs, she said that CFOs tend to rely on textbook examples and past experiences of other companies they have worked for to influence their decision making processes and should instead strive to understand the company they are currently working for as well as its KPIs and targets. Finally, she commented on the importance of good communication skills for CFOs which are vital to “market our (CFOs) arguments and convince people.”

The next question, “How do you groom a CFO to be a strategist and a pragmatist?” was a most interesting one, which was answered by Axiata Group CFO Chari TVT who said, “First and foremost the CFO needs to understand the business” whilst stressing the importance of adaptability in a world that is definitely

changing in terms of expectations.

Director/ CEO Lion Brewery Ceylon Plc Suresh Shah was asked to give his thoughts on whether CFOs could keep up with their changing requirements, to which he replied, “It is not about can they change fast enough. I think they have no choice. I think the change is already taking place.”

He also touched on his own experience to further drive home this point, stating, “I started as an accountant, and back then it was one dimensional… taking into account the technologies that have evolved over the years, that’s the second dimension.” He concluded by stating the third dimension wherein “CFOs need to be part of the top level of the company in today’s changing business climate.”

Then followed an engaging debate amongst the panelists during which ideas and opinions were exchanged and justified with the same intensity and

Beyond Accounting


Ravi De Costa

Participants

rapidity as a tennis ball in a rally.

Choice excerpts from this latter part of the discussion included advice to aspiring CFOs attending the forum from Lalith De Mel, who strongly advised them to be in touch with the commercial side of their company, whilst Nilanthi Sivapragasam astutely pointed out that as a CFO “You don’t sit in your little ivory tower or glass cubicle and say “This can’t be done,” you should make yourself the ‘go-to’ person.

She also spoke about the working relationship between CEO and CFO, stating, “It’s a matter of inclusiveness. And I think if the CEO and top level management understand that, there will be a happier working environment.”

The Strategic CFO Lalith De Mel then raised the question, “Is ethics a part of a CFOs responsibility?” to which Suresh Shah replied in agreement whilst reminding the audience that “It is very much a board issue as well.”

"Turning to Nilanthi Sivapragasam, Lalith De Mel presented a conundrum, "If your CEO says he has a gut feeling about something, and that he should do it, what should a CFO do?" Nilanthi Sivapragasam soundly suggested that in such a situation, it is the CFO's responsibility to present all the relevant facts to his/her CEO and state the risks involved. She also mentioned the significance of having an open-minded pre-disposition as "maybe the project will be good in the long run and have non-financial benefits."

In order to combat the common issue of CFOs being burdened with work that lies outside their area of expertise such as IT and legal exertions, Nilanthi Sivapragasam suggested outsourcing this work to other companies, but also realistically added that such outsourcing is difficult in Sri Lanka. Lalith De Mel interjected in agreement saying that allowing the CFO to concentrate on his/her field of work would allow him/ her to engage in a "real, creative, positive role with time." Suresh Shah recommended that companies recognize aspiring CFOs and help them in this process.

Next was an interactive question and answer (Q&A) session between the audience and panellists, which saw both CFOs and CEOs raising queries and adding their thoughts to the discussion.

Following the Q&A session, Moderator Imran Furkan invited the panellists to present their closing statements, wherein each panellist imparted distinctive tidbits of intellectual wisdom.

Chari TVT stated that a CFO’s position is "the only job that allows you to move anywhere, from sales to marketing" and wisely counseled CFOs not to become overconfident and hence reckless when making game-changing decisions such as acquisitions and mergers, saying, "We still need to run through the numbers like we're looking at them for the first time.”

"Suresh Shah said that CFOs have an "Amazing job, no question at all ... If you

want to be a CFO, there's no choice. You've got to start by being strategic...you have a responsibility to yourself to learn the strategic side of the business." Lalith De Mel advocated the company leaders to let the CFO concentrate on what he/she should do rather than overburdening them with irrelevant work, and Nilanthi Sivapragasam concluded the discussion by simply stating, "The Strategic CFO is here, and here to stay."

When asked for their feedback on the event, the majority of the audience concluded that it had been a fruitful and productive session, with interesting anecdotes and expert opinions from industrial heavyweights.

Sri Lanka Foreign Employment Agency Chairman Senaka D. Abeygoonasekera said the discussion "exposed the traditional cold war between the CEOs and the CFOs", expounding that "It's a matter of prominence. CFOs are doing a specific job and CEOs are doing a broader job. A CEO is more of a risk taker." Crysbro Director Shafi noted, "The CFO has now transformed from a standard accountant's job to a more strategic job. It all depends, as Suresh said, on finding the right guy.”

" Overall, the forum proved to be highly informative, current and professional, and proved that although there are significant challenges facing today's CFO, there are also plenty of opportunities for driven finance professionals seeking fulfilling, careers.”

By- Taryana Odayar

Beyond Accounting

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Why SLID ?■ Network: Regular events allow Members to network with the SLID fraternity and other senior level professionals from a wide spectrum of organizations. ■ Medium of knowledge: SLID events are renowned for the high profile speakers delivering time critical information.■ Advisory body: The Technical Advisory Committee stands ready to assist Memb-ers with business and technical queries.■ Be Heard: Represent your views as a united front on existing and proposed policy, codes, legal and regulatory aspects related to boards and directors, to government and statutory bodies.■ Stay Current: The Quarterly SLID Maga-zine, Power Pages and the disseminated information on contemporary topics relevant to directors keep you informed.■ Keep Your Edge: Accelerate your professional development with SLID’s range of educational services, including seminars, conferences, workshops, e-enabled learning and publications, transforming you to a dynamic business leader.

Upcoming SLID events:

• 23rd & 24th July Board Leadership Training II

• 16th September Dr. Phil Young Member of the Cornell Executive Business Education Network and Founder President of Nth Degree Systems Inc. On Strategy Transformation at Board level - What every CEO/Director must know about developing business acumen at every level.

• 28th October Mr Ramabadran Gopalakrishnan, Chairman of four of the Tata Group Companies and the Vice Chairman of Tata Chemicals Ltd, Hindustan Unilever, Director Tata Technologies Ltd, Non Executive Director, Tata Power Company and Akzo Nobel India Ltd, Former Non-Executive Director, Tata Teleservices (Maharashtra) Ltd, Independent Director of Hemas Holdings PLC.

• October Conducting Business Responsibly - Provincial Event

• 27th November SLID Mega event

• January 2015 Family Business: Succession Planning

• February 2015 Board Leadership Training – Flagship Programme

SLID Event Sponsorships & Annual Corporate Sponsorships

The SLID calendar of events attract large numbers of the crème de la crème of the corporate sector comprising, Chairmen, Directors, CEOs and Senior Managers who are the key decision makers. We believe this would be a prime target market to promote your Company and would be an ideal platform to reach a high caliber audience.

Do not miss out on the opportunity to sponsor any of the above events or partner SLID as an Annual Corporate Sponsor. The SLID Sponsorship Policy is available at the SLID Secretariat. Please call on 2301646/8 for more information.

Audit Committee Chairmen’s Forum

At the request of Mr. Richard Ebell and the interest of some of the senior members who are Chairmen of Audit Committees, the SLID Council decided to facilitate the setting up of a common forum for chairpersons / members of Audit Committees of companies to discuss, debate and deliberate on some of the challenges faced in performing the role expected of them in the current business environment. This was particularly with regard to the new regulatory requirements of the Securities and Exchange Commission, the Central Bank, Colombo Stock Exchange and other bodies, and those relating to financial reporting. SLID wrote to the Chairmen of Audit Committees and received indications of interest from a small segment of them. SLID assisted this initiative by convening the first meeting on the 27th of June at the SLID Secretariat, and provided the necessary administrative support. A number of Audit Committee Chairmen met, and discussed various topics some of which were on local regulations and best practice from other countries, sharing of experiences and discussions on shared concerns, issuance of practice guides on responsibilities on financial reporting, external audit, internal control and audit, risk management, compliance with laws and regulations and whistle blowing.Initially there was concern as to whether there would be sufficient, sustained interest in getting together. However, the consensus of the discussions that evening was that the

It is with much pleasure that we welcome Shalomi Ranasinghe who fills the vacancy of the Secretary to the CEO which was created when Rochelle Alahakone moved on to pursue a legal career in April this year. Shalomi has a background in HR and

administration and is involved very actively in social work in her community through her church and Voice of Peace Youth Club. We wish Shalomi a very successful career at SLID and hope she will grow to become yet another strong pillar of Team SLID.

News from Team SLID

SLID NEWS

SLID News

SLID POWER PAGES2014 SEPTEMBER [12] SLID POWER PAGES

initiative was worth pursuing, and the group is in communication on email and will be meeting in August again. The numbers have snowballed and have increased since the initial meeting.

SLID would be pleased to link any others who may be interested in participating at this forum. We hope the outcome of this would be to strengthen the governance structure of organizations while safeguarding the interests of the Directors.

Please do contact the Secretariat on 011 2301646/8 or write to [email protected] if you are interested in joining the group.

MEMBERSHIP DRIVEContinuing our membership drive, we are still looking to you for your active participation in introducing your colleagues and friends to the SLID fraternity.

Benefits of SLID Membership Career advancement• Training and development: For current directors, potential directors and aspiring directors.• Director education: The continual professional development programs are designed to address your needs and reflect contemporary thinking and practices.• Board Leadership training: Programmes leading to a hierarchical professional membership.• Events on a monthly basis: On topics relevant to directors, guiding and helping them grow to their full potential at a reduced

rate for members.• Net working opportunities: Designed to help you make connections with peers, experts and practitioners in the fields of business and regulations.• Presentations and speaker materials: A wealth of knowledge and information hosted on the site.Professional recognition and support• We support, represent and set standards for company directors• We help directors improve their personal and professional effectiveness for the continued success of the business• We promote excellence in the boardroom through shared views and experiences in corporate governance• We provide the forums to get insights in to effective directorships• We provide opportunities to interact with high caliber senior corporate directors• We provide opportunities for participation in discussions and debates amongst directors on related contemporary issues and gather

insights• We provide opportunities for more exposure within the director fraternity and to be recognized• Opportunities to be exposed to the cutting edge of the best practices in the world• Opportunities to help you master boardroom dynamics• We help restore investor confidence in the private and public sector of Sri Lanka. Staying informed• www.slid.lk: A wealth of director specific information including member only access to content and resources.• Power Pages: Quarterly reports on SLID events organized for its membership and features on current director insights.• Events: Special member pricing on training courses and events.

For more information log on to www.slid.lk or call us on 2301646 - 8.

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WELcOME TO OUR NEW MEMBERS1. Mr. Ashan Cirantha Fredrick Abeysundere, Papyrus Papers

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PLC3. Mr. Thilan Daminda Dharmarathne, Nilkamal Eswaran

Plastics (Pvt) Ltd4. Mr. Warnakulasuriya Preethilal Eustace Fernando, GAC

Group of Companies5. Mr. Anthony Linton Wijewickrama Goonawardena, Elpitiya

Plantations PLC6. Mr. Jayamal Bilindu Gunaratne, Majestic Investment (Pvt) Ltd7. Mr. Priyantha Rohana Sugath Hettiarachchi, Western Paper

Industries (Pvt) Ltd8. Mr. Mohamed Hisham Jamaldeen, Hayleys PLC9. Mr. Kithsiri Ratnapriya Jasenthu Nambi, Metatechno Lanka

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10. Mr. Amila Prasanna Jayasinghe, Bogala Graphite Lanka PLC11. Mr. Abeyrathne Jayasundara, Analytical Instruments (Pvt) Ltd12. Mrs. Oshadhini Upulika Kumari Jayasundara, Analytical

Instruments (Pvt) Ltd13. Mrs. Renuka Ramani Jayasundara, Analytical Instruments

(Pvt) Ltd14. Mr. Sheran Jayawardena, Majestic Electric Co. (Pvt) Ltd15. Mr. Murtaza Hasanally Jeewajee, Jeewajee Industries16. Mr. Subanu Eshana Perera, Sumikolanka Hotels (Pvt) Ltd17. Mr. Diyunuge Kavinda Sandeepa Rajapaksa, Samson

Rubber Industries (Pvt) Ltd18. Mr. Saaruban Sivaratnam, V4 Educational Consultancy ( Pvt) Ltd19. Mr. Tushan Harsha Mendis Wickramasinghe, Capital Trust

Holdings Limited20. Mr. Suran Wijesinghe, John Keells Holdings PLC

We warmly welcome the following new members who joined the SLID in the 2nd quarter of 2014. We look forward to your participation at our monthly events.

SLID News

2014 SEPTEMBER [13]SLID POWER PAGES 2014 MARCH [13]SLID POWER PAGES

BOARD GOVERNANcE DEPENDS ON WHERE YOU SITWilliam George, former CEO of Medtronic and a veteran of ten corporate boards, reflects on common governance pitfalls and how to overcome them.

Board governance is frequently discussed and often misunderstood. In this article, I

offer an insider’s perspective on the topic. Over the years, I have had the privilege of serving on ten corporate boards, as well as being chairman and CEO of Medtronic, chairman only, and CEO only. I have also observed dozens of boards from outside the boardroom and engaged in numerous confidential conversations with members of these boards about the challenges they faced and how they handled them.

What I have learned from these experiences is that one’s perspective about a board’s governance is strongly influenced by the seat one holds independent director, chair and CEO, CEO only, or chair only. That’s why it is essential to look at corporate governance through the eyes of each of these positions.

In surveying governance through the lens of different roles, I hope to address a problem in the prevailing dialogue: many of the governance experts exerting power over boards through shareholder proposals, media articles, and legislative actions have never participated in an executive session of a major board. It’s no surprise, therefore, that their proposals deal almost entirely with formal board processes and “check the box” criteria that generally have little to do with the substance of how boards operate.

I worry, in fact, that many of these proposals could weaken the performance of boards by burdening them with an excessive amount of ministerial details. That would be a shame, because corporate boards have made progress since the scandals of recent years, with a new generation of CEOs sharing with boards more openly, listening to them more closely, and working to achieve a healthier balance of power with independent directors.

#1Role The independent director

The combination of new governance regulations and rising expectations makes serving as an independent director much more important and difficult than it was in years past. The greatest challenge these directors face is

to stay fully informed about the companies on whose boards they serve. Information asymmetry is often at the root of this challenge. When directors are truly independent of the companies they serve, they generally lack the wealth of knowledge about the industry or business that their senior-executive counterparts have. Moreover, independent directors typically have limited engagement with the company and its board, meeting perhaps six to eight times a year. Consequently, management has far more information than independent directors can ever absorb. I recall this challenge well: of the nine boards I served on as an independent director across a range of industries I had industry-specific knowledge in exactly none of them. In one instance, I recall asking why a company wanted to implement an aggressive stock-buyback program when it might be better to preserve cash to take advantage of opportunities or to use as a cushion if cash flow turned negative. My question was not well received. The CFO argued that the company had always been able to raise cash when it was needed and had never passed up an opportunity for lack of cash. A fellow director told me that I simply didn’t understand the industry and that stock buybacks were routine. So I backed off.

However, a year later the company became so concerned about volatility in financial markets that it suspended all stock buybacks and began an aggressive program of increasing its liquidity. That was a good thing, because the following year the markets completely shut down when the credit and liquidity crunch occurred. Had the firm not had a large cash reserve, it might have wound up insolvent, like many of its competitors.

Whether or not my questions a year earlier helped nudge management in this direction, I strongly believe that independent directors can provide leadership and contribute to the companies they serve in ways that go beyond meeting the basic legal requirements and fiduciary responsibilities inherent in board service. In addition to asking tough questions, three opportunities stand out.

Be an advocate for sound governance

Independent directors should be advocates and enforcers of sound governance principles. This is especially important in challenging times or when the company is in crisis. Too many directors accept board governance as it is, without suggesting the kinds of process improvements that would make a difference; some directors even resist them.

Yet process matters hugely in the boardroom, and not just to make sure a company abides by governance rules. Process steps help to keep board members engaged and able to fulfill their responsibilities and, more important, establish the proper balance of power between management and the board.

Perhaps the most useful aspect of the governance rules passed a decade ago in the United States is the requirement that independent directors meet in executive session without the CEO present. These sessions give directors the opportunity to share concerns about the company and to ask for improved governance steps or additional reviews. They are also a time to discuss privately any concerns that directors have about management and to ensure that directors are fully informed. Finally, the sessions are useful in building chemistry among the independent directors.

Good chemistry is important. The director of a major European company shared with me his frustration when he challenged its CEO and the direction in which the chief executive was moving the company, but received no support just silence from his fellow directors. Later, when the board went into executive session without the CEO in the room, the directors around the table unanimously agreed with this director, saying that the CEO was not providing the right leadership or taking the company in a sound direction.

Leadership succession

Nearly all independent directors say that selecting the right leadership for a firm is their

Board Governance


most important role. Yet in my experience, the time spent on succession is far too limited and the discussion not nearly candid enough. All too often, board members settle for a “hit by a bus” contingency plan. Such plans are crucial, of course, even if just for an interim period. Yet oftentimes the person ultimately identified to lead is just the most obvious interim leader, not the best long-term successor.

To better prepare for succession, boards should have multiple discussions each year to identify the company’s next generation of leaders. They need to create ways to get to know these candidates personally and observe them in crises and under pressure. The board should also create a series of assignments to prepare prospective CEOs and other senior-executive candidates.

If succession isn’t taken seriously, directors may find that when the time comes, they do not have confidence in the internal candidates. Faced with this situation, directors may react or overreact by immediately initiating an external search, which bears substantial risks of its own. Outside hires may look good on paper and have been successful elsewhere, but it is not uncommon to find they do not understand the company’s culture and values and do not take the time to identify the people who make the organization run successfully.

The board should instead conduct detailed leadership-succession planning sessions to review candidates and their progression, ensuring that they have the necessary experiences to get them ready for the top jobs. In these reviews, the age of the potential top leaders matters. They should not be so close in age to the CEO that they would be unable to have a sufficiently long tenure as CEO prior to reaching mandatory retirement, nor can they be so young that there simply isn’t time for them to have the experiences they need for such a major task. Thus, the process of identifying candidates for top roles must start earlytypically, with leaders who are barely 30 years old.

On one board on which I served, the long-time CEO, who was doing an excellent job, steadfastly resisted the board’s insistence that he develop potential successors. Frustrated by his inaction, the compensation committee (of which I was not a member) voted to provide him with a special bonus for grooming a prospective successor. He then reluctantly initiated an external search for a chief operating officer.

However, before any candidates were identified, he set up an off-site meeting with the independent directors to recommend that the external search be canceled because “it was causing too much disruption.” Instead, he proposed to the board that he would develop

some much younger candidates who not only were several years away from being viable successors but also, in some cases, seemed unlikely ever to make effective CEOs.

That was enough for me. I decided to resign rather than remain part of what I viewed as a charade. the CEO stayed for many more years, eventually stepping down after two decades in the job. Even then, he continued to occupy his CEO office at company headquarters. His successor, who was quite junior to him in age, found that managers routinely took problems and opportunities to the old CEO, thereby undermining the new CEO’s authority.

Leading in crisisThe real test of a board of directors comes when the company is in crisis. Independent directors, in particular, are counted upon to step up to their responsibilities in difficult times. Their accumulated wisdom and judgment are crucial to make sound decisions under the pressure of time and media attention. The overarching lesson I have distilled from the crises I’ve experienced (among them, the termination or resignation of CEOs, external financial crises such as the 2008 financial-market meltdown, major governmental action against the firm, and an unexpected takeover attempt) is that board members need to understand and trust each other. Only when they can have candid conversations will they ultimately reach a consensus that has positive and far-reaching implications for the company. Trust becomes even more important when meetings are conducted by telephone, which is often the case in crises.

The bottom line for independent directors is that their responsibilities and obligations are so great these days that they cannot serve on a board and expect to preside while fulfilling only the minimum r e q u i r e m e n t s . Rather, independent directors must be fully engaged, do their best to learn the business, and stay connected between

meetings. Otherwise, they won’t be prepared to lead when a crisis hits. For many independent directors, this will mean not serving on as many boards as they did in the past a change that’s appropriate given the time it takes to be an effective board member.

#2 CEO with nonexecutive chair

In 1991, I became CEO of Medtronic, two years after joining the company as president and chief operating officer. My predecessor, who had just turned 65, continued as chair of the board. I was quite satisfied with this arrangement. His wealth of experience and wisdom were valuable to me as CEO, and he had the board’s full confidence. He was also more than willing to take on difficult assignments at my request regarding delicate government and legal issues.

This dual structure the standard model in Europe is preferred by most governance experts and some regulators. The split clearly distinguishes the role of management (to lead the company) from that of the board chair (to take responsibility for the board and governance).

Yet as obvious as the structure seems in principle, I have seen no evidence or research to demonstrate that split roles create superior

Board Governance


performance or even provide greater stability at the top. Anecdotally, the opposite is often the case.

In practice, the model’s effectiveness depends on the relationship between the two individuals in these roles. If they are not squarely in agreement about the direction, leadership, and strategy of the company, an unhealthy separation may emerge within the board, and between management and the board. The result can be a lack of clear direction for the company a state of affairs that leads to malaise or confusion within the employee ranks and, ultimately, to dissatisfied customers and shareholders. In the worst case, the two leaders engage in a power struggle that paralyzes both management and the board, thus preventing the company from making important decisions and responding quickly to changing conditions.

As much as I initially supported the separation of roles when I became CEO, over time the arrangement became more difficult. For example, some board members seemed confused about whom they should look to for strategic direction, especially in the case of acquisitions. In addition, the chair felt he should be “the eyes and ears of the board” in the company. Over time, this led to some confusion within management about his role. The board was also somewhat confused about whether I reported to him or to the board as a whole, an issue that was never fully clarified. Quite naturally, I felt that I reported to the board as a whole and that my responsibility and authority to lead the company depended on those relationships.

Tension also developed because board members seemed hesitant to give me direct feedback or to talk openly about their concerns. When I became board chair as well as CEO, this tension evaporated quickly, and I found myself spending far less time on board governance. In part, this happened because communication lines opened up and were more direct. By contrast, when the roles had been separate, I found I had to spend more time than I had expected involved in board governance and in responding to issues raised by the board.

# 3The dual mandate

North American CEOs strongly prefer the dual mandate of being board chair and CEO, as it puts them squarely in charge and avoids the likelihood of conflicts or power struggles within the boardroom. The downside of this model is that in the past it often encouraged complacency by boards and discouraged them from getting deeply involved in issues until it was too late.

In practical terms, a leader is most effective in dual-mandate roles when he or she starts by keeping independent directors well informed through a combination of telephone updates, monthly progress reports, and candid comments in executive sessions with the independent directors about the real-time issues facing the company. The leader must be responsive to the independent directors’ concerns and either take action on them or put them on the board agenda for discussion by the full board.

Such a leader also must learn to perform a delicate balancing act: facilitating open discussions on the board while at the same time representing management’s position to it. If this individual argues his or her case too strenuously, he or she may shut down thoughtful comments from the independent directors. On the other hand, if the individual acts solely as a facilitator of these discussions, the directors won’t get the full benefit of management’s thinking and rationale.

Having served on several boards with a single leader in the combined roles of chair and CEO, I have learned that a board is most effective when the leader clearly understands the difference between these two roles and bends over backward to respect the board’s independence. This independence extends to the directors’ need to have open discussions without the CEO present, to ensure that important issues are addressed privately.

Similarly, when I had this dual role, I did whatever I could to open up meaningful discussions within the board, especially by drawing out the opinions of its quieter members. This was particularly challenging when the board was discussing important strategic issues or acquisitions and needed the benefit of my judgments and insights. I had to learn to withhold my opinions until others had the opportunity to offer theirs and then work them into the context of my conclusions. Frequently, this meant delaying decisions until the board had time to digest the ideas or management could undertake additional analyses.

One of the benefits the board and I had was an active, capable lead director with whom I could work closely. He did a superb job in guiding the issues of the independent directors and in keeping me fully informed of any concerns and issues the board might have. When it came time to select my successor, he developed a sound process that we both agreed upon and led the board through it.

The rise of the role of lead director, elected by the independent directors, is contributing to a better separation of governance from management. To make the position work effectively, it is essential that this role have a separate job description that is publicly

available and respected by the chair and CEO. The most effective lead directors view themselves as “first among equals” and can coordinate the opinions of all directors and facilitate open discussion among them.

# 4Non-CEO chair

The role played by a non-CEO board chair will depend heavily on the experience that person brings to the position. If this individual was the previous CEO a common situation he or she will bring a wealth of experience, a keen knowledge of the other directors, some strong opinions about what the company needs, and oftentimes a legacy to nourish or at least maintain. Therein lies the difficulty: no matter how hard old CEOs try to restrain themselves, they may have a tendency to overshadow or, worse, override new CEOs.

This problem is exacerbated by independent directors who still rely heavily on the ex-CEO’s opinions and may trust his or her recommendations more than they do those of the current CEO. Still, when former CEOs can restrain themselves, recognize that it is time to let go, and do everything they can to support their successors, they can be very effective in the role of board chair.

In my case at Medtronic, I was committed to a seamless transition with my successor and to ensuring his success and the company’s. Also, the board and I had agreed upon a timetable of just one year for me to serve as chair, so I was clearly in a transitional mode. I was still in my 50s and looking forward to turning my attention to other interests.

Nevertheless, it didn’t take long before I faced a board-level challenge. It came at an off-site board meeting just a month after the CEO transition. For 15 years, dating back to my predecessor’s tenure, Medtronic had pursued publicly announced goals of 15 percent per annum growth in both revenues and profits, compounded over any five-year period. These aggressive goals provided discipline within the company and a consistent benchmark for shareholders. We had been successful in exceeding these goals, but not without risks and challenges.

At a board meeting, however, one of the independent directors argued forcefully that given the company’s larger size, it would be impossible to continue to achieve such high rates of growth. Although I was tempted to jump into the discussion and defend the importance of the goals, I held my fire. My successor held firm, and the company stayed the course.

Many people make a strong case that a former

Board Governance

SLID POWER PAGES2014 MARCH [16]

By- William George

CEO is not the right person to serve as board chair and that he or she should leave the board immediately. An alternate choice could be one of the existing directors, provided there is a well-qualified candidate available. An equally good choice is to appoint someone who has served as chair, CEO, or both at another company. In some countries, the board chair may be an independent attorney or financial expert, but this approach risks ending up with a candidate who has insufficient knowledge of the company, its business, and what it takes to lead it. Regardless of who holds the position, it must have a well-defined job description to keep accountability strong. A nonexecutive chair should be formally evaluated at least annually by fellow board members. Finally, the position should have a defined term of office, after which a new nonexecutive chair is elected or the existing chair is formally reelected.

Reflections

The diversity of perspectives that board members bring to the role can be a considerable strength for the companies they serve. How can organizations make the most of it? Here are three suggestions.

• The board should acknowledge that no single structure works in all cases. Boards must be pragmatic enough to adapt to the individuals involved rather than put a rigid structure in place.

• All parties, but especially CEOs, should acknowledge different points of view and work to minimize the conflicts that inevitably arise from them. This requires high-level listening skills, theability to see situations from the other person’s perspective, and the wisdom to understand the basis for the different points of view.

• All directors, but especially CEOs, can benefit from holding different positions, either within the company or on other companies’ boards. Nominating committees should seek out prospective board members with diverse experiences. Boards should also encourage CEOs to serve on at least one outside board to give them the experience of being an independent director and seeing firsthand the challenges outside directors face.

If these basic guidelines are followed, I believe that board governance will improve markedly. As a result, companies will have a steady hand in the boardroom to sustain their achievements through successive generations of leadership and board membership.

Board Governance


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Effective Leaders in organizations bring together both individuals and

organizations to solve customer and organizational problems. But, there is a difference between leaders and leadership. Leaders refer to individuals who have unique capabilities to guide the behavior of others to deliver outstanding results or resolve issues. Leadership refers to an organization’s capacity to build future leaders and leadership bench strength. An individual leader matters, but an organization’s leadership matters more over time both to shareholders and customers. Therefore, organizations must not only invest to help individual leaders to be more effective through coaching, 360 feedback, and by executing individual development plans, but also must invest to build leadership depth by devoting sufficient time for leadership development. Build LeadershipGenerally there are a few key things that organizations can do to upgrade the quality of leadership in a firm. The quality of leadership will drive business performance both inside and outside the organization. Organizations with leadership depth will have the capacity to respond to changing business conditions, execute strategy, increase investor confidence, and anticipate and deliver those customer requirements. Often leadership success remains inside the company. As a result potential leaders learn

from other leaders in the company who have succeeded. The criteria of leadership should start with customers. The owners in a firm must define the company’s intended brand and then identify the leadership behaviors consistent with this external brand. When leaders inside the company behave in line with the expectations of customers and other stakeholders outside the company, the leadership becomes more sustainable and effective. Also by defining internal leadership through external expectations will set more relevant and impactful leadership standards. Once leadership standards are set, leaders need to be assessed on how well they meet those standards. To get an external view, leadership 360’s may be expanded to 720’s where customers, suppliers, communities, regulators, or other external stakeholders may be included in assessing targeted leaders. The Board of Directors should also regularly assess the CEO’s performance both inside the company with his team, among his employees and outside the company with key stakeholders. This type of assessment offers a more complete view of leaders who have key roles to play with external stakeholders. Assessment also helps to identify high potentials and future leaders by looking at the extent to which they have aspirations to lead, ability to meet future challenges, and agility to learn and grow. It is the responsibility of the board to keep

an eye on potential leaders’ ability to serve customers and engage employees to do their best work.

Leadership investmentThe traditional formula for leadership investment has been 70 – 20 – 10. The logic is that 70% of learning and development is on the job; 20% from feedback and observation of role models, and only 10% from training. Now it is suggested by Prof Dave Ulrich the author of the Leadership Code that this formula should shift to something like: 50% of learning from job experience, including mirroring role models, 30% of learning from updated training and 20% of learning from life experience. Most leaders have learnt and learn from experiences outside of work, in families, social settings, social networks, volunteer work, reading, and traveling. When companies can encourage and access knowledge from these life experiences, leaders will broaden their repertoire. For example, many companies now use their CSR efforts as development opportunities for high potential leaders. These mix of leadership investments in my view is the foundation for a professional approach for development of leadership throughout a firm.(The writer is a thought leader in HR.)

WHY cOMPANIES MUST INVEST IN LEADERSHIP

By - Dinesh Weerakkody

Leadership

2014 SEPTEMBER [19]SLID POWER PAGESSLID POWER PAGES

Pravir Samarasinghe was re-elected the Chairman of SLID to serve a second year. Shiromal Cooray

was re-appointed as the Senior Deputy Chairperson, whilst Preethi Jayawardana was re-appointed the Vice Chairman, and Ronnie Peiris the Immediate Past Chairman. Dilani Alagaratnam, Aroshi Perera, A.R.Rasiah, Kavan Ratnayaka, Faizal Salieh, Nilanthi Sivapragasam and Dinesh Weerakkody, were also re-appointed as the Council Members.The Chairman in his address stated the strength of SLID and the programs done to educate the top management of the corporate Sector, driving corporate governance from Colombo to provincials throughout the island.Pravir Elucidated on the Board Leadership Training Introduced to the membership . The Modules are the International standards given by the International Finance Corporation, accredited by the

Securities and Exchange Commission. Having achieved the targets set last year successfully, SLID has been accelerated in spreading corporate governance and best board room practices in both private and government sectors.The Australian High Commissioner to Sri Lanka Her Excellency Robyn Mudie was the Chief Guest.Addressing the gathering she highlighted the strong interest of Australian governments in trade and investment relationship with Sri Lanka which has influenced a considerable increment of investment marking 340 million Dollars for the period of 2012 -2013. She announced that the key object of her role was to improve investments in Sri Lanka in the sectors of Education, Trade, Tourism and Hotel Management.

Elucidating more on sustainability and development, prominence was given

to Social Responsibilty, Governance and Anti Corruption of corporate sector. Narrating further, the challenge for Sri Lanka is to meet the need of the present without compromising the environment for future generations.The commitment to sustainable development does not stop at any border and it increases the internationalization of industries regardless of the place of incorporation, there is a responsibility for each corporate to improve sustainable development said Her Excellency. Showcasing the interest of Australian investors She also emphasized on the relationship between human rights and business. She culminated her speech sharing her views on SLID and the key role played by the Institute evolving governance and creating an attractive fertile ground for foreign investments.

THE SEcOND ANNUAL MEMBERSHIP MEETING

Annual Membership Meeting


ANNUAL MEMBERSHIP MEETING

Annual Membership Meeting


volume 14 | issue 02 | september 2014

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