What are the biggest issues with board effectivenss and corporate governance today in the global markets ?
Good Answers (3)
Alexander K.
SVP at ContourGlobal
Best Answers in: Corporate Governance (3), Organizational Development (2), Energy and Development (1)
1. Most corporate boards are entrenched. Shareholders have a relatively meaningless right to vote for the board slate that the board itself proposes on its proxy statement (though the SEC's proxy reform proposal, if passed, might begin to change that).
2. Boards are supposed to retain and compensate the CEOs, but CEOs often hold Chairmanship positions of their boards or at the very least are key in approving their company's proxy statements. Effectively, this way instead of CEOs reporting to the boards, the boards frequently report to the CEOs. Inter-alia, this dysfunctionality causes CEO compensation to be justified by obscure comparisons to the levels of other CEO compensations instead of providing proper incentives to increase shareholder (hence, long term company) value.
3. Most boards are poorly qualified and staggered. Hence, even if a majority of shareholders watned to replace the entire board, they could only do so over the course of 3 years. Meanwhile, a bunch of generally disinterested and unqualified retired politicians can hold on to their seats.
Links:
- http://www.calpers-governance.org/marketinitiatives/home
- http://finlayongovernance.com/?p=1649
- http://www.icahnreport.com/report/2008/06/corporate-board.html
Clarification added July 12, 2009:
Although I referred to the US Security and Exchange Commission (SEC) in point 1, and there are various regulatory issues in different markets, the problems above are universal in the Global market. Board effectiveness continues to be hedged on board's true incentives to perform on behalf of shareholders, and it is imcumbent upon the sharehodlers to demand this.
Valeria S.
Principal at Metrus Group
Best Answers in: Personnel Policies (6), Staffing and Recruiting (3), Compensation and Benefits (2), Change Management (1)
One of the biggest issues with corporate governance is that the boards which are charged with oversight do not demand an adequate level of accountability from the leadership team. Often they are focused uniquely on financial aspects of the business, or perhaps major product/service or senior staffing decisions. They do not have a good view of other key components of the business that are predictive of performance--for example, employee perspectives, and customer information. This information is often available, but is not reviewed at board level, thus early warning indictors from employees or customers that may signal future financial concerns are not available.
Examples of some solutions that are available to boards are available at the web site below. These parpallel the solutions that help senior leadership teams to become more effective.
Hope this is useful.
Valeria
Links:
Octavio B.
Global Thinker ★ Corporate Strategist with focus in 2.0 Technologies
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Hi Yaseen,
1. A clear strategic vision that may be shared among all the parties involved with a common language and a unified sense of purpose.
2. A well-established system of performance indicators that may measure both global performance and regional performance according to a set of metrics that consider the peculiarities of the local markets.
3. A strong and influential global leadership with the empowerment to share and suggest a set of good governance practices to be applied in all the branches of the company.
4. An integrated effort to provide real-time information about business performance and use of strategic dashboards to make sure that operational excellence is reached consistently according to the markets needs and by offering all the time, the required alignment with the business strategy.
5. The emotional traits of a seasoned leader play an important role in tough times where a pragmatic attitude in the business analysis, aplomb in the making decision process and positive conviction about the relevance and pertinence of his/her influential role in the board of directors are crucial factors when a global company must assume a shift in its process of strategy execution in the search of a possibility to survive in a business context, that is highly volatile and uncertain.
I hope that helps.
Octavio
More Answers (6)
Lou G.
Originating Change - "Success is not by chance."
Best Answers in: Organizational Development (9), Mentoring (2), Project Management (2), Staffing and Recruiting (1), Corporate Governance (1), Change Management (1), Manufacturing (1), Computer Networking (1), Information Security (1), Using LinkedIn (1)
Unification of focus, and core values with that of the business.
Clarity in communication, effective motivation, and the ever present spectre of accountability.
Lou Gasco
MüTō Performance Corp.
Lou.Gasco@MuToCorp.com
www.mutoperformancecorp.com
c. 917-834-2402
Links:
Premnath M.
C-Level Executive, Management Advisor, Guest / Visiting Faculty at B-schools
Best Answers in: Job Search (1), Occupational Training (1), Property Law (1), Starting Up (1), Web Development (1)
Accountability, being proactive, and unity in thought and direction are the core issues. I'd add one more - not many might agree - basic human greed!
Regds
Forrest B.
CEO and President of Smarter Solutions, Inc. (Forrest@SmarterSolutions.com)
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Thinking that hiring a superman or superwoman as a CEO is the silver bullet for what it takes to make a company successful. What is needed is a business orchestration system that the board monitors which provides the framework for integrating scorecards, strategic planning, and business improvement efforts so that the business as a whole benefits; e.g., as described in the attached link.
Links:
Perception and credibility. The corporate governance projects that I have seen fail, do so because they are more form over substance. Unless corporate governance is seen as a value creating vehicle, and there is true leadership from the Board with proper accountability - and reward - driven down through the leadership team, it will by design always be seen as a costly overhead that isnt perhaps taken as seriously as it could.
One wonders whether the current economic downturn is a good impetus for getting board effectiveness right. Leadership and business models that didnt work in the past will struggle to survive and thrive through difficult times (see the demise of the investment banking sector if you want recent proof). And it will take guts, determination and a preparedness to strip back to basics for Boards to ensure that they lead their organisation through the current global crisis.
shaun.critten@willismorris.co.uk
Links:
Russell K.
Workforce Planning Leader - Americas at Hewlett-Packard
Best Answers in: Organizational Development (2), Staffing and Recruiting (1), Offshoring and Outsourcing (1)
I think the largest challenge facing boards is an unfamiliarity with the specific global markets the company is playing in. For example just because you have a good understanding of the US and EU markets doesn't mean you understand the governance and regulatory constraints in the Andian Pact or ASEAN Marketplace.
Also boards are appointed for overall business accumen, but the sub committees (Audit, Executive Recruitment / Retention, Compensation, etc.) require specialized skills in a global market place and the experience of the board needs to be diverse enough to have these.
Finally most boards suffer from, for lack of a better term, ageism. They are to gray to fully intuitively grasp the nature of globalization and it becomes an intellectual exercise more than a practical one. That is a very broad over generalization, but again generational diversity helps eliminate these challenges.
Obtaining unfiltered and unbiased information about the true state of the corporation's affairs.
