Boards spend an unbelievable amount of time, energy and financial resources trying to find the right nominees/candidates that can add value and enhance governance oversight, but for many boards, the momentum ends once the vacancy is filled or when the infamous “orientation binder” is sent to a newly elected board member. In practical terms, this is like an Olympic marathon runner training for years and then deciding to walk their race on the day of their Olympic event – ultimately, they are not utilizing or benefiting from the hard work they put in upfront.
There’s been a lot of talk in the market place today about the value of performance plans. The naysayers claim that they are not driving performance in the way they were originally intended, and the supporters argue that all compensation should not be a guarantee. A point of intersection is the fact that everyone agrees that employees should be recognized for the contributions they make and the performance they deliver.
Good board members ask good questions.
Risk exists in every organization and it is a board member’s role to probe until they are convinced that management is not incurring any undue risk or risk that is outside of the boundaries they helped to establish. Board members must be cognizant of the lengthy list of risks that exist. Be it:
Fifty years. That's how long it has been since Japanese manufacturers introduced the world to “just-in-time” production methods. Toyota is credited as the initial birthplace of this methodology, which is aimed primarily at reducing flow times within production systems as well as response times from suppliers and customers. A huge aspect of this process is understanding production schedules and timelines and making sure that inputs, resources and parts are supplied and readily available.
One of the many responsibilities for Boards of Directors is to hire and oversee the compensation and performance of the top executive within their organization. As well, Boards are responsible for establishing the organization's long-term strategic direction. Embracing the “just-in-time” approach and applying it to human capital management will allow Boards to anticipate what executive skills and characteristics are needed, at each stage of their strategic plans.
In the compensation and governance world, it is commonly known that shareholders are relatively quiet when companies are successful and driving returns. However, when things go south, shareholders question more and demand to know how corporate governance can be improved. These demands are accentuated for public pensions. When pension funds are performing well, there is little pressure, but after weathering through the past two recessions and, for some, experiencing co-payment holidays, under-funding status levels are understandably correlated to the increased level of pressure they are experiencing today.
Two Advisory Partners, from Global Governance Advisors, recently presented at the annual NCPERS conference for public pension Chief Investment Officers (CIOs) on how to build and motivate high performance investment teams.
There is a wide array of organizations that exist in the market place:
- privately-owned/publicly traded
- public sector/private sector
And unfortunately, with this variety, there tends to be a false assumption that there shouldn't be a similar array of board governance standards.
The truth is that ALL Boards of Directors operate under the same three fiduciary duties: