Board Member Harassment – Indemnification and Insurance Will Not Protect You

by | Sep 2, 2019 | Board Dynamics, Leadership, Organizational Development

I have a daughter, and as the father of a young girl, I naturally worry about her future. How I might protect her; help her develop skills; and prepare her for a successful and fulfilling career? When I think about these things, I worry about what she might endure along her journey and how can I protect her from negative experiences like bullying and harassment? The reality is that, unless the two of us are employed in the same company or she is sitting on the same Boards that I sit on, I will rarely be able to protect her once she is an adult in the professional world.

As a governance advisory professional, all Board actions must be aligned to the fiduciary duties of loyalty, prudence and impartiality and it should always be clear – harassment should never be present or overlooked in the workplace and the boardroom is no exception. Generally, to fulfill these duties, Board members need to adhere to their strategic oversight roles of:

  • Establishing and maintaining a mission and vision;
  • Establishing and maintaining effective policies and procedures; and
  • Monitoring, identifying and mitigating risk.

With a heightened focus on anti-bullying campaigns and the global emergence of the Me-Too Movement, many leaders are challenged to ensure that everyone’s physical and emotional rights are both respected and protected. But what happens when this abuse happens in the boardroom or comes from a Board member? When you consider that most Board members have unfettered access to facilities and staff and are often expected to attend organizational and Board functions outside of their official meeting attendance, the risk of this happening becomes quite substantial.

Harassment is normally defined locally, varies by region, and is generically described by Wikipedia as:

“…a wide range of behaviors of an offensive nature. It is commonly understood as behavior that demeans, humiliates or embarrasses a person, and it is characteristically identified by its unlikelihood in terms of social and moral reasonableness. In the legal sense, these are behaviors that appear to be disturbing, upsetting or threatening.”

Board members should always know they are never protected if they break the law and the current multijurisdictional nature of organizations should make Board members overly sensitive about their actual and/or perceived conduct.

Current harassment laws in North America are rooted in the 1964 US Civil Rights Act and the 1984 Canadian Human Rights Act and depending on the location, the definition of harassment can be either narrowly or broadly defined and if a local definition is not set, then the default is to defer to a federal standard. Therefore, being familiar with only one local definition will not protect Board members whenever they are attending events or meetings in other regions or locations. Many Boards are comprised of members from a wide array of locations and sometimes follow a practice of rotating the location of their in-person meetings.

As well, it is generally understood that workplace harassment does not have to occur within an actual “place of work” and board members need to understand that they are also accountable for their actions when they are not officially in their organization or boardroom. This also applies to when they are:

  • On travel status,
  • At a conference where the attendance is sponsored by their organization,
  • At sponsored training activities/sessions, and
  • At formally sponsored and/or informal social events.

If a harassment charge is brought against a member, the location of the alleged activity will determine what legal definition is used, where the proceedings will take place, and if convicted, where that person may be incarcerated. In both Canada and the United States, the maximum penalty for an indictable harassment conviction is 10 years imprisonment and therefore should be taken very seriously by organisations and their Board members.

Complicating things even further, the broad scope of offensive behaviors and situations outlined in guidance tools produced by legal advisory groups provide lists that often includes:

  • Specific criteria that is normally associated with the act of harassment;
  • Actions that may be conceived as harassment; as well as

Actions that generally are viewed as harassment

In total, these lists typically encompass a large array of possibilities which increases the possibility of a Board member’s actions falling under these described actions or scenarios and if a Board member is formally charged for harassment, indemnify policies and Insurance will not protect them. Identification and Directors & Officers insurance are only in place to protect innocent Board members and therefore, once a charge is laid, the board member(s) is fully responsible for covering their legal fees and will be subjected to the full extent of the law and related convictions.

Most Board members don’t know what they don’t know.

Therefore, it is recommended that all Board members be educated on the laws and legal definitions that pertain to the regions that they will be in and that your Board establish a comprehensive code of conduct that is reviewed and signed by all your members.

Given the extensive list of possibilities, Board members need to be overly sensitive to all potential interpretations of their words and actions and in order to fulfill their fiduciary obligations and mitigate risk, Board members must always maintain their conduct at the highest standard possible. As a Board member you need to also understand that the potential repercussions to you and the organization that you are entrusted to oversee are serious.

 

Effective Board Member Orientation Pays Off

by | Jan 7, 2019 | Board Dynamics, Governance, Leadership, Productivity

Effectively Preparing New Board Members

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.

By not following up with a strong orientation program, boards are not preparing their new members to become true board contributors from day one, which means that they will take roughly their first year to catch up and self-learn as much as they can. Alternatively, boards can be proactive and do their best to prepare new board members upfront and help ensure they hit the ground running and are contributing on day one.

Orientation Packages

As a bare minimum, your board should have an updated orientation package ready for new members the day they are elected. Ideally, this should be kept in an electronic format, updated regularly, and perpetually available to all members. Overall, this should include:

  • A short historical overview of the organization including its mission, vision and values;
  • A year-to-date list of organizational accomplishments;
  • Staff organizational chart;
  • Charter/articles of incorporation;
  • Bylaws and committee mandates;
  • Most recent financial statements (quarterly and audited annual);
  • Most recent strategic plan and approved budget;
  • Approved minutes from the last 3 to 6 meetings;
  • Current board member bios and photos;
  • A list of links to all overarching legislation;
  • All applicable governance policies including the board’s code of conduct;
  • A copy of the director’s & officers liability insurance policy;
  • Yearly calendar of all upcoming board meetings, committee meetings and important events.

Orientation Session

As well, a general orientation session should be offered as soon as possible to help review the high-level elements of the aforementioned documents and to review the board and management’s roles and responsibilities. Understandably, it is the chair and committee chairs that attend and present at this session, but it is also a best practice to make these sessions open to all board members that can attend because it will not only provide a great opportunity for the new members to get to know the board, but also provide a discrete refresher for any board members who may feel that they could benefit but are afraid to ask. Also, in attendance should be key executive staff members who can walk participants through their roles and specific area of responsibility. As an alternative, if a general session is impossible to establish, the second-best option is to set up a day or two of individual meetings with the board chair, each of the committee chairs, and key executives.

Timely Onboarding is Key

Ideally, all of this needs to happen well in advance of the new members’ first board meeting because, by doing so, there will be a higher probability of them participating and/or contributing at an impactful level right from the very beginning. They know that there was a lot of thought put into their election onto your board and that comes with an expectation that they are bringing value to your board. If you don’t help them build momentum from the very beginning, you diminish their potential and full capacity that your board has in effectively overseeing your organization.

Effective Performance Planning

by | Dec 3, 2018 | Board Dynamics, Executive Compensation, Governance, Leadership

All About Motivating the Right Behaviour

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.

Open the Conversation

Organizations are notoriously bad at having “hard conversations” which are discussions on performance, behavior, or anything that can be interpreted as judgmental in any way. This is a problem because all organizations need to deal with negative activities when they arise and, more importantly, inspire the lion share of their employees to perform at their highest level. By doing so, they can maximize outcomes (sales, profits, etc.) and keep stakeholders happy. When it comes to compensation and governance, stakeholders are relatively quiet when organizations are successful and driving higher returns, but when things go south, board pressures increase because stakeholders tend to place more scrutiny on things such as compensation plans and demand changes to corporate governance.

Establish a Schedule

To properly drive performance, organizations need to first establish a schedule and stick to it! You’d be surprised how many boards get around to first discussing annual performance objectives half way through or at the end of the first quarter. This would be like betting on a horse race after the horses are out of the gates and sprinting toward the finish line. Two things happen here, staff feel that first quarter performance is not considered important and agreed targets are easier to hit. If you want employees to perform for the entire fiscal year, logically you need to agree on the performance objectives and targets before the fiscal year begins.

Implement SMARTER Objectives

A reasonable set of SMARTER objectives; Clarity and focus are other elements that help to set an organization up for success. Laundry lists of objectives do little to keep employees focus on essential outcomes and instead, have them struggle with prioritizing their time between multiple objectives that will have minimal impact on their overall incentive reward. Therefore, to help to keep employees focused and driven concise one-page scorecards are ideal and should clearly outline:

  1. Clear performance target expectations; and
  2. All rewards associated with each objective.

Once the performance cycle properly begins, hard discussions should be replaced with proactive coaching conversations focused around the scorecards where employees go into every meeting with absolute clarity on their performance and can engage in win-win conversations in overcoming barriers and/or achieving higher performance levels. Moving away from judgmental conversations and focusing discussions on performance improvement, helps engage employees on a higher level and affirms that everyone wants the same thing – higher performance.

Performance management plan naysayers most likely develop their opinion on experiences and aspects associated with poorly executed and unclear plans that do little to motivate employees. Implementing simple things such as a schedule, scorecards, and win-win coaching conversations go a long way and help ensure that performance remains a priority and that stakeholder expectations are being met.

Risky Business & Board Oversight

by | Oct 29, 2018 | Board Dynamics, Governance, Leadership

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:

  • financial risk,
  • legal risk,
  • human resource risk,
  • governance risk,
  • political risk,
  • cyber risk,
  • social media risk, or
  • headline risk.

Overall, board members need to make sure that they are successfully overseeing risk, asking good questions, and ensuring there are other elements of good governance and risk management are place.

Guiding charters, bylaws, mandates, strategic plans, policies and procedures need to be formulated, implemented and updated regularly because they provide focus and direction to proper oversight and establish a framework and safety net for your board to operate within. Operating without these documents, or failing to update them, will not only put your organization at risk but will also increase your board’s liability. Often, board members don’t realize that guiding documents can help protect board members, if something was ever to go wrong. If something did go wrong, your Board must be able to answer “yes” to the following questions – it will go a long way in protecting board members and the stakeholders they serve.

  • Did the board members act with loyalty, prudence and impartiality?
  • Did the board members act within the guidelines of the existing and relevant policy or procedure?

Given the evolution of cyber threats, protecting confidential or sensitive information is an area that is relatively new to organizations. Over the last decade, many boards have evolved away from printing out and shipping board meeting packages to every member.

  1. With the emergence of email, many boards began to send out board materials electronically.
    • This opened risks to email hacks, the ease of forwarding sensitive material, and fact that material remained accessible on lost or stolen devices.
  2. The provision of document repositories then enabled boards to store and access electronic documents on the internet.
    • Many of these services were not secure which made them vulnerable to hacks.
  3. The emergence of secure digital platforms now enables boards to improve their document security while simultaneously enhancing access to electronic materials and inter-member and stakeholder communication tools.
    • With enhanced security around access, and control, this next evolutionary step is proving to be the logical next step for boards that are concerned about mitigating risk.

Risk is a reality in all organizations and board members need to remain vigilant in its oversight. As seen in guiding frameworks and board materials distribution and communication, things will continue to evolve, and related risks will continue to change. Therefore, board members need to continue to ask good questions, and continue to ensure that their organizations are managing risk in a proactive way and doing what is necessary and required to safeguard themselves, as fiduciary leaders and the organizations they are entrusted to oversee.

Strategy Mapping & Succession Planning

by | Sep 10, 2018 | Executive Compensation, Governance, Leadership, Succession Planning

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.

Ideally, Boards should be mapping their executive succession planning activities to their strategic planning responsibilities to help ensure that they have the right leadership within their strategic evolution. Like just-in-time manufacturing, proper succession planning requires organizations to proactively understand what skills they will need and when they will be needed.

All succession planning should begin with a review of strategic plans to understand what leadership skills are required at each stage. Once Boards have clarity on what will be needed, they will then be able to properly establish an inventory of:

  • What skills they have,
  • What skills can be developed, and
  • What skills should be acquired.

After Boards successfully implement a just-in-time mindset and map their succession responsibilities to their strategic planning responsibilities, they will have positioned their organizations for future success.

Global Governance Advisors (GGA) works solely for the board, in collaboration with senior management. GGA successfully provides expert, state of the art compensation and governance advice without apparent or perceived conflicts of interest. Our Executive Compensation consulting practice implements comprehensive reviews to ensure pay-for-performance linkage, successful succession planning, fulfillment of disclosure requirements and the optimum alignment of compensation to corporate strategy. We provide rigorous competitive assessments of pay levels for Chairman, Committee Chair, Committee Member and Board Director positions. These assessments include key financial metrics relative to peer groups in terms of retainer, meeting fees and equity compensation.