Board Meetings: Worst Practices

Factors that Result in an Ineffective Meeting

Ineffective Board and Committee meetings are one of the key factors that inhibit a board from operating most efficiently and helps drive better decision-making. As an advisor to boards, I have participated in hundreds of meetings over the years and have observed both efficient and inefficiently run meetings. Ultimately, the meetings that ran most inefficiently are distracted by trivial issues that delay decision-making.

Four Key Factors That Lead to Ineffective Board or Committee Meeting

1. Poor Time Management

2. Lack of Member Participation

3. Insufficient Time to Review Materials

4. Unprepared Board/Committee Members

Poor Time Management

This occurs in situations where the key issues to be discussed are side-tracked by trivial or unrelated issues that would be better discussed outside of the scheduled meeting time. It also can happen when an insufficient amount of time is allocated to discuss important issues. This means that decisions are either rushed or are deferred until future meetings, which can delay the organization’s overall agenda.

Lack of  Member Participation

This occurs in situations where one to two members of the Board/Committee dominate the conversation while other members are either unable to speak or are less prepared and therefore have little to add to the conversation. This means that the full breadth of views on an issue may not be discussed and considered, which can lead to less effective decision-making. It also can lead certain Board/Committee members, who are unable to participate, to question their relevance and value that they are bringing to the discussion.

Insufficient Time to Review Materials

This occurs in situations where meeting agendas and supporting materials are sent out only one to two days in advance of a meeting. Not only does this provide Board/Committee members with very little time to review materials before the meeting, but it also provides less time to adjust the meeting agenda and associated timelines if it is felt that too little time has been allocated to discuss certain topics.

Unprepared Board/Committee Members

This factor can be influenced by some of the aforementioned issues, but ultimately leads to less effective meetings as Board/Committee members are not able to effectively discuss the important issues or may take things sideways by discussing issues that were already addressed in the meeting materials. If members are not prepared, ineffective decision-making is the result, which ultimately is not in the best interest of the organization.

Effective Meetings Lead to Higher Performance

Ensuring effective meetings of the boards and its committees is key in making sure that your board is performing at a high level. If you find your Board/Committee meetings are less effective, look for signs of this through the factors listed above and read: Creating Board Meetings – Best Practices. By looking at what works best in creating effective meetings, you can improve your board’s overall effectiveness which should lead to better decision-making and positive results for your organization.

Best Practices for Board Meetings

Advice for Efficient and Effective Meetings

Effective Board and Committee meetings are one of the key factors that allow a board from operating most efficiently and helps drive better decision-making. As an advisor to boards, I have participated in hundreds of meetings over the years and have observed both efficient and inefficiently run meetings. Ultimately, the meetings that ran most efficiently allowed the Board/Committee to move forward with its agenda and not be distracted by trivial issues that delay decision-making.

Six Actions to Ensure an Efficient Meeting

1. Development of a clear meeting agenda.

2. Provide enough notice and appropriate materials for members to be prepared.

3. Keep the meeting on time and on topic.

4. Ensure each member is able to voice their views and opinions.

5. Ensure that results are accomplished and/or action items identified.

6.  Include some social interaction and networking time.

Development of a clear meeting agenda

This includes identifying the topic and issues to be discussed during the meeting, so there is no confusion on the purpose of the meeting. The agenda should also include any actions that are required to be taken by the Board/Committee as part of the meeting (i.e. is a topic “for information only” or “does it require a decision”). Identifying who will lead the discussion of each topic must be added to each agenda item. Lastly, each agenda item should have an associated timing, provided in the agenda, so that Board/Committee members have a sense of the timing and importance of the issues to be discussed.

Provide enough notice and appropriate materials for members to be prepared

As a best practice, meeting materials and the agenda should be sent out a minimum of one week before the associated meeting to provide members with sufficient time to review the materials. Some of the boards I have worked with will even send materials out two weeks beforehand and have a pre-meeting internally to discuss materials before the actual meeting date.

Keep the meeting on time and on topic

While this task is one that ultimately is the responsibility of the Board/Committee Chair, it is important that the timelines provided in the agenda are followed. Meetings should not stray too far outside of their purpose. As an extreme example, if your Audit Committee is discussing the organization’s budget, the discussion should not stray into discussing a specific personnel issue around the CEO’s performance or compensation which are unrelated to the topic at hand. If you find your meetings starting to stray off topic, acknowledge the member’s concern as being important but that it be taken off-line and discussed at a later time. This ensures that your meeting stays on schedule and respects all Board/Committee member’s time.

Ensure each member is able to voice their views and opinions

While this task largely falls on the Board/Committee Chair, it is important that all members feel their opinions matter and are provided sufficient time to discuss their views. If you find one to two members dominating the conversation, make sure that once they have finished their point that you then ask other members, who have not had the chance to speak, to weigh in on the topic and provide their perspective. This helps ensure that all members feel like they are providing value to the Board/Committee and that a comprehensive discussion of all potential views can be had amongst the group.

Ensure that results are accomplished and/or action items identified

It is important that any actions required of the Board/Committee relating to the agenda are generally accomplished, as part of the meeting. This means bringing items to a close after an appropriate discussion has been had to ensure things are kept on track. If it is felt that more time is needed to discuss a specific issue, a follow-up action item should be identified, at the very least, so the Board/Committee has specific direction on what the next steps are to come to a resolution on a specific issue.

Include some social interaction and networking time

It is important that you allow Board/Committee members to have some time outside of the scheduled agenda to interact and network amongst each other. This helps to create a positive atmosphere and culture amongst the Board/Committee which will help ensure that all members feel respected and trust can be built. Many boards will schedule Board dinners the night before/after a Board meeting for all members to interact. This can also be done through scheduling team-building experiences/exercises either between meetings or at strategic off-sites where the Board and management are discussing organizational strategy.

Effective Meetings = Positive Results

Ensuring effective meetings of the boards and its committees is key in making sure that your board is performing at a high level. Effective meetings also lead to an appropriate discussion of all relevant issues and opinions amongst its members before actions are taken. If you find your Board/Committee meetings are less effective, look for signs of this through the factors listed above and ask questions about how you and your board can improve. By looking at what works best in creating effective meetings, you can improve your board’s overall effectiveness which should lead to better decision-making and positive results for your organization.

How to Adopt a Dynamic Approach to CEO Compensation

Mitigate Risk and Improve Compliance

CEO compensation governance is fast paced, and it can be seemingly impossible to stay ahead of the ever-changing industry trends. The industry tends to move so quickly that a seasoned executive may not even be aware that they are at risk for creating a Board that is non-compliant when creating dynamic incentive plans for the CEO and other key senior managers.

“Many classical models of CEO compensation consider only a single period, or multiple periods with a single terminal consumption. However, the optimal static contract may be ineffective in a dynamic world. In reality, securities given to incentivize the CEO may lose their power over time: if the firm value declines, options may fall out-of-the-money and bear little sensitivity to the stock price. The CEO may be able to engage in private saving, to achieve a higher future income than intended by the contract, in turn reducing his effort incentives. Single-period contracts can encourage the CEO to engage in short-termism/myopia, i.e., inflate the current stock price at the expense of long-run value. In addition to the above challenges, a dynamic setting provides opportunities to the firm, the firm can reward effort with future rather than current pay.” Alex Edmans, Xavier Gabaix, Tomasz Sadzik, and Yuliy Sannikov; Harvard University

Global Governance Advisors (GGA) provides a wide-ranging review and evaluation of board structure, director pay, governance policies and board performance. We also help to define and articulate each client’s organization compensation philosophy in terms of desired pay positioning, peer group, short and long-term compensation, performance management, succession, retention and recruiting strategies.

Global Governance Advisors works with its clients to address the challenge of creating and maintaining a compliant Board room, by helping Corporate Directors prioritize the following 4 Ps of Effective Corporate Governance:

1. Participation 

An impactful Corporate Director will foster an environment that encourages open dialogue between the Board and management and urges them to engage in human capital discussions. The dialogue and advancement of strong corporate governance is fundamental – not only to your bottom line for the next quarter, but to the long-term goals of your organization for many years to come. All in all, participation is needed to ensure that the Board and management are steadily collaborating to fulfil their compliance requirements.

2. Perception

It’s essential for a Corporate Director to understand his or her shareholders. To accomplish this, Corporate Directors need to work hand in hand with their IR and Corporate Secretary to efficiently monitor the institutional and retail shareholders along with advisory firm guideline changes.

3. Preparedness

Preparation breeds success. To maintain compliance, Corporate Directors must stay prepared and ahead of industry trends including shareholder perspectives, industry, capital markets and exchange rules.

4. Proactivity

Corporate Directors are responsible for completing an annual risk assessment, which includes the production of an annual work plan. Since compensation adjustments work in annual cycles, Corporate Directors need to carve out a sufficient amount of time to efficiently develop annual work plans, prior to the beginning of the new fiscal year. At a minimum, the work plan should reflect the compensation committees charter. To accomplish this, they need to appoint their compensation advisor early so that he or she has ample time to prepare preliminary drafts for the Chair’s review and schedule any pre-meetings. Compensation trends move relatively quickly, and an active advisor with access to deep resources can be invaluable to directors and help management get ahead of potential issues before they may arise.

Global Governance Advisors (GGA) is a top 5 North American Human Capital Management firm that services boards of directors and senior management by providing transformative Human Capital Management governance advisory services.

The Power of Board Assessments

Board assessments are a powerful tool that can be used to evaluate the ongoing performance of your Board and ensure that you are following proper governance practices.

The board assessment process helps directors answer the important questions, such as:

  1. Do all directors understand the organization’s short and long-term strategies?
  2. Are directors and the executive team aligned on the organization’s strategy?
  3. Do directors understand the factors that drive the organization’s success, as well as the risk elements that can destroy value?
  4. Are there disputes or other issues between the directors and management, that impede smooth functioning of the Board?
  5. Do the Board and management understand their respective roles, so that there is clarity on both sides?

There are three types of board assessments:

Overall Board Assessments, Committee Assessments, and Peer Assessments. 98% of Boards assess their Overall Board performance, and over the past few years there has been an increase in the importance of Committee Evaluations and Peer Evaluations at 85% and 38% of Boards respectively, according to research conducted by Spencer Stuart. Organizations can also use the board assessment process to have directors reflect on their own performance, using self-evaluation questions, but this is less prevalent in the marketplace.

Board Assessments Continue to Evolve:

Evaluating your Board’s performance is a critical step in ensuring that you, as a director, are fulfilling your fiduciary duties. While this used to be done in a vacuum informally through individual one-on-one conversations between the Board Chair and individual directors, it has evolved into a much more robust process that involves post-meeting assessments, but also formal assessments of Board, Committee and Peer performance on a regular basis.

With the increased pressure and workload being placed on Boards of Directors in today’s marketplace, it is critical that you evaluate your Board’s performance on a regular basis. Regular board assessments can act as a powerful tool in identifying areas for continuous improvement to ensure that your Board is fulfilling its fiduciary obligations and ensuring the long-term sustainability of your organization.

Striving for Good Governance Should be Universal

There is a wide array of organizations that exist in the market place:

  • for-profit/not-for-profit
  • 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:

  1. Loyalty;
  2. Prudence; and
  3. Impartiality.

Whether you sit on the Board of Alphabet, a charity, or your local condo board, ALL Boards must do their best to adhere to these same duties. Quite often, Board members suspect that because they are “only” on a board for a not-for-profit, start-up, small privately-owned company, etc. they don’t need to adhere to the same expectations/obligations of a larger, more complex organization.

Prudence is defined by Merriam-Webster as “the ability to govern and discipline oneself by the use of reason” which is why the “reasonable person” test is often applied to Board member actions whenever legal action is taken against them.

In any type of organization, Board members often know that there is, or should be, a better way to conduct their Board activities and complete their annual workplans, and it is fair to argue that in such cases, reasonable people should investigate what that improvement should be. Regardless of our level of skill or experience, all Board members experience a time when something doesn’t seem right or does not pass our personal “smell test.” What we often miss is that, if we feel that things could improve, there is a very high probability that there are others on our Board that feel the same way.

However, the identification of problems or shortcomings is a thing that we, as Board members, often shy away from because it requires us to either admit our own failings, the failings of our Board colleagues, or the failings of our entire Board. Whatever the issue, the duty of Prudence should compel us to act. But what is the best way for us to proceed without potentially embarrassing ourselves or our colleagues?

Board Effectiveness Assessments are a current governance best practice and an easy tool that Boards use to identify shortcomings, establish improvement plans, and track their progress. Board Effectiveness Assessments are annual board surveys that help Board members improve their collective ability to oversee their organization and ensure that they are prudently looking for ways to improve. Specifically, there are several benefits that Effectiveness Assessments provide:

  1. Understanding that most problems are often identified by more than one Board member. Collectively completing an effectiveness questionnaire enables members to collect views and opinions on Board practices and mutually identify areas where there are or could be problems.
  2. The surveys safeguard reputations and relationships because individual responses are often kept anonymous and aggregated with the other responses.
  3. Boards easily use the findings to establish proactive development plans that help them become more effective by improve shortcomings.
  4. Year over year results clearly show if a Board is making progress toward improving problematic areas.

If, for any reason, your Board has shied away from conducting such an assessment, or has not conducted one for a long while, the duty of prudence should compel us to ask “Why?” Regardless of the type of organization you oversee, the same fiduciary duties apply to ALL Boards, and ALL Boards should reasonably strive to be the most effective they can possibly be while fulfilling their Board duties.

Three Types of Board Assessments

Board Assessments that Benefit an Organization’s Board Governance Practice

Board assessments can range in scope from simple, post Board meeting questionnaire of 5 to 10 questions on how to improve future meetings to detailed reviews at the end of the year that cover not only Board performance, but also director’s views on Committee performance and their peers’ performance. While organizations tended to conduct these types of assessments internally in the past, more and more organizations are relying on independent third parties to help them during the assessment with 45% of Boards reporting the use of consultants during their Board assessment, according to a recent Global Board survey, conducted by InterSearch and Board Network.

There are three types of Board Assessments that will benefit an organization’s board governance practices:

Overall Board Assessments

This is the most common assessment utilized by Boards and involves having directors evaluate the Board’s overall performance by asking questions relating to:

  • The Board’s overall understanding of organizational strategy
  • Director skills and competencies
  • Board Chair performance
  • The effectiveness of Board meetings
  • Board meeting materials and preparation time for meetings
  • Director relationships and collegiality
  • Director orientation

Typically, questions are provided with a 1 to 5 rating scale format and directors are given the chance to leave a  comment  where they may have evaluated performance at a low level (e.g. a rating of 1 or 2). Once the ratings from each director are consolidated, the range and average of ratings are generated for each question. From there, the Board is easily able to identify those areas where they have assessed performance as being weaker (i.e. Average Rating of 3 or lower) and is able to develop action plans to improve performance.

Committee Assessments

This is another common assessment utilized by Boards and involves having committee members evaluate the performance of the committees they participate in by asking questions relating to:

  • Committee Chair performance
  • The effectiveness of Committee meetings
  • Committee meeting materials and preparation time for meetings
  • Access to management and independent advisors

Like the Overall Board Assessment, a 1 to 5 rating scale questionnaire can be used to evaluate performance in these areas and, in turn, weaknesses can be identified and addressed through appropriate action plans to improve committee performance.

Peer Assessments

This is the least common assessment. Boards use it as a professional development exercise for directors and as part of the annual re-nomination and director selection process. Directors can evaluate their peers’ performance in several areas, including:

  • Meeting preparedness
  • Knowledge of the organization
  • Level of engagement
  • Understanding of their role
  • Collegiality and ability to work with other directors
  • Contribution to the Board

Peers can also be evaluated on a 1 to 5 rating scale using a questionnaire with directors who receive lower average ratings identified quite clearly. The evaluation can identify “problem” directors who can then be provided with the opportunity to improve their performance or resign well in advance of the re-nomination process.

Following Up on the Results of the Questionnaire

The most powerful used of the questionnaire is combing the results with individual follow-up interviews. The follow-up interviews can help the directors identify why they rated certain areas higher or lower and explore specific ways for the Board, Committees, and Peers to improve their performance. The feedback from these interviews must be kept confidential, with only the high-level themes of the interviews summarized. After the questionnaires and interviews are completed, boards can use the results to develop strong action plans that will establish specific ways in which performance can be improved.

GGA notes that communicating the results of the assessment (specifically peer evaluations) is a sensitive issue and typically is handled by either the Board Chair, Governance Committee Chair or an independent third party. Typically, the summary results are provided to the full Board, along with any action plans required to improve performance moving forward. Peer Assessment results are typically discussed individually with each director. Conversations with directors on their own performance are sensitive matters, so effective and diplomatic communication is required by whoever is delivering the feedback. They must identify existing areas of strength and contributions, so that they understand where they are already effective. When raising shortcomings, they must provide specific examples and keep comments constructive by avoiding personality-related comments. Most importantly, they cannot dodge the sensitive issues. Sensitive issues must be addressed for improvements to be made.