How to Effectively Take Board Meeting Minutes

by | Jul 5, 2018 | Governance, Meeting Effectiveness, Productivity

Tips to Make Minute Taking Efficient & Reliable

The number of times a board meets each year varies and is dependent on each individual board’s goals. Some boards will only meet once – at their annual general meeting (AGM) – and others will meet multiple times. Regardless of how many times a board meets, one task is universal throughout all board rooms. During each meeting, board meeting minutes are recorded.

Board meeting minutes are an official record of what occurs during the meeting. The role  of minute-taker is of utmost importance, and typically the Company Secretary does most of the writing and recording of the minutes. However, it is up to the remaining board members to review the minutes and make sure that the record accurately depicts their intentions.

Why are Board Meeting Minutes Important?

It is vital for a board to understand the importance of meeting minutes. Meeting minutes are the historical record of a board’s plans – short and long-term. Furthermore, meeting minutes assist in interactions with the IRS. The IRS or auditors have the power to challenge the record and compare it with tax returns. Having accurate records are necessary, especially since meeting minutes may be used as evidence, in court.

Planning and Preparing for Meetings

To avoid playing catch-up during a meeting, the minute-taker can benefit tremendously from using a template for following along in the meeting. It’s essential for company secretaries to budget enough time to prepare and plan for the meeting. Several meeting minutes can be pre-filled, such as location, meeting type, date, time and attendance (if the minute-taker or the Board Chair has a list of those who said they were coming and those who said they couldn’t attend). It is also important to record the start time of the meeting and the name of the person who is acting as minute-taker and recording and transcribing the minutes.

Taking the Board Meeting Minutes

Minute-takers must know what types of information should be reflected on the record. In essence, meeting minutes drive the needed actions of the board members and they detail the board’s expectations of who needs to take action; what they need to do; and when they will complete their tasks.

How to Build & Motivate High Performance Investment Teams

by | Jul 5, 2018 | Executive Compensation, Governance, Pension Funds

A Summary of Our Presentation at the NCPERS Conference

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.

Two Aspects of Building High-Performance Teams

The presentation focused on two critical points:

  1. Ensure that the compensation plan’s offering is fair and/or competitive to attract and retain key personnel.
  2. Establish an “at-risk pay” plan that effectively acknowledges and rewards investment staff for performance and contribution toward achieving higher returns for their pension funds.

Public pensions throughout North America need investment professionals to help manage the trillions of collective dollars with which they are intrusted. Public Pensions are competing with a private sector financial community that historically pays their employees at highly competitive compensation levels. The success of working in this sector is easily reflected in the 2018 Forbes World’s Billionaires list where 14% made their fortunes in the finance and investments industry – the highest-ranking industry represented in this list. It’s important to understand what other public funds are doing in the way of competing in the private market of pension compensation.

Positively designed “at-risk” incentive plans are easy ways to be competitive, reward employees for their performance, and mitigate risk. In the compensation world, the total opportunity is what is most important. By providing a reasonable base salary public fund boards can supplement salary with an incentive that will only pay out if positive results/performance is achieved.

What is the value to the fund if the performance increases by 5%, 10%, 20% or more? And, is that increased performance worth additional compensation?

Working in both the public and private sectors, GGA recognizes that public perception and headline risk are real obstacles for public pensions. As a result, public pensions will struggle to be competitive if they do not arm themselves with the objective facts. A few years ago, one of our clients struggled with higher than normal attrition; as well as difficulties hiring new investment staff. They theorized that they were not competitive nationally and were especially not competitive in their local community where several large public funds competed for talent.

They too, were straddled with public pressures and publicly dictated pay bands but wanted to objectively investigate their overall competitiveness. On behalf of this client, GGA conducted a nation-wide custom compensation survey and determined that their investment team positions were below the national levels for similar positions within public pensions. More importantly, the study showed that not only were they below the national levels, they were substantially below the compensation levels offered within their own community. Now, armed with current objective data, they were able to argue the case that adjustments were required if they were to continue to managing billions of dollars on their members’ behalf. The resulting increase in performance changed the fortunes of the fund.

At no point do we claim that it is easy for public funds to raise their compensation levels or implement incentive plans. However, if boards of trustees and executive teams throw up their hands and claim defeat before they try to proactively manage their teams, then they will continue to lose staff or fail to attract and retain the skilled professionals they need to grow their fund’s assets and protect the financial well-being of their members. Building your arguments on current objective facts and calculating how at-risk incentives can drive performance and higher returns will only strengthen your case and get you what you need to be successful.

How to Adopt a Dynamic Approach to CEO Compensation

by | Jul 5, 2018 | Board Dynamics, Executive Compensation, Governance, Leadership

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

by | Jul 5, 2018 | Board Dynamics, Governance

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

by | Jul 5, 2018 | Board Dynamics, Governance, Leadership

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

by | Jul 5, 2018 | Board Dynamics, Governance, Leadership, Organizational Development

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.