Board of Directors
Here are 10 Questions you should cover off before signing up as a Director with a non-profit Board. As a Director, ignorance is not bliss; it is your job to know about risks. You will demonstrate a lot of sophistication if you ask these questions before agreeing to join.
Non-profit organizations (NPOs) are governed by a board of highly skilled directors. While significant advances in technology and education have taken place over the past few years, director training has essentially remained the same for the past 20 years.
It is hardly surprising that boards do not focus on value creation, strategic planning, or maximizing company performance, survey after survey, as much as they do on compliance. Their compensation structure does not incent them to. Here is what is needed to align director pay with shareholder interests:
One of the best pieces of advice I've ever received as it relates to starting or building a business is this: Get a board of directors. Why would someone running a business want a board of directors? That's a great question and here is my humble opinion: Starting and running a company is hard work and at times it can be damn lonely.
What follows is a series of recommendations that could apply to any public board to: make it more focused on value creation; to strengthen real director independence, including from management; to strengthen management accountability to the board; and to strengthen board accountability to shareholders.
There is a concept, called short-termism, which could devastate finances in the future, and has in the past devastated the millions who rely on their paycheques or pensions in the corporate world.
I recently trained a group of directors and CEOs from the banking and agricultural sectors in Texas and Arizona. We discussed mutual expectations on the part of the board and management. The following represents the output of these discussions, which could apply to a variety of boards.
Trust at the board level is necessary at three intersection points: board and CEO, board member to board member, and CEO to C-suite. Why does trust matter? Think about the transactional costs of a low-trust relationship. In low trust relationships, suspicion abounds and parties feel compelled to paper every decision and every discussion. What can boards and executives do about this? Here is some advice.
Placing a price on carbon of anywhere from $10 to $80 a tonne can have a profound effect on business planning. It can help a company cut costs, while dramatically reducing its risk and exposure to rising energy prices and a price being put on carbon. Which brings us to an important question...
Only 150 out of 1000 Canadian companies had any diversity on boards. What is the business case for diversity on boards? There is no clear evidence that diverse boards create greater shareholder value. There is, however, evidence that diverse groups make better decisions and mitigate group-think.