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Building a Better Board

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Title: Avoding the Enron Syndrome Author: Tim Harrington Last modified by: Tim Created Date: 4/9/2003 6:38:15 PM Document presentation format: On-screen Show – PowerPoint PPT presentation

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Title: Building a Better Board


1
Building a Better Board
  • Tim Harrington, CPA
  • T.E.A.M. Resources
  • 7049 E. Tanque Verde Road, PMB 136
  • Tucson, AZ 85715
  • 800-788-9542 e-mail tharrington_at_forTeamResources
    .com

2
Worst Boards
  • Interlocking directorships
  • Holding NO meetings without the CEO present
  • No nominating committee in place
  • Allowing the CEO to handpick directors
  • Awarding contracts to family members
  • Allowing management to be overpaid in
    compensation and deferred compensation
  • Having too many insiders
  • Too many directors on too many boards
  • BusinessWeek, Annual Corporate Board Survey

2
3
Best Boards
  • Independent and interested directors
  • Remain on level of Planning and Policy
  • Plan with clear and measurable goals
  • Monitor plan status regularly
  • Hold periodic meetings without CEO present
  • Develop effective nominating committee
  • Avoid Conflicts of Interest and Nepotism
  • Evaluate CEO based on achievement of plan
  • Compensate CEO based on achievement of plan
  • Evaluate their own performance

3
4
What has been said of Boards
  • Effective governance by a board is a relatively
    rare and unnatural act. Chait
  • There is one thing all boards have in
    commonThey do not function. Drucker
  • Boards tend to be incompetent groups of
    competent individuals. Carver

4
5
The illiterate of the 21st century will not be
those who cannot read and write, but those who
cannot learn, unlearn, and relearn. Alvin
Toffler
5
6
Keys to a Better Board
  • Key 1 Recruit better
  • Key 2 Nominate better
  • Key 3 Evaluate better
  • Key 4 Govern better

6
7
Recruit Better
  • Dont Wait until someone comes to you and asks to
    volunteer!
  • Proactively identify and recruit qualified
    candidates

7
8
Recruit Better
  • Create an Advisory Board
  • Invite key leaders in your field of membership to
    periodically attend meetings
  • Give them a voice
  • Solicit their advice
  • Reward them with dinner or gift for service
  • Dont have to be members
  • Establish a Board Mentor Program
  • Target members on current committees that show
    promise
  • Let them attend meetings with Mentor

8
9
Nominate Better
  • Establish standing Nominating Committee
  • Committee members are assigned to work all year
    to identify prospects

9
10
  • Nominating Committee
  • Made up of people who understand the board
  • Perhaps board members not running for next
    election
  • Identify skills, qualities and experience needed
  • Develop checklists and questionnaires
  • Do not hesitate to eliminate from nomination
    prospective candidates who do not meet
    criteriaThis is a tough, demanding position

10
11
Nominate Better
  • Nominating Committee
  • Must understand how complex credit unions are
    today
  • Should screen candidates with critical eye
  • Should determine how to deal with incumbent
    candidates running again for seat
  • Should use Self-evaluation results to determine
    qualifications
  • Should not accept incumbency as a qualification
    for nomination

11
12
Ways to Improve Board
  • An existing board can be improved thru
  • Election process (doesnt work)
  • Term limits (doesnt work)
  • Self-evaluations (works! But tough to get boards
    to do this)
  • Boards tend to not want to hold themselves
    accountable. But this is CRITICAL!!!

12
13
Evaluate Better
  • Evaluations
  • No better way to improve your board than by
    evaluations
  • Evaluate Board as a whole
  • Evaluate individual members by peers (Structured
    Peer Review)
  • Evaluation of Board meetings

13
14
Evaluate Better
  • Evaluations
  • Self-evaluation is not important to a Board,
  • Self-evaluation is essential to a Board.
  • John Carver

14
15
Evaluate Better
  • What do you do after evaluations
  • If they are all good?
  • Pat yourself on the back and celebrate
  • Check your level of honesty

15
16
Evaluate Better
  • What do you do after evaluations
  • If they are not so good?
  • Meet with member who is falling short
  • Explain to him or her what areas they are week in
  • Help them find education/conferences in that area
  • Monitor that area ongoing

16
17
  • Free Board Evaluation Source
  • http//www.forteamresources.com/board_downloads.ht
    ml
  • Free evaluations you can do yourselfor
    EvalRUs.com

17
18
Govern Better
  • The Board is where
  • all authority resides
  • until some of it
  • is delegated to others.

18
19
MEMBERS
Board
Accountability and Feedback
CEO
Credit Union Operations
19
20
The role is to govern, not to operate the credit
union
  • Oversee and guide the credit union so that the
    members assets are as safe and productive as
    possible.
  • Hire and when necessary, replace management
  • Provide supportive oversight between hire and
    replace
  • Remain independent of management

20
21
How a Board Governs Effectively
  • Establishes clear expectationsPlan
  • Delegates authority to CEO
  • Checks whether those expectations have been
    metMeasurement and Evaluation
  • Responds appropriately to the results
  • Links CEOs evaluation and compensation to
    long-term success of company

21
22
Govern Better
  • CEO is the single point of delegation from the
    Board
  • Board has one employee
  • CEO has one boss, Board as a whole
  • CEO is accountable for meeting the
    Pre-established expectations (Ends)
  • CEO must be delegated all the authority needed to
    match this level of accountability (Means)

22
23
Board Speaks with One Voice
  • Board Speaks with One Voice
  • Statements by individual board members have NO
    AUTHORITY
  • Board speaks authoritatively when it passes an
    official motion or makes an official strategy
  • One Voice or None at All

23
24
Govern Better
  • Whoever is directly responsible for achieving
    the ends must decide which means to use.
  • John Carver

24
25
The Governance Process
Start all over again!
Governance Policies, Strategic Goals and
Measurable Results
Management Carries Out Plans And Policies
Reviews Results, Compares to Plan
Evaluation! Reward Management If plan met or
exceeded
Management
Board (and Management)
Board
Board and Management
25
26
Governance is workingOutside the Box
Values, Mission, Plans, Goals, Policies
Operations at the control of CEO
Member survey Staff survey Mystery Shops Fraud
hotline
Board Packet Dash Board External
Reports Internal feedback systems
External Audit, Internal
Audit Regulatory Exam
26
27
Credit Union Directors Newsletter
  • Boards should meet regularly without management
    present and should evaluate their performance
    every year. Audit committees should meet at least
    four times a year. Boards should be frugal on
    executive pay, decisive when planning CEO
    succession, diligent in oversight
    responsibilities, and quick to act when trouble
    strikes.

27
28
Boards should meet regularly without the CEO
present
  • Allows candid discussion that may be stifled with
    CEO present
  • Allows Boards to remember and practice their
    independence
  • BUT Keep general minutes
  • Inform the CEO what the meeting generally covered
  • This is not a get the CEO session

28
29
Micro-Managing or Rubber Stamping A Difficult
Balance
  • A zealous, conscientious board can micro-manage
  • A trusting board can become a rubber stamp

29
30
Remember who RUNS the Credit Union
  • Board oversees and governs the credit union
  • Management runs the credit union
  • Boards need to define what information they need
    to ascertain that the credit union is heading in
    the right direction
  • But, Boards need to make sure they do not step
    into managing the credit union
  • The line is sometimes thin

30
31
Working Board Managing Board Governing Board Ratifying Board Failing Board
No CEO or Acting CEO Board assumes CEO needs help running org Competent CEO and experienced staff that knows more than board Board hires a good CEO and stays out of his/her way CEO controls Board. Board inactive or ineffective
Small CU Board involved in minutiae, manager of CEO Clear division between Ops and Governance Organization OK but board in decline Financial, audit, or ethical issues
Board doing job of CEO Board assigns tasks to CEO Focused on Board Work, concerned with values Board approves what CEO brings CEO doing job of board
Focus on day-to-day operations Board hands on and proud of it Operates on future/strategic level Out of touch, complacent, delegating Gov. Looking to the past, way behind staff
Short time horizon Focus on administration Operations Delegates Operations to CEO Stale policies, little accountability Not strategic, crippled by in-fighting or inertia
Primary role is operations Primary role is making decisions Primary role is setting policy and general direction Primary role is supporting CEO, rubber stamping Primary role of board is keeping perks
32
  • Try something new.
  • You may be surprised what happens.

32
33
Building a Better Board
  • Tim Harrington, CPA
  • T.E.A.M. Resources
  • 7049 E. Tanque Verde Road, PMB 136
  • Tucson, AZ 85715
  • 800-788-9542 e-mail tharrington_at_forTeamResources
    .com
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