BOARD EFFICIENCY:

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BOARD EFFICIENCY

• The Agenda Setting Role and Information Needs of
  the Supervisory Board
• Holly J. Gregory
• Weil, Gotshal Manges LLP

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Board Challenge

• Direct the affairs of the corporation in
  assembling capital, human resources and other
  necessary inputs to produce goods and services
  efficiently
• While holding managers accountable for the use of
  assets provided by others

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• Predicates for Board Efficiency
• Composition - Independence, Expertise
• Committee Structure
• Board Agenda
• Board Access to Information
• Board Self-Evaluation

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Board Functions

• Select, monitor, evaluate, compensate and -- when
  necessary -- replace senior management
• Review and approve strategic and long-term plans
• Monitor corporate performance against plans
• Review and approve material capital allocations,
  financial standards and policies
• Ensure financial control and reporting integrity,
  ethical standards and legal compliance
• Monitor constituent relations
• Organize the board

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Information

• Relevant and timely information is an
  essential predicate for satisfying the boards
  role

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Common Information Needs

• Corporate Performance
• Background Analysis of Major Issues/Transactions
  
• Related Party Transactions Potential Conflicts
  of Interest

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Integrity of information depends on

• Financial information and reporting systems
• Legal compliance and risk assessment systems

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Board Management Interaction

• When does the board expect to be informed by
  management of potential problems?
• When does the board meet without members of
  management present?
• When does the board conduct independent
  investigations and hire its own experts?

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Issues for Board Reflection Evaluation

• Division of authority between the board and
  management
• Matters for the board agenda
• Number and composition of committees
• Information required by the board and its
  committees
• Performance of CEO and board evaluation
• Qualifications for director nominees
• Form of independent leadership
• Limitations on director service
• -- etc.

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Seven Practices to Assist Board Function

• Chief Justice Norman E. Veasey
• Delaware Supreme Court
• A heavy majority of purely independent
  directors
• Board involvement in actual governance
• Regular face-to-face, comprehensive meetings of
  directors
• Regular evaluation of CEO and regular executive
  sessions of independent directors
• Limits on number of boards directors serve on
• Careful review of disclosure documents
• Effective law compliance programs monitored by
  the board

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Building Efficient, Accountable Organizations
Requires

• identity and continuity
• objectives and strategies
• oversight and protection
• accountability
• performance

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Basic Paradigm

• Managers accountable to boards boards
  accountable to shareholders (profit) or for the
  organizations mission (non-profit).

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Comparison of Duties

• Board Leadership
• Chairman
• Organizes work of the board
• Ensures that board duties are carried out

• Company Leadership
• CEO
• Develops effective management team
• Develops and recommends strategy, business plans,
  budgets
• Responsible for corporate activities to achieve
  corporate strategy and plans

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Board Priorities

• Choose best managers available compensate based
  on performance replace when necessary plan for
  succession
• Engage with management in strategic planning and
  monitor performance against strategic and
  business plans
• Ensure that corporate reporting, audit and legal
  compliance systems are in good order
• Review/approve major transactions and
  expenditures
• Ensure that conflict situations are avoided and
  insider transactions are objectively fair to the
  corporation and entire shareholding body
• Determine and demand the information needed to
  govern