Last month I had the pleasure of attending the 2011 ICD (Institute of Corporate Directors) annual conference and fellowship awards gala. More than two dozen high profile Canadian business leaders and directors (with the exception of one American and one Brit) filled the day with speeches and panel discussions.
There were a few ideas put forward that particularly stayed with me, which I thought were worth sharing.
For example, Bob Posen, Chairman Emeritus of MFS Investment Management and senior lecturer at Harvard Business School, made some very powerful comments about the responsibility directors have to get involved with the businesses they oversee. Posen said, “Directors should spend more time on each board they sit on, and the additional time should be devoted to going out and seeing the business. They should visit the business not in an organized field trip with the whole board, but they should go alone and they should talk to people in the organization.” He also said, “The most important responsibilities of the Board are: #1 – pick the right CEO #2 – Executive compensation.” These last comments were, of course, music to my ears.
I was also struck by a few of the statements made by David O’Brien, Chair of the Royal Bank of Canada and EnCana Corporation. He said, “Canadian boards are healthier than US boards in the way they are able to challenge management.” He went on to say, “The Chief Risk Officer, Internal Auditor, and CFO should have direct access to the Risk and Audit Committee and should be able to raise any issues they think are important.” I think the same should be true of the Chief HR Officer. The senior HR executives should have a direct working relationship with the Chair of the HR and Compensation Committee. He/she should have time alone with the committee without the CEO present, and everyone should understand that it is his/her duty to discuss issues fairly and openly with the committee.
I also liked one of the suggestions made by John Thompson, Former Chair of the TD Bank Financial Group. He said, “The Board should receive a dashboard every month showing red, yellow, green on each of the various risk factors.” Why not also do this once a quarter for the board on all of the key goals and objectives for the CEO and the organization – a dashboard showing green (on target for successful completion), yellow (some progress made, but may not fully meet deadlines) and red (risk of not being accomplished on time, or at all).
Finally, one of my mentors, Purdy Crawford, Counsel with Osler Hoskin & Harcourt LLP and former Chair and CEO Imasco Limited, said, “Many boards and CEOs now realize that the Board is the boss of the CEO. ….this is a shift in the balance of power and was not always so.” I agree that this is an important shift and one that many boards have not yet made. Boards tend to be very comfortable with the role of advisor – when they discuss strategy, operating results, major initiatives, and risks. They are also comfortable and more competent now in the role of the watchdog – auditing the financials and making sure all affairs are being done ethically. But many are still uncomfortable donning the “Boss” hat – when it is time to evaluate the CEO’s performance, provide performance feedback to the CEO, and discuss whether the CEO has the right skills to lead the company through the next few years. In Purdy’s words, “One of the biggest risks for many companies is the quality of succession in the long term.”