Navigating the Future

The Board Work Ahead
Evaluating Your Board for 2023 and
Plans for Beyond
9/22/2023
Boardwise, Inc.. - All Rights Reserved

What it Takes
9/22/2023

Let’s Start With: Why Governance At All?
• Why do laws around the globe call for
governance by boards?
• How did elected boards of directors become the
accepted mode of corporate governance ?
One Exception
9/22/2023
Boardwise Ltd. - All Rights Reserved
Finland

Beliefs That Led to Popularity of Boards
Groups make better decisions than CEO’s
do with personal judgment alone
More likely to ferret out the truth and make
superior decisions
Fair means of representation of
shareholders and mediation of claims
related to distribution of interests of
stakeholders
What touches all shall be consented to by all
Protect people’s interests better
Need for central management – practical
way to handle numerous, remote owners
Practical way to convene when entire assembly
is impossible
Monitoring of management
Check against misdeeds
Improves and enhances performance
9/22/2023

Board-Centered Model
Company managed under supervision of directors
 Shareholders elect board members
 Directors as peers decide together
 Boards select committee heads, CEO
and senior officers
Balance of Power
Shareholder
Director Director
Executives
9/22/2023

A Bit Of History:
When Did We Turn a Serious Eye to Board Performance
9/22/2023

Our National Philosophy About Governance Affects How We Set
Structure, Regulations and Compliance
Orientation Belief About Governance
Checks and Balances Distribute power to avoid abuse
Behavior Define clear ethics, moral rules, hire with
integrity
Market Discipline Market pressures improve governance
Rules and Processes Apply strong rules and processes and monitor
Marketing Ordering Fix the overall system within a market sector and
governance will improve; e.g., overhaul the banks
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Five Main Philosophies

Source: Frijns 2009
Government
Economists
Governance profile before the financial crisis
9/22/2023

Source: Frijns 2009
Government
Economists
Governance profile after the financial crisis
9/22/2023

Globally, Boards Went Under Scrutiny to Change
.
Structure
Leadership
Accountability
Skills and
Competencies Fit
Process
Efficiencies
9/22/2023

Early Reactions: Evaluating Board Performance
Where are your clients along this continuum?
Scofflaw
insulted by over-
regulation, ignores
the evaluation
process, wait and
see if we get
caught and then
plead ignorance
Perfunctory
ask GC to make
compliance checklist
and file the proxy
items for them;
trivialize the effort
delegated to GC
Back-slappers
Allocates 5 minutes at
board meeting to ask
“How’d we do?” Have a
group nod, pat each
other on the back for a
job well done. Mocks the
purpose of evaluation.
Conflicted
Ask a third party
to evaluate but
choose one with
direct conflict of
interest, e.g,
search firms
Half a Deck
Assess but not
thoroughly; focus on
select topics, e.g.,
processes, structure,
committee structure but
ignore group dynamics,
committee leadership or
information symmetry
Controllers
Conduct their
own, subjectively,
compromised
9/22/2023

Evaluating Board PerformanceGraduating to what works
Personal Best
Conducts annual evaluation comparing relative progress;
athlete’s approach to incremental improvement
Normative Best Practices
Conduct annual evaluation with a common set of
indicators , comparing to norms within their industry peers
or comparable-sized companies. Learn about best
practices to accelerate improvements. Evaluate across 12-
10 key performance criteria and track impact of
governance on corporate performance , year after year.
Directors demonstrate deep commitment to learn, share
and improve.
9/22/2023

Best Practice Today: Independent Reviews
• Bring an objective, cost-effective, standards-
based approach to evaluations which provides
more robust, useful data and solutions to
governance improvement;
• Address the rapidly escalating regulatory
requirements for dynamic changes in data to
disclose;
• Maintain accurate governance and corporate
performance data over time, to determine what
factors contribute to sustained governance
excellence;
• Provide reliable performance improvement and
best practices to boards for adoption;
• Provide the optimal source for qualified directors
for global companies;
• Be the source for thought leadership in global
governance, based on the intellectual property
within the database maintained.
A No Conflict of Interest
Approach
• Secure objective third
party to perform
evaluations, maintains
directories and conducts
research and education.
It should not provide
consulting services for
remediation
improvement.
• It can refer to
established strategic
partners
9/22/2023

Board Evaluation: Topics Reviewed
 Board access to information
 Board composition
 Board meeting quality and effectiveness
 Board accountability
 Board committee effectiveness
 Board member interaction
 Board standards of conduct
 Board evaluation of company management
 Management-board relations
 Board leadership
 Director self assessment
 Director peer evaluation
 Risk mitigation
 Board compensation
 Board potential
 Board philosophy and institutional framework
 Personal demographics: diversity and problem-solving orientation
 Corporate disclosure and compliance
Tied to….
 Corporate performance metrics and
 Industry and global best practices
™
9/22/2023

9/22/2023
Forces At
Play
Meeting expectations of sophisticated shareholders and stakeholders
with more interactions with boards and management
Slower to market
Stricter requirements for access to institutional investor funds
Disclosure and fuller formal transparency
Data management for evidence companies meet standards as
responsible on issues of environment, social and governance
Tighter regulations and reinforcement
Stretching of governance accountability
Trend trendspotting as routine part of the job

Recent Trends to Address
Surges in Activism
 2022 has the highest record for activism activity in
history. Activists' agenda was to take advantage
of low stock prices and stressed financial
forecasts of struggling companies. Their focus
was on company strategy and operational
performance for than past years when the focus
was more on M&A and capital allocations.
 This noted, the jump in activity has produced
higher success for activists. 2022 shows a 200%
increase in adoption of shareholder rights plan
from 2021.
 Preparing and defending again activism has
boards busy with updating their bylaws with
amendments regarding voting and decision
abilities.
Risk Management
 Areas for coverage in risk management are
broadening. To address this, some boards are
separating Audit and Risk Committees into separate
committees: Audit separated from Risk. Others are
revising their committee charters to include the new
duties and systems to monitor critical functions,
safety issues, oversight of the strategies and policies
and practices adopted to address risks.
 The new areas in cybersecurity, cryptocurrency,
ESG, climate, new laws permitting officer
exculpation from personal liability for monetary
damages expands the committee work. It also
requires new expertise to join the boards as new
rules regarding disclosure of expertise on boards is
now an SEC requirement.
9/22/2023

Recent Trends to Address
Board and Management Relationship
 With the expansion of responsibilities, the board
and executive leadership are dealing with new
pressures. Directors must get more involved in
understanding of company operations, challenges
and fiduciary expectations. Directors and
executive are now encouraged to come together
to define their respective roles and
responsibilities and authority to ensure the check
and balance between governance and
management and to uphold a healthy
collaborative partnership.
 Based on our research in 34 countries, the most
highly correlated factor for a high performing
board is the functionality of the group dynamics.
Diversity
 Investor expectations for board diversity includes
firm investor voting policies and proxy advisory
guidelines. The influence from such groups as
Vanguard, Fidelity International and ISS has
impact on practices. By example, ISS
recommends against the Nom and Gov committee
and other directors at a company that has no
woman on the board.
 The disclosure rules regarding diversity are
underway. Nasdaq-listed company mush provide
annual public disclosures of diversity statistics
with a board diversity matrix to comply or
disclose their explanation as to why they do not
meet the objectives.
 Additionally, companies are now subjected to
state diversity laws, which differ by states.
9/22/2023

Now, There is More!
Changes Underway to Address Historically
Shifting
Board Content Expansion
• ESG issues
• Cybersecurity
• Climate change
• Long-term strategy
• Shareholder relations
Board Talent
Adding new subject matter experts to contribute to areas in risk
management for cybersecurity, diversity, environmental changes
and long-term strategic thinking.
Board Size 5-9 directors 9-11 directors
More Board Meetings 6 8-12
Committee Work Changes
• Wider Duties
• Separation of Work
Compensation
Audit& Risk
Human Capital Mgt.
Risk
Finance& Audit
9/22/2023

Changes to Address
New Committees and Structure Changes
 While stock exchange standards call for
companies to have at least three committees –
audit, nomination and governance and
compensation – the majority of boards of large
companies have evolved to four or five
committees and are now growing even more.
 As of June, 2022, the S&P 500 companies
with now six committees has grown to 13% this
year.
 To be fair, smaller companies with
revenues less than $100 million have three or
fewer committees and fewer directors currently.
 By industry, the types of companies taking
the lead in expanding their committees are in
financial, materials and utilities sectors. Others
are beginning to follow.
The growth and change in committee types is important to evaluate for
your board planning. The new ones emerging are:
Committees % of S&P Co. with Committee in Place
 Executive Committee 30%
 Finance Committee 27%
 Science and Technology Committees 16%
 Risk Committee 13%
 Health/Environmental Safety Committees 11%
9/22/2023

Evolution of Governance:
Reframing Core Principles for Future
 Purpose
 Accountability
 Objectivity
 Information Agenda
 Board-Mgt. Relations
 Strategy/Risk
 Company Talent Composition
 Company/Bd. Culture
 Board Composition Refresh
 Transparency Engagement
American Board Commission/NACD, 2022
Boardwise, Inc.. - All Rights Reserved 9/22/2023

More Talent, More Topics and More Time Ahead!
 Bring your board together to
explore:
 Redesign
 Planning for Work Assignments
and Coordination
 Permanent Education
 Attracting/Retaining Talented
Qualified Directors
 Reframe Governance for Future
9/22/2023
Moving from oversight to the greater context to keep companies accountable to larger stakeholder community

9/22/2023
New
Practices to
Consider
Create and offer director education/sessions on key topics/speakers
at dinner the evening before board meetings or at breakfast before
meetings begin
Learn
Board strategic planning for board members to consider:
•Board’s long-term contributions to business success and
•Best ways to address governance trends, forces and changes ahead
Board
Foresight
Assign directors as mentors for executives in management to
enhance working relationships
Collaborate
Review best practices in governance globally to consider for
adoption
Look Around
Understanding Trends, Changes and Duties in Governance for 2023 and Beyond

Key Skill
It is the most adaptable
organizations that will win,
while every company is a
tech company these days!

High Performance High Impact Boards
9/22/2023

Board Performance and Board Impact: Global Research on Factors that Matter
Factor Low Med High
Frequency of meeting per year 10-19 days 19 days 40 days
Proactive: commissioning reports, requesting information; getting out to meet
customers, stakeholders, staff
Accountability: full board involvement, engagement, participation; full evaluations
of board annually; do homework/prepare for meetings
Deep knowledge/exposure of business and industry
Clear delineation between board and management roles:
Written protocol between board and management duties
Clear delegation of committee work
Clear role of board in strategy as innovative thinkers for the long view; futurists;
analyze value drivers, alternative strategies, use of resources, test ideas
Annual agenda and monitored plans
Regular review and nurture of talent and senior management
Healthy debate, dissent: no subject is undiscussable
Aligned on risk appetite: more focus on risk with separate committee
Transparent communication: bad news/controversial topics brought forward to all;
no factions and back channels of information; employees are open with board
Group chemistry/dynamics: healthy culture; open dissent, respect, trust, candor,
spirited give and take, intelligent questions; diversity of thought
9/22/2023

POLL QUESTION:WHICH FACTOR IS MOST IMPACTFUL?
Factor Low Med High
Clear delineation between board and management roles: effective collaboration
9/22/2023

ANSWER: MOST KEY FACTORS
Factor Low Med High
Clear delineation between board and management roles: effective collaboration
9/22/2023

Board and Executive Collaboration
Board Evaluation New Assessment Tool
9/22/2023
The Board Engagement Module
Evaluates Key Factors for Collaborative Success
 Executive Reporting
 Strategy
 Engagement Dynamics and Trust
 Crisis Management
 Risk Management
 Decision-Making and Prioritization
 Customers, Employees &ESG
 Purpose, Culture and Values

What Makes Great Teams Great
Comparative Study of Teams Which Succeed vs. Fail
 Formal aspects of team
 Attendance
 Training to analyze complex
issues
 Risk awareness
 Age of members
 Size of team
 Capacity to perform
 Failure correlates to
dysfunction within the
social system
Source: Jeffrey Sonnenfeld, Harvard
Business Review, 9/2202
Boardrooms that Work
Australian Institute , 2003
9/22/2023
“Have a robust,
effective social
system with a
virtuous cycle of
respect, trust and
candor.”

Dynamics and Diversity… and a European
Nudge
Defining diversity and its impact
Focus:
Diversity of Thought
9/22/2023

Diversity and Outcomes
 Much of the research focuses on mix
based on gender or ethnicity
Positive impact on….
 Tensile strength for improved decision-making
 Check and balance for debate and discussion
 Increases innovation and creativity
Provided…….Group dynamics operate with clear
rules of engagement and respect for others
A mix of skills, qualifications,
experiences and thinking
styles creates more direct access
to diversity
9/22/2023

For Example…..
Tom Patti
9/22/2023

Stories, for Example…..
Sir Ken Robinson 9/22/2023

Orientation to Problem Solving
9/22/2023
Action Process
Strategy
People

.
Orientations
9/22/2023
ROLE FOCUS SPEED VISION NICKNAME STYLE COMPLAINT
ACTION
ACCOMPLISHER
Results Fast Short-term Long-ranger • Workaholic
• Not time for seminars
• First in still here
• No time for mtgs.
Not enough
time
PROCESS
REGULATORS
Details Slow Narrow Bureaucrat • Meetings every MWF
Arrive/leave same time
• Clean Desk
• Staff comes 1 minute before
• Same meeting agenda for 12yrs.
Not enough
rules
STRATEGY
CREATORS
Change Fast Wide Arsonist • Overloads subordinates
• No fixed time
• No agenda
• Talks too much
• Starts fires; rushing; crisis
• Change priorities
• You can’t disagree with me; I changed my
mind
• No sense of time
Too few good
ideas
PEOPLE
UNITERS
Teamwork Slow Wide Super
Follower
• Gets lots of people involved
• Checks in on everyone
• Incubates on front-end of projects
• Breaks down steps
• Develops/manages great execution
Poor planning
None Survival None None Deadwood • Due to rate of change, can’t keep up
• Finally, someone without issues!
No
complaints

Know Your Governance Style
CHANGE DRIVER
[Micromanager]
UNIFIER
[Compromiser]
CHALLENGER
[Criticizer]
ADVISER | EXPERT
[Patronizer]
STATESMAN
[Politician]
Collective
Dissent
Individual
Consensus
INITIATE = Short-term,
difficult strategic
change
REACT/MONITOR = Short-term,
less difficult strategic change
IMPLEMENT = Long-term,
difficult strategic
change
MAINTAIN = Long-term, less
difficult strategic change
Competencies
: Operating;
strategic; public
sector;
marketing.
Multinational,
global
strategy.
Complex
restructuring.
Divestments.
Acquisitions.
Unfriendly
mergers.
Competencies:
Policy-making;
financial literacy;
marketing;
international.
Replace CEO.
Takeovers.
Counter
strategy.
Turbulent
change.
Competencies:
Legal, human
resources, special.
Monopolistic
environment.
Regulated
change.
Friendly merger.
Strategic
alliances.
Mature industry.
Cooperative
strategies.
Competencies:
Coach and mentor
of CEO and
directors.
Crisis planning
and
management.
External
negotiation.
Succession
planning.
Personal
contacts.
9/22/2023

Diversity by Style - AAA-rated bank
Change
Driver
Challenger
Unifier
Advisor
Expert
Statesman
Micro-
manager
Criticizer
Compromiser
Patronizer
Politician
-100 -90 -80 -70 -60 -50 -40 -30 -20 -10 0 10 20 30 40 50 60 70 80 90 100
9/22/2023

MICROMANAGERS COMPROMISERS
CHANGE DRIVERS
Focus on strategy
and change
UNIFIERS
Focus on people
and cohesion
POLITICIANS
STATESMEN
Focus on Company’s
best interests
CHALLENGERS
Focus on action
and results
ADVISOR EXPERTS
Focus on process
and rules
CRITICIZERS PATRONIZERS
GOVERNING STYLES
FIN TECH CORPORATION
June 2021
■ Large
Investor, Adam ■ Large
Investor, Jim
■ Founder/CEO;
Jason
■ Independent, Donna
■ Medium
Investor, Andrew
 Co-Founder,
Rob

Newest Data
 3000 of the largest publicly traded companies in the US
show causative link between inclusion practices and
better innovation of products and services
 Improvements in financial performance
 Improved returns in hedge funds
 Higher corporate valuations
 Interviews with 160 executives
 80 Women
 80 Men
 Reports of actual outcomes tied to diversity and
inclusion

POLL QUESTION: WHAT IS YOUR STYLE?
9/22/2023
Change Driver
Challenger
Advisor
Expert
Unifer
Statesperson

Board Bona Fide Profiler
9/22/2023
Change Driver
Challenger Statesperson
Unifier
Advisor/Expert

Group Disciplines
 Build boards of highly diverse thinkers
 Provide communication skills, director and
management effectiveness and team
dynamics training, especially in key skills:
 LISTENING
 APPRECIATIVE INQUIRY
 SOCIAL FITNESS
 COURAGEOUS CONVERSATIONS
 PEER-BASED LEADERSHIP
 On-boarding program to engage new
members and build effective relationships
9/22/2023
Boardwise, Ltd. - All Rights Reserved

Personal Disciplines
 Read articles and books from authors with whom you disagree.
 Ask people for their opinions that you know you don’t want to hear.
 Build a 3:1 ratio: Ask 3 questions for every 1 declaration.
 Ask until you understand before declaring a solution.
 Practice and improve your objectivity and accuracy in processing
what you are told.
 Seek and speak the truth.
 Test yourself with flexible thinking games and tools

Resources
STRATEGIQUE -- Making boards future ready with
tools for strategic foresight
falberti@ strategique.us
Long Now Foundation – Futurists on key topics for
long-term thinking https://longnow.org/
The DCRO Risk Governance Institute
https://dcroi.org/Risk - Training/credentialing and
advisor support
Maximize Your Board’sPotential–Globalgovernance
program 10-13th of June 2024, Harvard Faculty Club in
Cambridge, MASS, USA

Questions
9/22/2023

Care to Think Things Over?
Donna Hamlin
dhamlin@hhboardwise.com
510-517-7791
9/22/2023
This Photo by Unknown Author is licensed under CC BY

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