case from strategic perspective

1. How Well-Run Boards
Make Decisions

2. All about the Article
• The structural changes which are happening in the governing body of
the small as well as large corporations.
• The regulations and rules which are incorporated in the corporate
governance and the directors have to comply with them.
• Importance of delegation of authority and bifurcation of decision making
process.
• Followed by the three cases and Conclusion at the end.

3. Drawing the Right Decision-Making Lines
Annual Calendars- Now days, the
organizations have started making
schedules for the major topics the Board
must consider.
Committee Charters- Development of
charters in order to define the decision for
which the board committees are
responsible.
Decision Protocols- There are different
protocols of taking decisions which varies
from company to company. These basically
identifies the criteria to determine the
decisions which are to be taken by the
directors and which are to be shifted to the
Middle level of management.

4. • Description of the decisions which are to be submit for board
considerations at the time of contingencies like-
o Regulatory issues
o Competitor moves
o Technical glitches
This part highly also varies from company to company.
Creating Corporate Governance

5. Companies work according to these guidelines that what are the decisions
which are coming under the span of directors and how those decisions should
be made.

7. • Mary Cantrell, CEO of Universal Investments faced problem regarding
investing in diamond mining companies.
• She asked board of directors to give recommendations.
• John Shore, Universal’s diamond fund manager itself was worried about
the astonishing growth.
• After several months of study and intense discussion with the directors,
the board decided to continue investing in diamond, but to expand to
other precious stones, metals or even coal.
• The board took different decision with what was produced in-front of
them. They also took customers in consideration.
Digging for Diamonds at Universal Investments

8. • Decisions entailing even relatively modest resources should be taken to
the board if they are of strategic significance, because they touch on the
firm’s core values
• Even when directors have the opportunity and resources to carefully vet
the underlying issues, the board can bring invaluable insight and
analysis to bear that is not otherwise available, resulting in a better
company decision than management would have made on its own.
Key Principles Learnt

9. • Boeing was designing a new aircraft.
• Thousands of decisions to be taken ranging from big ones to small ones,
financial to strategic
• Together, they could mean the difference between the airplane’s success
and failure
• Reaching the final design could cost billions of dollars.
• In order to ensure board scrutiny, management broke the overall design
decision into smaller pieces and had the board weigh in at three critical
go or no-go points in the development of the plane.
Designing Boeing’s 787 Aircraft

10. • Key points to decide upon-
i. This task required that the board accurately appraise the future of airline travel.
ii. Airbus A380 was on the premise that a superjumbo, with 555 seats in a three-class
configuration (and 853 if all in coach), would be more appealing than ordinary
jetliners to the carriers in crowded hub-and-spoke airports.
iii. Boeing was banking on a different view of the future. The company believed that
the traditional hub-and-spoke system was breaking down, as passengers
increasingly demanded direct service between two points.
iv. The 787 promised just that: Long-haul, point-to-point service for 20% less cost
because of its new weight-saving technologies and its more modest capacity of 200
to 300 seats.
• Points raised by the Board
i. Was the hub-and-spoke scheme really destined to disappear?
ii. Was the point-to-point scenario economically feasible for airlines?
1. To review and approve a multibillion-dollar budget
and a timeline for the aircraft’s development

11. • Key points to decide upon-
i. To authorize such sales calls, the board had to be confident that Boeing
could manufacture the 787 with the promised performance at the
promised price by the promised date.
ii. The new airliner was to be built with a higher percentage of lightweight,
high-strength composite materials that would allow for lower costs and
increased creature comforts, like higher humidity (the composite would
not corrode with greater moisture).
iii. But the board was not entirely certain that the company could
successfully mould the composites into the larger and more complex
sections envisioned for the 787.
• Points raised by the Board
Directors required executives to present compelling evidence that the 787 could
indeed be built with composites and priced competitively against what Airbus
was expected to offer.
2. Whether the time was right to allow sales managers
to discuss the aircraft’s specifications with the airlines.

12. • Key points to decide upon-
i. It require Boeing to commit additional billions of dollars to the project.
ii. To be convinced that customers would in fact like what they saw.
iii. Then the sales team would be unleashed to secure the written orders upon
which the big bet rested; once signed, those orders called for stiff
penalties, if Boeing failed to deliver as promised.
• Points raised by the Board
The directors pressed management for a detailed production plan and proof
that anticipated engine suppliers General Electric and Rolls-Royce could create
the required thrust at an acceptable price.
3. To give the final go-ahead for production of
the aircraft

13. • The directors insisted on monitoring both manufacturing progress and order
flow.
• Engineers coded their key production stages red, yellow, or green, and
directors pressed them to explain why anything other than green remained.
Steps taken after launch

14. • Management should divide large strategic decisions into smaller pieces
that the board can address sequentially, so the board can give each piece
detailed attention before approaching the next milestone.
• Directors must remain vigilant after making their decisions, following up
with management to ensure that they are effectively implemented and
that the many secondary decisions stemming from the primary decisions
are dealt with as well.
Key Principles learnt

15. • In June 2002, Edward D. Breen replaced Dennis Kozlowski, after he was
imprisoned for fraud and sales tax evasion.
• Kozlowski acquired around 900 companies. He was focused on
acquiring rather than consolidating.
• Breen wanted to disinvest from weak assets and John A. Krol, the new
lead director agree to the point.
• Around 130 units were recognized as weak assets by Martina Hund-
Mejean, Tyco’s new treasurer.
• The board of directors asked for financial and strategic pros & cons of
disposing of each unit.
Shedding Assets at Tyco International

16. • The list shrinked down to 48 units & shedding process was then started.
• Martina kept the directors informed about the divestment with it’s pros
and cons.
• Now the board members also agreed to the team.
• Directors played a strategic role, reviewing each of the proposal instead
of just rubber stamping.
Shedding Assets at Tyco International

17. • Ongoing/Current information should be shared with the board of
directors.
• Directors should helpfully review management proposals before saying .
yes or no
Key Principles learnt

18. • Improved decision making can be generative as well as protective.
• Good decisions about strategy and products can move a business to the
next performance level.
• Directors should be casted as investor-elected monitors of management,
installed to ensure that executives make good decisions or are swiftly
replaced.
• A customized set of guidelines should be created that will promote
effective board decision making—the essence of good governance.
Conclusion

19. Thank You