NAVIGATING THE BOARDROOM  40 Maxims ... Things You Must Know and         Do to Be a Great Director                    By: ...
© Dennis D. Pointer, 2008       Greenlake Press       5544 Kenwood Place, North       Seattle, WA 98103           - i-
Washington State Hospital Association               300 Elliot Avenue, West               Seattle, Washington 98119The Was...
Reviews"Easy to digest, practical and condensed wisdom; an essential road map forboth new and experienced directors. This ...
“I have spent 27 years of my life as the CEO of healthcare organizations, apublicly traded company and a start-up IT ventu...
“This concise and practical book captures the challenges, vitality, and com-plexity of healthcare boards. Denny offers can...
Distribution and Use     I’m making this book available free-of-charge for several reasons: First,to facilitate spreading ...
Dennis D. Pointer, Ph.D.     Denny is Austin Ross – Virginia Mason Professor, Department of HealthAdministration, School o...
Letter to ReadersDear Colleagues:     There are approximately 10,000 nonprofit healthcare provider organiza-tion boards in...
shelf pages and download what you find useful/interesting. The website alsocontains a “truck-load” of other governance “kn...
The Maxims1.    Governance matters.2.    Evaluate your interest in, and commitment to, the or-      ganization before serv...
22.   Participate.23.   Question.24.   Play devil’s advocate.25.   Acknowledge conflicts-of-interests and disengage when  ...
1.   Governance matters.                                      agement and physician leaders;                              ...
ers.” Additionally, its quarterly meetings                  attendance and participation.provided her an opportunity to sp...
• am•a•teur (am`ã-tur); A person who                        torship?   engages in an activity as a past-time;   someone la...
• Do you have a director job description           Even if not offered, I think it’s a must to  or position charter I can ...
around the table and having members                   up to speed and begin understanding this      briefly introduce them...
ship                                            • the distinctive nature of a nonprofit                                   ...
ran.                                                     ing boards bear legal fiduciary responsibil-                     ...
directorship                                       board’s most senior, distinguished and                                 ...
plemented by technologies, to                                                              directorship         solve prob...
and managing is fuzzy. Diligent governing          move into a new and highly competitiveto one director is encroaching on...
Health system boards, hospital                               Management’s plans, proposals andboards, medical group boards...
• For your board to be truly                                       cial).      stakeholder-centric it must specify      th...
cense nor a platform for “beating the                 stakeholders always trumps loyalty to the       drum” regarding issu...
this duty.                                                   covered (e.g., the cost of indemnifica-                      ...
tributed an adequate amount of time                       before dealing with important matters  prior to board/committee ...
specifying                                • review/approve key organization-wide                   ORGANIZATIONAL         ...
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  1. 1. NAVIGATING THE BOARDROOM 40 Maxims ... Things You Must Know and Do to Be a Great Director By: Dennis D. Pointer
  2. 2. © Dennis D. Pointer, 2008 Greenlake Press 5544 Kenwood Place, North Seattle, WA 98103 - i-
  3. 3. Washington State Hospital Association 300 Elliot Avenue, West Seattle, Washington 98119The Washington State Hospital Association is pleased to formally sponsor andendorse Navigating the Boardroom. This is a highly practical, useful, empow-ering and beautifully written book. It forwards 40 “shoulds” and “should-nots” directors must heed to really govern plus ensure their boards are mak-ing the most difference and adding the greatest value. WSHA, with the helpof its Hospital Governing Boards Committee and affiliate CEOs, will get thisbook to trustees/commissioners in all the State’s health systems and hospi-tals.Worth mentioning: The book has a reach far broader than the title suggests.Although targeted at healthcare organizations, most of the maxims are appli-cable to other nonprofit, government agency and even commercial corpora-tion directors.Denny has done the field a great service by making a pdf version of the bookavailable as an open-source document.This book has been a long time in the making; Denny has been tossingscraps of paper with ideas scribbled on them in a folder for at least five years.When he talked with me about finally writing Navigating and then giving itaway free-of-charge, I thought he’d lost it. His objective was to get the bookin as many directors’ hands as possible, explaining “a zero price has got tohelp.” Over several lunches plus numerous telephone calls and e-mail ex-changes we discovered that giving something away isn’t that easy; there areno ready-made distribution channels in place for doing so. WSHA and I seekyour assistance in propagating this valuable book; send it to colleagues, di-rect them to www.BoardFood.com (homepage) for downloading or post it oninternet or intranet websites.Leo GreenawaltPresident and CEO - ii -
  4. 4. Reviews"Easy to digest, practical and condensed wisdom; an essential road map forboth new and experienced directors. This is valuable reading for all thosewho are serious about governing." Mark R. Neaman President & CEO Evanston Northwestern Healthcare Evanston, IL"An extraordinary book, very well written. The 40 maxims are right on targetand valuable guides for all trustees. This is a must read." Stephen A. Williams President & CEO Norton Healthcare Louisville, KY“Denny has a nose for understanding best practices and worst mistakes. Helays out ‘rules of the road’ for novice and experienced directors alike. Every-one who enters a health system or hospital boardroom can benefit from thisbook.” J. Knox Singleton President & CEO Inova Health System Falls Church, VA"Denny has pointed his pen and taken aim at directors of healthcare organiza-tions. His 40 maxims provide a much-needed, focused and prescriptive roadmap for greater trusteeship professionalism which, if followed, will result inmore proficient and effective governance." Ken Hanover President & CEO Health Alliance of Greater Cincinnati Cincinnati, OH“All directors should read these 40 Maxims; they will change the way youthink about governing and perform in the boardroom.” Douglas Hawthorne President & CEO Texas Health Resources Arlington, TX“The acid test is: Will these maxims improve director quality and effective-ness? The answer is a resounding ‘absolutely’! Maxim #1 should have been:Read these before embarking on the critical task of governing.” John W. O’Connell President & CEO Franciscan Services Corporation Sylvania, OH - iii -
  5. 5. “I have spent 27 years of my life as the CEO of healthcare organizations, apublicly traded company and a start-up IT venture; I’ve always soughtDenny’s counsel and advice about governance. These maxims will help direc-tors make good boards great. In an era of transparency, boards that heedthese ideas will outshine their counterparts and be of greater value to soci-ety.” R. Timothy Stack President & CEO Piedmont Healthcare Atlanta, GA“A must have resource for all health system and hospital boards; CEOs,chairs and directors should make this valuable book part of their tool box.” David D. Whitaker President & CEO Norman Regional Health System Norman, OK"CEOs are realizing strong, informed and empowered boards are great assetsfor navigating the challenges facing contemporary healthcare organizations.High performance governance requires: boards that engage in best practices;and directors who unde rstand and execute their critical roles. Dennys bookprovides an essential road map for executives, board chairs and directors." Gary S. Kaplan, M.D. Chairman & CEO Virginia Mason Medical Center Seattle, WA“Denny has produced an invaluable guide about the self-care and develop-ment of board officers and members. It is targeted perfectly. I wish such alist of do’s and don’ts had been available when I entered the field in 1955.Clearly, in today’s complex environment, his contribution is of special value.It serves as a powerful guide to strengthen executive-board relationships.” Austin Ross Executive Vice President, Emeritus Virginia Mason Medical Center Seattle, WA“Serving on a governing board is a monumental challenge. For the freshmandirector or more seasoned one, this book lays out key elements of a well or-ganized platform which each director needs to fulfill his/her fiduciary respon-sibilities.” William Himmelsbach Executive Officer, VHA Empire-Metro VHA Senior Vice President New York, NY - iv -
  6. 6. “This concise and practical book captures the challenges, vitality, and com-plexity of healthcare boards. Denny offers candid and straightforward advice,plus numerous anecdotes, drawn from decades of governance consulting, re-search and teaching experience. Navigating the Boardroom provides thought-ful maxims for readers interested in a quick bit of advice or those wantinggreater depth.” Dale Schumacher, M.D., M.P.H. President Rockburn Institute Elkridge, MD - v -
  7. 7. Distribution and Use I’m making this book available free-of-charge for several reasons: First,to facilitate spreading ideas I believe can help directors improve their per-formance/contributions and get more out of the experience serving on non-profit healthcare organization boards. Second, it’s a small way of sayingthanks to the field that has provided me such a meaningful and enjoyable ca-reer. This is an open-source document. As such you may: • print from the pdf file, copy and distribute it in hardcopy; • circulate it as a pdf file; • post it on internet or intranet websites; and/or • employ www.BoardFood.com as a URL for others to download it in pdf format directly from the website’s homepage.Duplication/distribution/posting must be done with full attribution and usedexclusively for non-commercial, educational purposes. Sale or repackaging,in any form, is prohibited. Readers are expected to respect my intellectualproperty and not use this material as the content for other documents orspeeches/prese ntations without my written permission. Navigating the Boardroom: 40 Maxims by Dennis Pointer (Bozeman, MT: Second River Healthcare Press, 2008); ISBN-13 / 978 - 974F8609-6. If you’d like to order a hardcover (“real book”) version, it’s available from: Second River Healthcare Press for information, contact: www.secondriverhealthcare.com 406-586-8775 The price is $19.95.“Ideal for CEOs or chairs who would like to provide board members somethingmore substantial than a 8½ by 11 ‘Xeroxed’ copy of Navigating.” JerryPogue, Publisher; Second River Healthcare Press. - vi -
  8. 8. Dennis D. Pointer, Ph.D. Denny is Austin Ross – Virginia Mason Professor, Department of HealthAdministration, School of Public Health and Community Medicine, Universityof Washington (Seattle). He has held two previous endowed chairs: John J.Hanlon Professor of Health Services, Graduate School of Public Health, SanDiego State University (1991-2002); and Arthur Graham Glasgow Professorof Health Services Management, Department of Health Administration, Medi-cal College of Virginia, Virginia Commonwealth University (1986-1991). From1975 to 1986 he was affiliated with the University of California - Los Angeleswhere he served as: Professor and Head, Program in Health Services Man-agement, School of Public Health; Associate Director, U.C.L.A. Medical Cen-ter; Professor, Anderson School of Management; and Professor of Psychiatryand Bio-behavioral Sciences, School of Medicine. During his tenure atU.C.L.A. he was a Research Fellow at the RAND Corporation. He has heldfaculty appointments at the Mount Sinai School of Medicine (New York) andthe Baruch School of Management of the City University of New York in addi-tion to having served as Associate Director, Department of Teaching Hospi-tals, Association of American Medical Colleges (Washington, D.C.). Denny is the author of eleven books. Really Governing and Board Workhave won the James A. Hamilton book of the year award from the AmericanCollege of Healthcare Executives. His other books include: Getting to Great:Principles of Healthcare Governance; The High Performance Board; TheHealth Care Industry: A Primer for Board Members; Essentials of Health CareOrganization Finance: A Primer for Board Members; and Governing the 21stCentury Nonprofit Healthcare Organization: Transforming the Work and Con-tributions of Your Board (estimated release in early 2009). He has written 80scholarly and professional articles. Principal of Dennis D. Pointer & Associates, Denny has been retained as agovernance consultant, retreat facilitator and speaker by over 250 healthcareorganizations, commercial corporations, governmental agencies and profes-sional/trade associations. He was a founding partner of the AmericanHealthcare Governance and Leadership Group LLC, now the Center forHealthcare Governance of the American Hospital Association. Denny received his Ph.D. from the University of Iowa in hospital andhealth services administration and B.Sc. in organizational psychology fromIowa State University. - vii -
  9. 9. Letter to ReadersDear Colleagues: There are approximately 10,000 nonprofit healthcare provider organiza-tion boards in the U.S., each of which has about 15 members. Thus, thebest-guess number of directors is 150,000. The effectiveness of these boards ... the extent they make a differenceon behalf of their communities and add value to the organizations they gov-ern ... depends on the qualities of directors; their dedication, effort, knowl-edge, skills, experience and perspectives. Although governing is a “teamsport,” it’s practiced by individuals who occupy all those boardroom chairs. The vast governance literature has focused almost exclusively on boards;their obligations, responsibilities and roles; the way they should be struc-tured, configured and composed; how they should function; and what theycan do to improve their performance. Little attention has been accorded di-rectors and directorship. The book was written to begin filling that void. Drivers’ manuals aren’t provided to directors at the time of their initialappointment or during their terms of service. The assumption is that brightpeople will figure out, and pick up the fundamentals of, board work by justdoing it. While experience is a great teacher, it can be enriched, leveragedand enlivened when grounded on good ideas. max•im (mac’sîm); Succinct formulation of a fundamental principle; a guideline for thinking, deciding and acting. Navigating the Boardroom forwards 40 maxims, some things you mustknow and do to maximize your performance and contributions as a nonprofithealthcare organization director, whethe r you’re new or long-tenured. Thebook is straight talk that forwards practical and usable wisdom. This is a product of what I’ve learned over 30 years of governanceconsulting, teaching, research, writing and speaking. I’ve spent a hugeamount of time in boardrooms with directors, both colleagues and clients. Iowe these folks a large debt; they are, in every sense, my co-pilots in thisendeavor (bearing none of the blame for what you might find ill-conceived orpoorly stated). Additionally, it has been my good fortune to have workedwith a bunch of wonderful collaborators/friends over the years. With trepida-tions regarding sins of omission, thanks to (in alphabetical order): GaryAden, Ted Ball, Jim Begun, Rick Carlson, David Cohen, John Colloton, BillDowling, Charlie Ewell, Debbie Gramling, Leo Greenawalt, Jan Jennings, NateKaufman, Dick Knapp, Jennifer Kozakowski, Baldwin Lamson, Sam Levy,Roice Luke, Michele Molden, Jerry Norville, Jamie Orlikoff, Andy Pasternack,Dave Pitts, Jerry Pogue, Austin Ross, Marty Ross, Lou Rossiter, Bob Simmons,Mary Totten, Tim Stack, Dennis Stillman, Will Welton and Steve Williams ...you’ve all enriched my life. I wanted to keep this book short [Maye West was wrong when she said,“Too much of a good thing is great.”] So, rather than including numerousreferenced supplemental materials as appendices, they’re provided atwww.Boardfood.com; go to the navigational aids, other resources or book- - viii -
  10. 10. shelf pages and download what you find useful/interesting. The website alsocontains a “truck-load” of other governance “knowledgeware,” all provided asopen-source documents.DennyDennis D. PointerSeattle, Washingtondennis.pointer@comcast.net - ix -
  11. 11. The Maxims1. Governance matters.2. Evaluate your interest in, and commitment to, the or- ganization before serving or continuing to serve.3. Don’t be a “letterhead” director.4. Become a professional director.5. Know what’s expected of you.6. Get to know your colleagues.7. If you are a newly appointed director, hook up with a mentor.8. Immediately begin acquiring an understanding of gov- ernance and the nature of board work.9. Understand board topography.10. Serve your apprenticeship, but do so quickly.11. Realize governing is a distinctive organizational prac- tice.12. Recognize the difference between governing and man- aging, then respect it.13. Keep your eyes on the prize.14. Don’t represent narrow interests or constituencies.15. Understand your legal fiduciary duties of loyalty, care and obedience in addition to director liabili- ties/protections.16. Understand your board’s governing responsibilities.17. Acquire an increasingly sophisticated unde rstanding of content areas underpinning issues your board will be addressing.18. Develop (or enhance) your healthcare organization- specific financial literacy.19. If you’re the board chair, learn how to run effective and efficient meetings.20. Do your homework.21. Show up. - x -
  12. 12. 22. Participate.23. Question.24. Play devil’s advocate.25. Acknowledge conflicts-of-interests and disengage when you have one.26. Keep sensitive information confidential.27. Be ethical.28. Do governing work only in the boardroom.29. Stroke.30. Don’t make individual requests of the CEO and execu- tive team members.31. Be prepared to vote no.32. Argue in the boardroom, lock arms when you leave it.33. Don’t engage in personal financial dealings with other directors or executives.34. Never do non-governance work for the organization.35. Keep your personal relationship with the CEO at arms- length.36. Provide the CEO with advice and counsel, but be care- ful.37. Be prepared to lead.38. Be a good board and organizational citizen.39. Prior to the conclusion of each term, assess your per- formance and contributions.40. Enjoy the journey and have fun.References and Resources - xi -
  13. 13. 1. Governance matters. agement and physician leaders; boards just get in the way and slow Healthcare organizations are impor- down an organization’s metabolism.tant institutions. They’re a critical part of What do you think? What value canyour community’s infrastructure, provide boards add that executives and phy-services affecting its wellbeing and have a sician leaders can’t? What are thesignificant economic impact. distinctive purpose and contributions of boards? These question are fun- “A board is as high up in an organiza- damental ones, to which I will returntion as one can go and still remain inside later.it” (from Boards that Make a Difference byJohn Carver). Accordingly, your board • What difference does your boardbears ultimate responsibility and account- make and how much value does itability for the organization: everything it add? During the past year, what wereis, does and should become; stewardship your board’s most important contribu-of its resources and capacities; and how tions?well it serves your community. • In what ways has your board been a Because your board is where the buck drag on the organization?stops, its work has a potentially huge im-pact on the organization’s performance • What are some things that have in-and success. The issues your board ad- hibited/impaired your board fromdresses, and decisions it makes regarding maximizing its performance and con-them, defines the organization and shapes tributions?its future. • What do you bring to this boardroom; If you don’t buy the notion that knowledge, skills, experiences andboards make a difference, consider this perspectives? How much of a contri-“reverse angle” thought experiment: Your bution do you make?board has 15 minutes to make decisionsthat would really harm the organization … • What are things you might do to be-strategically, managerially, financially, op- come a better director?erationally or clinically. Could you do it?Every board to which I have posed this 2. Evaluate your interest in, andquestion has responded: “Yes, we’re up commitment to, the organizationto the challenge, it would be easy and before serving or continuing towouldn’t take 15 minutes.” Your board, serve.the work it does and how well it’s donehas a significant impact ... for better or Being a high performing/contributingworse. director requires conside rable time and effort. Personal interest in issues beingdirectorship dealt with by the board should capture your attention and personal commitment to the organization’s mission should sus- • Some contend that boards don’t make tain your involvement over the long haul. a great deal of difference or add Both interest and commitment are neces- much value. They say: directors are sary ingredients for great directorship. amateurs lacking a sophisticated un- derstanding of the healthcare indus- Anecdote: Several years ago a col- try, local markets, community needs, league of mine resigned from a board she competitors and the organizations had joined only 14 months earlier. This they’re governing. They also argue: board was first-rate and appointment to it the few things boards do reasonably was an honor. She had wanted to work well could be done far better by man- with its members, all “movers and shak- - page 1 – © Dennis D. Pointer www.BoardFood.com
  14. 14. ers.” Additionally, its quarterly meetings attendance and participation.provided her an opportunity to spend timewith the CEO, a good friend. The prob- • By taking a seat and then “checkinglem, recognized too late: this organiza- out,” you rob the board of a valuabletion’s mission and issues the board ad- asset.dressed weren’t important to her. Don’tmake a similar mistake. Serve, and continue serving, because you have something to contribute and are will-directorship ing/able to do so. directorship • How invested are you in this organi- zation? What about it is really impor- tant to you? How committed are you • In all communities, the pool of tal- to its vision and mission? How inter- ented/connected leaders is small and ested are you in issues passing such folks are sought by many orga- through the boardroom? nizations to serve on their boards. Your interest, time and effort are fi- • Why did you decide to join this nite and you have a wide variety of board? opportunities for giving something back. Why did you choose this board • Overall, how does this director/board as a way of making a contribution? experience stack up with others you’ve had? • On how many boards do you pres- ently serve? If it’s more than three, • What would cause you to resign? evaluate if you’re spread too thin.3. Don’t be a “letterhead” director. • If you no longer have the necessary time or level of commitment to serve, Being nominated or re-appointed to a consider resigning. Don’t sully yourhealthcare organization board is an honor reputation by poor attendance andand privilege; recognizing you’re a com- problematic performance. Sincemunity leader and a respected person in healthcare organization boards arethe eyes of your peers, plus offering you composed of the most connected andthe opportunity to do important work and respected people in town, wordmake a difference. quickly gets around regarding direc- tors who pull their weight and those Letterhead directors are those who who don’t.want the glory that comes with boardmembership but rarely attend meetings 4. Become a professional director.and don’t participate or contribute much.There are several good reasons, beyond Professionals are typically defined asthe obvious ones, for not being this type of people who engage in occupations full-director: time for pay, whereas amateurs are those who undertake the same endeavors on a • It totally depreciates the value associ- part-time basis without compensation. In ated with board membership you this sense, all board members are ama- wanted when signing on. teurs. But, the following definitions get closer to the essence of these terms. • You’re accountable and potentially li- able for board decisions/actions, even • pro•fes•sion•al (pra`fêsh-a-nal); A when you don’t attend meetings. In- highly committed, knowledgeable, deed, you breach the fiduciary duty of skilled and experienced practitioner. care (see Maxim #15) through non- - page 2 – © Dennis D. Pointer www.BoardFood.com
  15. 15. • am•a•teur (am`ã-tur); A person who torship? engages in an activity as a past-time; someone lacking a high level of so- • Which aspects of your director prac- phistication and competency. tice are professional? Which are amateurish? To make a difference, add value andreally govern, boards must be composed 5. Know what’s expected of you.of pros. Professional directors, as con-trasted to amateurs: The price of admission to the best boardrooms is fulfilling (indeed, exceed- • undertake board service as a vocation ing) expectations. Be clear about what - a role that’s assumed to perform they are. Vague or totally unrealistic ex- important tasks; rather than as a pectations are killers that can sap your hobby, done solely for personal grati- motivation, erode the amount/quality of fication and amusement your participation and impair your effectiveness. • take their responsibilities seriously; they’re not dilettantes Anecdote: I was being interviewed for membership on two nonprofit boards • are committed to representing com- and couldn’t accept both appointments. munity interests; not furthering their Over dinners with the CEOs and board own chairs I asked, “What’s expected of me?” Here (paraphrased) are the responses I • devote considerable time and energy got: Chair A: “Hum, haven’t really to the job; not just enough to get by thought about it. I guess, not too much. We meet every other month for three • are highly knowledgeable, skilled and hours; you’d be expected to serve on experienced; not marginal practitio- several committees and attend our annual ners retreat.” Chair B: “This board takes its work very seriously. We feel governance • are actively engaged; not passive makes a significant difference to our stakeholders and the organization’s long- • are inquisitive and somewhat skepti- term success. The key is great directors cal; not totally accepting who understand what’s expected of them and then deliver. We’ve thought very • function as checks-and-balances; not carefully about this and have developed a “rubber stamps” job description. I should have sent you a copy before this interview, but here it is. • continually increase their competen- Look it over and then let’s talk.” cies; aren’t satisfied with their own status quo directorshipdirectorship When being interviewed for a board seat, here are some questions you might • Who are the pros on your board? ask: Who are the amateurs? What differ- entiates their director practice? • Why am I being considered for ap- Watch the pros and learn from them. pointment to this board? What knowledge, skills, experiences and • All groups typically get what they ex- perspectives are you seeking? What pect and continuously reinforce. To contributions do you think I can what extent, and how, does your make? board encourage professional direc- - page 3 – © Dennis D. Pointer www.BoardFood.com
  16. 16. • Do you have a director job description Even if not offered, I think it’s a must to or position charter I can review? ask for the opportunity to talk with several [This is a benchmark governance current directors. Schedule about an hour practice. If you’d like to see an illus- with each individually. The key topics trative nonprofit healthcare organiza- should be: the nature of their experiences tion director position charter, log-on as directors, both pluses and minuses; to www.BoardFood.com, go to the and general board climate/culture. navigation aids page and download the document.] 6. Get to know your colleagues.• About how many hours per month or Governance is an intensely interper- year should I expect to devote as a sonal activity. The best boards function member of this board? as focused, effective, efficient and creative teams. A necessary prerequisite is mem-• What is the term length and how bers who understand one another and many terms are members expected to where each is coming from. Get to know serve before leaving the board? your fellow directors; their profes- sional/personal histories, perspec-• When does the board meet (day and tives/values, interests, knowl- time)? How many regularly sched- edge/skill/experience mix, why they uled meetings are held each year and choose to serve and continue serving, and how long are they? How many spe- what they want to accomplish. cial meetings were held last year and how long were they? Although directors need not (and probably shouldn’t) be best friends, it’s• On occasion, can I participate in critical they understand and respect one board meetings telephonically? another. Building wholesome and empow- ering interpersonal relationships takes time• On how many committees will I be and effort. This can’t be done through in- required to serve? How often do they teractions in the boardroom alone; there meet and for how long? Do I have isn’t enough time and it’s not a particularly some input regarding committee as- conducive space for doing so. signments? Anecdote: I once sat on a commer-• Does the board hold annual retreats? cial corporation board where the directors Where are they typically held (locally and key executives went on a four-day or at a distant location)? fishing trip each year to an isolated loca- tion. I don’t like to fish and when first• Am I expected to attend extramural told of the annual ritual, I thought it was governance educational confer- an unnecessary boondoggle. After going ences/seminars? If so, how often? on several of them, I came to realize how important they were to our board’s• What type of organizational events healthy/empowering culture and effective will I be asked to attend during the teamwork (one of the best I have ever year? been part of). Members had the opportu- nity to get into each others’ heads and• Will I be expected (either explicitly or skins. It was time and money well spent. implied) to make personal contribu- tions to the organization? If so, what directorship is the norm? Will I be required to so- licit donations from individuals and organizations where I have connec- • I’ve seen boards that don’t give any tions? thought or effort to integrating newly appointed directors, other than going - page 4 – © Dennis D. Pointer www.BoardFood.com
  17. 17. around the table and having members up to speed and begin understanding this briefly introduce themselves. If this terrain in terms of boardroom substance is the extent of it, take the “bull by and dynamics. the horns.” During the first several months of your service, schedule in- My recommendation: Early in your dividual lunch/dinner get-togethers tenure, enlist an experienced director to with all other board members. Rest serve as your mentor; someone that can assured, they will be blown away by help you understand the organization, the the gesture and effort. Use the time board, how it functions and issues coming to build rapport with, and get to before it. know, your colleagues. directorship • Additionally, if not part of your orien- tation, insist the CEO arrange meet- ings for you with each executive team • If your board doesn’t have a formal member. Seize the opportunity to mentoring program as part of its new learn about them and what they do. director orientation (most don’t), talk with the board chair and request that • If your board has someone that pro- someone is assigned to you to play vides staff support (i.e., executive as- this role. The individual should be an sistant, the CEO’s secretary, govern- experienced director (one that’s ex- ance coordinator, corporate secre- ceptionally competent and high tary), take him/her to dinner. More performing) who has the time and than anyone, he/she will be able to skills to work with you for about six provide you with a feel for the “lay of months. I recommend the following the land.” two books on how to craft a produc- tive mentor-mentee relationship: The • What are some things your board Mentee’s Guide to Mentoring by Nor- might do to help directors developing man Cohen; and Power Mentoring: better “interpersonal glue” and build How Successful Mentors and Protégés the team? It need not be a fishing Get the Most Out of Their Relation- trip to an isolated location. For some ships by Ellen Ensher and Susan Mur- ideas, I suggest you consult: The phy. Five Dysfunctions of a Team by Pat- rick Lencioni; and Team Building – • At your first meeting (perhaps during Proven Strategies for Improving Team a long conversation over dinner), get Performance by William Dyer, et. al.1 an initial “navigational fix.” Some things to talk about might include:7. If you are a newly appointed di- rector, hook up with a mentor. - thumb-nail profiles of each director and key executive A good bit of what goes on in board-rooms is rooted in long chains of - strengths and weakne ss of theevents/issues that have evolved over board in terms of how it considerstime, linked to a variety of other matters, and acts upon issues, plans, pro-very subtle, permeated with nuance (i.e., posals and recommendations“politics”) and complex. Additionally,every board has its own distinctive way of - the most important boardroomdoing business. Your success as a direc- norms; rules-of-the-road (rarelytor will depend on how effectively you get formally codified or even dis- cussed) that guide director behav-1 The full citations for these, and all other ior and how business is conductedbooks/articles mentioned in the following pages, areprovided in the “References and Resources” section. - nature of the board-CEO relation- - page 5 – © Dennis D. Pointer www.BoardFood.com
  18. 18. ship • the distinctive nature of a nonprofit healthcare organization’s stakeholders - a brief history of how the board and how they relate to a board’s pur- has evolved and changed over the pose last five years or so; particularly seminal events ... major successes • obligations, responsibilities and roles and failures, how the board coped of nonprofit healthcare organization with them and what was learned boards • Before each board meeting, get on • key factors that drive/affect board the phone with your mentor and performance and contributions spend some time reviewing the agenda. • how boards exercise influence over/in the organizations they govern - What are the key issues (both ex- plicit and below the surface)? • nature of the board–CEO relationship - What is the context and history I will address these topics, very briefly, in surrounding items that will be ad- some of the maxims that follow; but, it’s a dressed? Why are they on the mere “Baskin Robbins taste spoon.” agenda? What is wanted from the board and how can it make a con- directorship tribution? What sensitivities (or- ganizational and personal) might emerge? • To acquire a grounding, I recom- mend: • After each board meeting huddle with your mentor to “re-view” the meeting - Getting to Great: Principles of and how the board went about its Health Care Organization Govern- work, in addition to your own per- ance by Dennis Pointer and James formance/contributions. Orlikoff. This book is less than 200 pages, employs a principles for- • If you’re an experienced director, of- mat, is chock-full of application fer to mentor a newly appointed one. sidebars/guides and written in a You’ll get far more than you give. tight/conversational style. If you want to review the book’s table of8. Immediately begin acquiring an contents, including a listing of the understanding of governance and 72 principles, log-on to the nature of board work. www.BoardFood.com, go to the bookshelf page and download the Like all other types of work, director- document.ship is a practice grounded on a body ofknowledge. You’ll pick up some of this in - The Excellent Board I and the Ex-the boardroom over time. But, the under- cellent Board II by Karen Gardnerlying and essential fundamentals can’t be (editor) is a compendium of theacquired by repeated observation and best articles on a wide variety ofpractice alone; a little formal learning will governance topics taken from Trus-be required. tee Magazine. The best “book knowledge” leavens • If you want to move beyond the ba-experience. Some things about govern- sics, I suggest: Governance as Lead-ance and governing important to under- ership: Reframing the Work of Non-stand are: profit Boards by Richard Chait, et. al; and Boards that Deliver by Ram Cha- - page 6 – © Dennis D. Pointer www.BoardFood.com
  19. 19. ran. ing boards bear legal fiduciary responsibil- ity and accountability for their organiza-9. Understand board topography. tions. Advisory boards don’t ... they pro- vide input, advice and counsel to govern- Nonprofit healthcare organizations are ing boards and/or management.very diverse; accordingly, there’s a widevariety of arrangements for governing There are four primary methods of di-them. It’s important to understand key rector selection: 3features of this terrain. • Appointed - One or more directors are There are two basic governance chosen by (for example): astructure s: centralized and decentralized. stakeholder group such as a sole cor- porate member (parent board in a Centralized health system); or city council for the board of a municipal hospital. BOARD • Elected - Some or all directors are di- rectly elected by (for example): members of the corporation; 4 or the general public in governmental, dis- system or hospital trict hospitals. 5 • Ex officio - One or more directors are appointed to the board because of other positions they hold. Some illus- trations include serving on a board by Decentralized virtue of being: the CEO; system chief/president of the medical staff; president of the volunteer organiza- PARENT BOARD tion or foundation; or holding an elected political office. BOARD BOARD BOARD • Self-selected - Some or all directors subsidiary subsidiary subsidiary are chosen by presently serving board organization organization organization members.In centralized structures, organizationsare governed by a single board. For ex-ample, in centralized healthcare systems,subsidiary organizations don’t have their 3own boards. Decentralized systems are Note: These methods can (and often are) com-composed of a parent and one or more bined in composing a board, for example: some directors are appointed, some are ex-officio and oth-subsidiaries, 2 each of which have boards; ers are self-selected.governing responsibilities are subdivided 4 Although an increasingly ra re governance struc-and shared among them. ture, some nonprofit healthcare organizations have “incorporators”; generally individuals meeting mini- mal criteria who can become members after paying a There are two different types of nominal fee. Typically, their sole function is electingboards: governing and advisory. Govern- directors nominated by the presently serving board. 5 Distric t hospitals are supported by public funds;2 Which could include hospitals, long-term care typically, bonds and property taxes. The taxingfacilities, medical service organization (MSO), medi- authorities are established like school distri cts; vot-cal practices/groups/corporations, a foundation, joint ers elect board members who are public officials.venture corporations, real estate holding company, States with significant numbers of distri ct hospitalsetc. include California, Texas and Washington. - page 7 – © Dennis D. Pointer www.BoardFood.com
  20. 20. directorship board’s most senior, distinguished and accomplished member. A lesson learned the hard way. • Understand the positioning of your board in this terrain, along the key The wise person understands first im- dimensions: pressions are critical because they come - parent/system or subsidiary board first and are hard to undo. - type of board - governing or advi- directorship sory - method(s) of director selection - • What chair you take in the boardroom appointed, elected, ex-officio may be a trivial matter; but what and/or self-selected you say or don’t, isn’t. I recommend sitting back and observing for your • If you serve on the board in a first three or four meetings. When healthcare system that’s decentral- you engage, do so by asking ques- ized: request and review a chart of tions; not the probing type, but it’s governance structure; and ask to rather those designed to seek infor- see a document that specifies how mation, clarification and elaboration. governing responsibilities (see Maxim A person rarely harms oneself by say- #16) are subdivided and coordinated ing too little, at least initially. My among parent and subsidiary boards greatest embarrassments as a new (i.e., who does what). director have come from making an observation or suggestion whe n I10. Serve your apprenticeship, but do didn’t understand context or know so quickly. what I was talking about. If you’re a newly appointed director, • Engage slowly and incrementally overthis particular boardroom is foreign terri- time. Don’t come on like “gang bust-tory. You’ve likely been “plopped down” in ers.”an unfamiliar industry/organization, aredealing with issues you don’t fully under- • Recognize that all boards have wellstand and are interacting with other direc- defined authority/power structurestors who are strangers. You’d be wise to (“pecking orders”). Figure out whatserve an apprenticeship before engaging they are. Enlist your mentor to helpas a full-fledged journeyman; do so, but you here (see Maxim #7).do it quickly. Keep in mind, you were ap-pointed to this board because of your • Use your time as an apprentice to:knowledge/skills/experience and for the get to know your colleague directorscontributions you’ll make. (Maxim #6); gain an understanding of healthcare organization governance Anecdote: In the early 90s, I joined (Maxim #8); and become familiarthe board of a NASDAQ listed healthcare- with the content areas underpinni ngfocused information services company. At issues flowing through the boardroommy first meeting, I walked into the board- (Maxim #17).room and took a seat at the front of thetable, to the chair’s right. As the meeting 11. Realize governing is a distinctiveprogresse d I noticed a bit of uneasiness organizational practice.and some sideways glances. At the breakI pulled an old friend aside who’d been a pra•tice (pràk-`tîcë); An ac-director for several years and asked if tivity employing knowledge (“know- what”) and skillssomething was off. He responded: “You (“know-how”), som etimes sup-sat in John’s chair.” Mr. ______ was the - page 8 – © Dennis D. Pointer www.BoardFood.com
  21. 21. plemented by technologies, to directorship solve problems and seize op- portunities. • Many directors, particularly those who Governance, like management and practice their professions individu-medicine, is a practice; however, when ally/autonomously (e.g., consultants,contrasted with them, it’s distinctive. physicians, lawyers, accountants), of- ten have difficultly adjusting to a First, governance is part-time and oc- board’s collective orientation and col-casional work. While executives, the laborative way of doing business.medical staff and employees are perma- Consensus decision making, afternent organizational fixtures ... directors long deliberation and debate, justare not. Boards convene for short periods goes against their grain. How com-of time, they adjourn and weeks or fortable, experienced and skilled aremonths pass before they meet again. you at playing the team sport of gov- ernance ? Second, due to its part-time nature,board work is episodic and fragmented. • I run across directors who think theyIt’s done in discrete bursts of activity, not can make individual requests of ... orcontinuously. As a consequence, collec- even tell ... executives, managementtive memory and momentum is difficult to staff, employees or physicians “whatsustain. No matter how important the is- to do.” They’re missing one of thesue being addressed, it fades into the most fundamental aspects of govern-background at the end of a meeting and ance as a collaborative practice.must be resurrected at the next one. • Because board attention and work is Third, boards exist only when they inherently fragmented ... memory,meet, between “raps of the gavel.”6 The thrust, follow-through and follow-uptypical nonprofit healthcare organization are often problematic. Systems andboard meets for two – three hours, 11 procedures must be put in place totimes a year; thus, it has only 22 – 33 increase the seamlessness and conti-hours per year to govern one of society’s nuity of governance work. Yourmost important and complex institutions. board might consider implementing a follow-up agenda to track all action Fourth, while management and medi- items for review/assessment at futurecine are individual practices,7 governance meetings. Additionally, I recommendis a “team sport.” A director has no indi- that you retain all board/committeevidual authority and power, as governing meeting agendas and associatedresponsibility rests with the board as a back-up materials for one year. Thiswhole. takes a bit of filing cabinet space, but it’s helpful as a memory refresher and personal tracking system.6 For example: boards, per se, don’t exist whentheir committees meet. Committees are board com- 12. Recognize the difference betweenponents/sub-groups; they can’t (other than in iso- governing and managing, then re-lated and narrow instances), legally or functionally, spect it.discharge full board obligations and responsibili ties.7 I typically get a push-back on this from confer- Management’s job is to run the orga-ence attendees, board retreat participants and mygraduate students; it’s always fun to discuss. nization; the board’s work is to ensureClearly, managerial and medical work is sup- it’s run well. The more your board at-ported/facilitated by many people; it couldn’t be tempts to manage, the less it will governdone without them. However, managerial and clini-cal decisions are made by individuals. My favorite effectively.illustrat ion is asking a physician whose name is onhis/her medical license; it’s he or she, not a group. Clearly, the zone between governing - page 9 – © Dennis D. Pointer www.BoardFood.com
  22. 22. and managing is fuzzy. Diligent governing move into a new and highly competitiveto one director is encroaching on man- market. I started peppering her with rec-agement prerogatives to another. Addi- ommendations. I’ve taught graduate-tionally, the governance-management level courses in competitive strategy forboundary changes over time. For exam- the past 25 years and have done exten-ple: a board might be more directive with sive consulting in this area with botha new, relatively inexperienced CEO than commercial and healthcare organizationwith one who’s done an outstanding job clients. Bob, the President/CEO and boardfor years. chair said: “Denny you’re doing it again; crossing the line and dabbling in man- General principle: the board’s role is agement. I know you’re sinning becauseto frame issues, question, probe and over- I’ve read your book.” Sheepishly, I re-see; management solves problems, plied, “You’re right; let’s move on.”seizes opportunities, executes and runs Driven by my personal interests and de-things. sire to be helpful, I had wandered where I didn’t belong. As an aside, this inter- Illustrations help, here’s one. A fi- change reflects a very healthy boardroomnancial problem arises. Days of cash on climate: the CEO felt comfortable usher-hand have been falling over the last six ing me back to the balcony.months and the organization’s liquidity isthreatened. The board’s job is to: recog- directorshipnize the problem (if it hasn’t already beenidentified and brought to it by manage-ment); understand the context and con- • Pay attention when you begin “drift-tingencies/constraints; explicitly and pre- ing down to the dance floor,” thencisely convey its expectations (the number pull yourself back. This requires con-of days of cash that should be on hand); stant vigilance, because the desire tohold management accountable for formu- be helpful by sharing your expertise islating a plan to correct the problem; and deeply ingrained. This is particularlythen follow-up to ensure management’s true when the issue being discussedplan is having the desired effect. The is in your professional “sweet spot.”board should not spend time discussinghow to solve the problem; this is man- • When a director colleague is ap-agement’s job. Yet, I see boards crossing proaching, or has crosse d, the gov-this governing-management boundary all ernance-management boundary, helpthe time. Such behavior deflects boards pull ‘em back by providing some feed-from what they should be doing, and back; do it lovingly and with humor.wastes a lot of valuable time, while simul- Like the “my sin anecdote,” healthytaneously disempowering executives. boardrooms are characte rized by this type of behavior. Here’s a metaphor I’ve found helpful:The board’s role is to stay in the balcony, • Encourage your board to have a dis-orchestrating and overseeing the dance. cussion regarding the general princi-Management does the dancing. Tempta- ple forwarded in this maxim;tions of the director: Every now and then, whether it should be adopted as adirectors want to take a spin on the dance “running rule” and how directorsfloor; it’s often more fun than just watch- should be reminded of it when theying. Simply: resist it! go astray. An anecdote, my sin: Some years 13. Keep your eyes on the prize.back I was on the board of XYZ Corpora-tion and attending a meeting where the This maxim is a famous quote fromVice President for Business Development Dr. Martin Luther King, Jr.was doing a briefing on a contemplated - page 10 – © Dennis D. Pointer www.BoardFood.com
  23. 23. Health system boards, hospital Management’s plans, proposals andboards, medical group boards, home recommendations are formulated to im-health agency boards, nursing home prove strategic, operational, financialboards, professional/trade association and/or clinical performance. However,boards … quite a diverse lot. But, beyond when they’re being reviewed, discussed,some superficial differences, they have considered and eventually voted on in theidentical obligations. boardroom, it’s easy for the interests of the organization per se to overwhelm and The purpose of all nonprofit boards is displace those of stakeholders.to represent stakeholders; the roughequivalent of shareholders in commercial Here’s the governing challenge: Mostcorporations. Identifying them can be often, what’s good for the organizationquite involved; but, a rough first ap- also benefits stakeholders. But some-proximation is: stakeholder = the com- times it doesn’t; what increases organiza-munity. 8 tional performance can decrease stakeholder benefit. It’s the board’s obli- A board’s fundamental and overarch- gation to be vigilant in such circumstancesing obligation is to make sure the organi- and carefully assess proposed initiativeszation benefits its stakeholders. Organi- from a stakeholder value-added perspec-zations are collections of resources: tive. Management should be concernedmoney, personnel, facilities, equipment, about this, but it’s the board’s responsibil-supplies, competencies and capacities. ity to ensure it.These are means; the end is stakeholderbenefit. Boards must ensure organiza- Anecdote: With the objective of pre-tional means lead to the end of maximiz- paring a case study (which never saw theing stakeholder benefit/value. This is the light of day), I interviewed directors serv-BIG WHY of governing. ing on the board of a nonprofit health sys- tem that was considering the sale of one The problem is: in boardrooms, of its hospitals to a for-profit corporation.means can overwhelm and eventually dis- Cutting through all of the detail, I foundplace ends. This dynamic is called means- no evidence the board ever seriously as-ends substitution. sessed the deal’s relative costs and bene- fits from a stakeholder benefit perspec- A board’s purpose is to represent the tive. Management’s analysis, contained ininterests of an organization’s a three-inch ring binder, and the board’sstakeholders; management’s objective is discussion/deliberation was totally organi-to enhance the organization’s perform- zational-centric; that is, how the dealance. A board’s purpose and manage- would benefit the health system. Putment’s objectives are different. simply: fundamentally flawed governance flowing from a lack of clarity regarding board purpose/obligations and stakeholder interests.8 The community is clearly a nonprofit healthcareorganization’s primary and ultimate stakeholder.However, this conceptualization is rarely fine-grained directorshipenough, as communities are very diverse. Here’s asimple illustration: Say you’re on the board of anonprofit condominium homeowners association. • I once sat on a Catholic hospitalWho are the stakeholders? At first glance the an- board where the sister chair (a trueswer is easy: those who own units (i.e., equivalentto the community of a nonprofit healthcare organiza- saint) began each meeting with ation). Actually, there are probably three stakeholder brief reflection/discussion regardingsubgroups: those who own units and live in them; the board’s purpose and its obligationand those who own units and rent them out; thosewho rent units. Each of these groups have different to stakeholders. This kept our “eyes(and potentially conflicting) needs/interests which on the prize.”the board must represent. - page 11 – © Dennis D. Pointer www.BoardFood.com
  24. 24. • For your board to be truly cial). stakeholder-centric it must specify the organization’s key stakeholders • Gail, president of the medical staff, and understand their most important believes she serves on the board to interests. If you’d like to have a advance physician interests, espe- Board Stakeholders Briefing (which cially those of her specialty (radiol- provides much more depth on ogy). stakeholders and how to map them, plus numerous nonprofit healthcare • Bill is a retired CPA and sings only organization examples), logon to one note: cost reduction. www.BoardFood.com, go to the navi- gation aids page and download the • Dan, the only Black on the board, document. perceives himself as an advocate for the African-American community. • You can learn more about stakeholders by consulting: Getting • Sharon has one issue, right-to-life, to Great: Principles of Health Care and isn’t interested in anything else. Organization Governance (Chapter 3) by Dennis Pointer and James Orlikoff. • Ann sees herself as the standard- bearer for women’s issues. • The foundational/critical importance of stakeholders, as a point of depar- • John, who several years ago made ture for governing, is emphasized in the single largest gift the organization Building an Exceptional Board: Effec- has every received, is only concerned tive Practices for Health Care Govern- about insuring his own legacy. ance – Report of a Blue Ribbon Panel published by the Center for Could this board govern effectively on be- Healthcare Governance (CHG), half of all stakeholders? Or would it be American Hospital Association. You torn apart, and eventually rendered impo- can download a copy, free-of-charge, tent, by each director’s narrow perspec- from CHG’s website at tives and interests? www.americangovernance.com. Your board’s job is to represent; but,14. Don’t represent narrow interests it must do so by balancing and aligning or constituencies. the different/divergent interests of various stakeholders. What you must not do is This is a more nuanced aspect of the serve as a narrowly focused standardpreceding maxim. bearer and single issue advocate. Consider this, albeit “over-the-top,” If your board is composed of memberssituation: 9 Friendly Hospital’s board is who seek to advance special interests, itcomposed of directors who see them- will be torn apart by centrifugal forces andselves as representatives of, and advo- its effort to govern fragmented. One direc-cates for, various special interests. Some tor argues on behalf of a particular group;illustrations: other directors do the same thing from equally narrow perspectives. The board • Harry feels it’s his duty to represent takes on the characteristics of a legislative employees (he’s a former union offi- body or courtroom.9 Although embellished, this is a real board for directorshipwhom I once conducted a retreat. It was a toughtwo days. None of the members could transcendtheir own narrow perspectives/interests and considerthose of all stakeholders; a crucial starting-point for • As a director you are a stakeholderreally governing. agent. Your position is neither a li- - page 12 – © Dennis D. Pointer www.BoardFood.com
  25. 25. cense nor a platform for “beating the stakeholders always trumps loyalty to the drum” regarding issues you hold dear. organization. Accordingly, loyalty’s cen- You have a duty to balance/align the ter-of-gravity is serving as a stakeholder interests of all stakeholders, not rep- agent and faithfully representing their in- resenting those of just one or a few. terests. You breach this duty when, for example: a material conflict-of-interest • Ex officio directors (those who serve influences your decisions; you disclose on the board by virtue of other posi- confidential information that might have a tions they hold) face the greatest detrimental effect on the organization; challenges here. 10 For example, a you seize a business opportunity for your- physician who’s a director because self or other parties that legitimately be- he/she is the elected chief of staff. longs to the organization; you vote for an The medical staff expects this individ- unlawful distribution of the organization’s ual to represent their interests. Your assets which subverts its charitable pur- board must offer such directors assis- pose and/or results in private inurnment. tance and “air cover”: providing them with gentle reminders when Care requires dischargi ng your gov- they overstep the boundary; and erning responsibilities with the diligence, constantly reminding their physician prudence and sound judgment equal to colleagues they’re on the board be- that of an ordinarily competent person in cause of the knowledge, skills, expe- similar circumstances. This duty focuses rience and perspectives they bring ... on the process of acting and deciding, not not to represent medical staff inter- the results. The test is: Was reasonable ests. care exercised? Not: Was the outcome optimal, satisfactory or even tolerable?15. Understand your legal fiduciary You are permitted to presume that infor- duties of loyalty, care and obedi- mation, analyses and recommendations ence in addition to director liabili- provided by others (executives, staff and ties/protections. consultants) are accurate, truthful and informed ... if there are no compelling All state nonprofit organization incor- reasons to believe otherwise. This dutyporation laws hold that directors have a does not require you to be overly cau-fiduciary duty to serve as stakeholder tious, avoiding all risks. Courts are veryagents, acting in ways that protect and hesitant to substitute their judgment foradvance their interests, carefully and in those of boards, after the fact. The ex-accordance with the law. You are ac- pectation is simply that directors act care-countable for being loyal, careful and obe- fully, with common sense and informeddient and potentially legally liable if you’re judgment.not. Obedience requires that you obey the Loyalty is owed first/primarily to law. Directors must avoid acts beyondstakeholders and then second/derivatively the board’s authority as articulated in ap-to the organization. Loyalty to plicable laws, court decisions and regula- tions in addition to those specified in the10 Ex officio directors have the same obligation as organization’s own governing documents.all other board members: to represent stakeholders To discharge this duty you must: under-as a “general class”; that is, balancing/aligning the stand the law and the organiza-interests of each stakeholder group, favoring no par- tion’s/board’s charter, articles of incorpo-ticular one. Look at it this way: What gets ex officiodirectors to the boardroom is their membership in a ration, bylaws and policies; and abide bystakeholder group; the board wants/needs the com- them. Unlike the requirement to be care-petencies, experiences and perspectives that comes ful, the test of fulfilling this duty is notwith such membership. However, once in the board-room ex officio directors breach their fiduciary duty merely good faith intentions, but ratherof loyalty (see Maxim #15) by solely representing compliance and results. Ignorance isthe interests of the groups from which they came. never a justifiable excuse for breaching - page 13 – © Dennis D. Pointer www.BoardFood.com
  26. 26. this duty. covered (e.g., the cost of indemnifica- tion); but certain types of claims are typi- The good news: nonprofit healthcare cally excluded. D&O insurance covers theorganization directors are rarely named in organization, not directors directly.lawsuits. The bad news: if you are, it’s ahassle. You must be loyal, careful and directorshipobedient; if someone feels that you’renot, they can sue. In an increasingly liti-gious society, and given heightened stan- • To learn more about your legal fiduci-dards of board accountability, such actions ary duties, I recommend: Theare becoming more common. My intent is Board’s Fiduciary Role: Legal Respon-not to scare you. However, because sibilities of Health Care Governingboard membership comes with potential Boards by Fredric Entin, et. al.personal liability, it pays to be prudent. Loyalty As a director you typically have twoprotections: 11 indemnification and direc- • Insist that your board is reminded of,tors and officers (D&O) insurance. Nei- and “re-briefed” by counsel regarding,ther is automatic. The first must be pro- its duty of loyalty prior to considering,vided (typically via your board’s bylaws), deliberating about and voting on ma-the second has to be purchased by the jor issues, big deals and large finan-organization on whose board you serve. cial transactions. Organizations can choose to indem- • With respect to issues coming beforenify directors (i.e., offer protection against your board, acknowledge any poten-liability and financial loss), although spe- tial conflicts-of-interest and seek ancific provisions vary considerably. If a di- opinion regarding their materiality. Ifrector is named in a suit arising out of the conflict is judged to be material,board service he/she may be reimbursed totally remove yourself from discuss-by the organization for expenses incurred ing, deliberating, exercising any influ-(including attorney’s fees) and in specified ence regarding, and voting on, theinstances for judgments, awards and matter. This is critical to fulfillingfines. Typically, expenses are paid by the your fiduciary duty of loyalty, as ma-organization during the action, not after terial conflicts are among the mostit’s resolved. The common standard for common causes of breaching it. Seesuch indemnification is: the director acted Maxim #25 where this is addressed inin good faith and in a manner he/she be- more depth.lieved to be in the best interest of the or-ganization and its stakeholders; and (if • Never talk with outsiders about in-the action is allegedly criminal), the direc- formation/matters deemed to be sen-tor had no reasonable cause to believe sitive or confidential. See Maxim #26his/her action was unlawful. where this is addressed in more depth. Additionally, an organization maypurchase liability insurance that reim- • Ensure that the independe nt/externalburses expenses incurred due to actions auditor reports to the board any con-for which its directors and officers are cerns regarding private inurnment ar- rangements that might jeopardize the11 In some states there are three; those that have organization’s charitable purposesenacted legislation providing the directors of certain and nonprofit status.charitable nonprofit organizations l imited indemnifi-cation (or immunity). The provisions of such legisla-tion vary so widely, I’ve chosen not to discuss them Carehere. My recommendation: ask the organization’scounsel for a briefing. • Insist background materials are dis- - page 14 – © Dennis D. Pointer www.BoardFood.com
  27. 27. tributed an adequate amount of time before dealing with important matters prior to board/committee meetings so and big deals. directors can carefully review and re- flect upon key issues before address- • If you’ve not done so recently, review ing them. the organization’s articles of incorpo- ration and charter in addition to your• Expect analyses prepared by staff and board’s bylaws. consultants thoroughly/accurately portray both the positives and nega- • Request a book containing all board tives of proposed initiatives. policies (updated continuously) be provided to you; then periodically re-• You must be present and contribute view them. to exercise due care; attend board meetings and participate. Liabilities and Protections• Come to every board/committee • These matters are very important, meeting prepared, having carefully complex and technical. Accordingly, read agenda materials and propos- each year, request the organization’s als/recommendations up for discus- counsel brief your board on potential sion and vote. risks and legal liabilities in addition to the nature/scope of protections avail-• Always ask for additional information able. If your board’s indemnification and clarification when you do not un- provisions and D&O insurance cover- derstand an issue. age haven’t been reviewed by an ex- perienced governance/corporate at-• Insist that adequate time is allocated torney in the last several years, re- for questions, elabora- quest this be done. tion/clarification, discussion, delibera- tion and debate prior to votes ... es- • You might want to have your personal pecially on important agenda items. attorney review the board’s indemni- fication policy and D&O insurance. As• Prior to votes on important matters, an extra layer of protection and com- ask for an assessment by counsel re- fort, ask your attorney for a referral garding whethe r your board has exer- to counsel experienced in govern- cised its duty of care. ance/corporate law.• Don’t be pressured by apparent • Your best protection against the po- overwhelming agreement. In light of tential legal liability that comes with the facts, after listening carefully to board service is to understand your your director colleagues plus taking a job and do it conscientiously ... and, I stakeholder perspective, be prepared might add, heed these 40 maxims!! to vote “no.” See Maxim #31 where this is addressed in more depth. 16. Understand your board’s govern- ing responsibilities.Obedience The substantive work of governing• Request that periodic educational ses- entails fulfilling responsibilities. The core sions are held on legislative, legal and ones for nonprofit healthcare organization regulatory developments in addition boards are: 12 to their implications for your board. 12 This model was originally introduced in Really• Ask for the opinion of legal counsel Governing: How Health System and Hospital Boards regarding the applicability of key Can Make More of a Difference by Dennis Pointer and laws, regulations and court decisions Charles Ewell. It was elaborated and expanded in: - page 15 – © Dennis D. Pointer www.BoardFood.com
  28. 28. specifying • review/approve key organization-wide ORGANIZATIONAL ENDS goals14 • ensure management strategies 15 are aligned with the vision and key goals ensuring ensuring EXECUTIVE FINANCIAL PERFORMANCE PERFORMANCE • monitor/assess how well the vision is being fulfilled, key goals are accom- plished and strategies are being pur- ensuring sued in addition to expecting correc- QUALITY OF CARE tive action if problems are detected Executive PerformanceOnly the briefest synopsis of these re-sponsibilities are forwarded here as A board has one direct report, thethey’ve been a major focus in four of my CEO; he/she is its agent and delegatedprevious books. authority to manage the organization’s affairs.Ends The board-CEO relationship is intri- Ends are destinations and paths cate and complex because the CEO: istaken. Both are choices, and among the simultaneously the board’s “subordinate”most important organizations make. (hired and fired by it) and a colleague di-Formulating/approving them is a board rector (in over 80 percent of health sys-responsibility. tems and hospitals); and exerts a signifi- cant influence over the amount/type of In attending to ends, your board de- information the board receives and itsfines the organization: what it is and agenda.isn’t; what it will and will not become.Governance begins here. Other responsi- Your board is responsible and ac-bilities (for executive performance, quality countable for the CEO’s performance; itof care and financial performance) all flow must:from this one. • recruit and select the CEO To fulfill this responsibility, yourboard must: • assess the CEO’s performance • provide input regarding, assist in for- • adjust the CEO’s compensation mulating and approving the organiza- tion’s vision13 fine-grained and empowering visions. The reason is simple: an organization cannot achieve that whichBoard Work: Governing Health Care Organizations, its leadership is unable to envision. Visions spell theGetting to Great: Principles of Health Care Organiza- difference between purposefully moving into the fu-tion Governance and The High Performance Board: ture versus aimlessly wandering there. A visionPrinciples of Nonprofit Organization Governance all specifies what an organization should/must becomeby Dennis Pointer and James Orlikoff. The model in order to maximize stakeholder benefit. The besthas become a standard framework for describ- way to formulate and codify a vision is not a proseing/prescribing the responsib ilities of nonprofit statement, but rather a list of specific characteristic shealthcare organization boards. See, for example: regarding what the organization should look like, atBuilding an Exceptional Board, Report of a Blue Rib- its very best, in the future. 14bon Panel on Health Care Governance (Center for Goals are the most important things an organiza-Healthcare Governance, American Hospital Associa- tion must accomplish for its vision to be fulfilled;tion); and Board Roles and Responsibilities: Ele- they increase a vision’s specificity and “density.” 15ments of Governance (The Governance Institute). Strategies are specific plans for deploying an or-13 Highly successful organizations sha re one thing in ganization’s resources (fiscal, human, facilities,common: they have distinctive, explicit, precise, equipment, supplies, etc.) to achieve key goals. - page 16 – © Dennis D. Pointer www.BoardFood.com

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