Board of Directors and other Advisors - Entrepreneurship 101

David Pasieka – Liberty Utilities  December 2011"

Governance Failures……Ø WorldcomØ EnronØ Martha StewartØ Bear SternsØ Lehman BrosØ NortelØ HollingerØ RIMØ eHealthØ Olympus

Why - Why – Why?§  Management Reporting Spin§  Part-Time role / Full Time Need§  Forceful CEO’s§  Board Skill and Experience§  Unwavering Trust of Management§  Unwillingness to Rock the Boat

The Corporation Management Advisory Board Board of Directors Shareholders

Key Linkages Shareholder Auditor Board of Directors Committees Management Team Advisory Board

Boards over TimeInfluence Governance Board of Complexity Directors Advisory Boards Stage Financing Time

Director’s DutyØ Fiduciary Duty- “To act in the best interests of the corporation. It is this notion that all stakeholders need to be considered.”Ø Duty of Care – “To exercise the care, diligence and skill that a reasonably prudent man would exercise under comparable circumstances.”

Stakeholder ViewShareholders / Public / NGO’s / Competitors / Global Markets Employees Legislators Scientists / Banks / Media / Customers / Investors

Directors FunctionsØ Hire / Fire CEOØ Reviews & Approves the Strategic Direction of the CorporationØ Monitor the Performance of Management

Directors ToolsØ Information: Ø  Right amount to absorb key issues and make informed decisions.Ø Process Ø  Independence & Diligence. Ask lots of Questions.Ø Business Judgment –  Background, Insight, Experience

Bright Red LineØ Very Passive: Rubber Stamp Ø  Management sets and drives agenda Ø  Packages are late or Walked in Ø  CEO strong willed Ø  Infrequent meetings Ø  Board Never votes noØ ModerateØ Very Active: Micro Management Ø  Board meets monthly, lots of Committees Ø  Board is stronger then the CEO Ø  Board Committee work extensive Ø  Board Large / Executive Committee Active Brown Governance 2005

TSX Governance Guidelines National Instrument 58-101Ø Board of DirectorsØ Orientation and Continuing EducationØ Ethical Business ConductØ Nomination of DirectorsØ CompensationØ Other Committees beyond Audit, Comp & NominatingØ Assessments

Building Your Board(s)Ø Define Strategic GapØ Business ExperienceØ Management ExperienceØ Directors ExperienceØ Personal AttributesØ Ready / Willing / Able

Board ChemistryØ Strong Board ChairØ Constant Tending of Culture and CompositionØ Senior Management Equipping DirectorsØ Bias to Forward Looking Insight vs Rear View Judgements

What’s the Motivation?Ø Favour to CEOØ Status / PrestigeØ Interesting & EngagingØ Opportunity to NetworkØ Give Something BackØ FunØ Remuneration

What’s the RiskØ Insolvency Liabilities: Ø Payments to Employees Ø Payments to Creditors Ø Payments to GovernmentØ Personal Conduct Ø Insider TradingØ Joint & Several Liability

Defending the RiskØ Fiduciary DutyØ Duty of CareØ Due DiligenceØ  Corporate IndemnityØ Director & Officer Insurance

Key Advisory RolesØ “The Customer”Ø “The Geek”Ø “Dad”Ø “Tight Ass”Ø “Jerry Maguire”“Art of the Start” – Guy Kawasaki

Managing Your BoardØ OrientationØ Effective ChartersØ Meeting ManagementØ Board MaterialsØ Agenda / MinutesØ In CameraØ Ongoing AssignmentsØ Celebrations

Evaluating ParticipationØ On the MastheadØ Silent and DeepØ Personality ChallengedØ Ethical Poison

Is It Time to Act?Ø Do they come prepared for the meetings?Ø Can you get your Advisors when you need them?Ø Is to much time being spent on trivial issues?Ø Are all members contributing to critical discussions?Ø Are you getting great return?

Assessment ApproachesØ Attendance at Meetings “Cheap & Cheerful”Ø For the “Good of the Board”Ø One on One Coaching SessionsØ Survey - Board / Peer PerformanceØ 360 degree FeedbackØ High Tech InteractiveØ Third Party Observers “Expensive & Comprehensive”

For the “Good of the Board”Round the Table (Verbal) Ø What Worked / What Didn’t Ø Areas to Improve Ø Emotional DecompressSurvey 1 to 5 (Written): Ø Pre-materials Concise and Helpful? Ø Everyone prepared? Ø Issues covered Trivial or Important? Ø Discussion Focused Operational or Strategic? Ø Stayed on Track? Ø Who were the Heroes? / Who were the Foes?

In SummaryØ The CorporationØ Directors DutyØ Building BoardsØ Managing BoardsØ Evaluating Boards

ReferencesØ  Corporate Governance – Carol Hansell 2003Ø  Integrity in the Spotlight – Maureen Sabia & James Goodfellow 2005Ø  National Instrument 58-101- Disclosure of Corporate Governance PracticesØ  CICA 20 Questions SeriesØ  www.Wallstreetfollies.comØ  “Money for Nothing: How the Failure of Corporate Boards Is Ruining American Business and Costing Us Trillions.” – Gillespie 2008Ø  Globe and Mail Board Games – 2011Ø  www.Guidedfutures.com - 2011Ø  Corporate Governance in Canada – Osler 2009

David Pasieka!  dpasieka@marsdd.com!

Board of Directors and other Advisors - Entrepreneurship 101

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Board of Directors and other Advisors - Entrepreneurship 101 Presentation Transcript