Board of Directors and other Advisors - Entrepreneurship 101


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Learn the difference between a board of advisors and a board of directors and what roles they play in running a business. Providing real-life examples of governance best practices and exploring the legal requirements of different structures and the consequences of board decisions.

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Board of Directors and other Advisors - Entrepreneurship 101

  1. 1. David Pasieka – Liberty Utilities

December 2011"
  2. 2. Governance Failures……Ø WorldcomØ EnronØ Martha StewartØ Bear SternsØ Lehman BrosØ NortelØ HollingerØ RIMØ eHealthØ Olympus
  3. 3. 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
  4. 4. The Corporation Management Advisory Board Board of Directors Shareholders
  5. 5. Key Linkages Shareholder Auditor Board of Directors Committees Management Team Advisory Board
  6. 6. Boards over TimeInfluence Governance Board of Complexity Directors Advisory Boards Stage Financing Time
  7. 7. 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.”
  8. 8. Stakeholder ViewShareholders / Public / NGO’s / Competitors / Global Markets Employees Legislators Scientists / Banks / Media / Customers / Investors
  9. 9. Directors FunctionsØ Hire / Fire CEOØ Reviews & Approves the Strategic Direction of the CorporationØ Monitor the Performance of Management
  10. 10. 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
  11. 11. 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
  12. 12. 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
  13. 13. Building Your Board(s)Ø Define Strategic GapØ Business ExperienceØ Management ExperienceØ Directors ExperienceØ Personal AttributesØ Ready / Willing / Able
  14. 14. Board ChemistryØ Strong Board ChairØ Constant Tending of Culture and CompositionØ Senior Management Equipping DirectorsØ Bias to Forward Looking Insight vs Rear View Judgements
  15. 15. What’s the Motivation?Ø Favour to CEOØ Status / PrestigeØ Interesting & EngagingØ Opportunity to NetworkØ Give Something BackØ FunØ Remuneration
  16. 16. 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
  17. 17. Defending the RiskØ Fiduciary DutyØ Duty of CareØ Due DiligenceØ  Corporate IndemnityØ Director & Officer Insurance
  18. 18. Key Advisory RolesØ “The Customer”Ø “The Geek”Ø “Dad”Ø “Tight Ass”Ø “Jerry Maguire”“Art of the Start” – Guy Kawasaki
  19. 19. Managing Your BoardØ OrientationØ Effective ChartersØ Meeting ManagementØ Board MaterialsØ Agenda / MinutesØ In CameraØ Ongoing AssignmentsØ Celebrations
  20. 20. Evaluating ParticipationØ On the MastheadØ Silent and DeepØ Personality ChallengedØ Ethical Poison
  21. 21. 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?
  22. 22. 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”
  23. 23. 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?
  24. 24. In SummaryØ The CorporationØ Directors DutyØ Building BoardsØ Managing BoardsØ Evaluating Boards
  25. 25. 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 - 2011Ø  Corporate Governance in Canada – Osler 2009
  26. 26. David Pasieka!!