In the year 2002, Warren Buffett made an admission that he had not been as vigilant as he should have been in his role as Director of the various subsidiaries of his holding company, Berkshire Hathaway. In a letter to the shareholders he wrote “ Too often I was silent when management made proposals that I judged to be counter to the interest of the shareholders. In those cases, collegiality trumped independence and a certain social atmosphere presides in boardrooms where it becomes impolitic to challenge the Chief Executive. Kevin Sharer, Chairman of Amgen, the US biotech company, portrayed a very different relationship between board and chief executive. “ Working with the board is vital, complex, and beyond your prior experience. It is among the most complex human relationships, especially if you are the chairman, when you are their boss, and they are your boss. Get the relationship right or it will hurt you. These two very different experiences open a new book, Boards that Lead- When to take charge, When to Partner and When to stay out of the way. The central premise of the books is a plea. “ Governing boards should take more active leadership of the enterprises, not just monitor its management? The growing complexity of markets and strategy, the authors say, is one of the biggest challenges for board members. It also means that they cannot afford to sit back and rubber stamp executive’s plans. Boards often fail to do their job, they point out, for example failing to do their due diligence. They cite the example of Yahoo’s Chief Executive Scott Thompson. After a few months in the post, it was discovered that he had listed a degree in both accounting and computer science, but had actually earned only the first. A good book to read move from Delivering to Leading. Happy Reading

1. Some Impressionistic takes from the book of
Dr. Ram Charan, Dennis Carey, Michael Useem
“Boards That Lead”
by Ramki – ramaddster@gmail.com

2. Dennis Carey is Vice Chairman
of Korn/Ferry International. He
has placed some of the most
prominent chief executives and
corporate Directors in the United
States, including those at 3M,
American Express, Goldman
Sachs, GSK, Humana, MCI, and
Tyco International. This is his
fourth book on CEO succession
and corporate governance.
Ram Charan is a business adviser
who has worked with executives
and Directors of many companies,
including DuPont, GE, Novartis,
Verizon, and RBS Group (Brazil).
He has served on the Harvard
Business School faculty, teaches
in Wharton Executive Education,
and serves on the board of
Hindalco (India). He is the author
of eighteen books.
Michael Useem is a professor of
management and the director of
the Center for Leadership and
Change Management at the
University of Pennsylvania's
Wharton School. He offers
courses on leadership and has
authored books on leadership
and corporate governance,
including The Leadership
Moment and Investor
Capitalism.
About the Author

3. Prelude
The book was written by three of the foremost business leaders today. Dr. Ram
Charan, author of Execution and other business books. He joins experts Dennis Carey
and Michael Useem in outlining the significant processes that make an effective
Corporate Board.
Boards That Lead is divided into three sections.
 The first delves into establishing functional boards, thus the title Boards That Lead.
 The second, Leading the Leaders, examines how boards work with an executive
team.
 The last section, Value Creation, identifies the activities that create the most utility
for an organization’s benefit.
The content of the book is gives the readers to imagine multiple combinations of direct
and collaborative leadership. Increased enterprise complexity calls for these varying
degrees of oversight.
The impressionistic take in this document captures the aspects of how a board leads,
partners, monitors, and delegates

4. “Investor demands for more independent boards
that would be accountable to them, paid like
them, and fiduciaries for them gave rise to
litigation….the legal actions did help establish two
standards for director obligation: Duty of care,
requiring Directors to exercise reasonable caution
in executing board responsibilities that could
harm others if not performed well, and duty of
loyalty, requiring that Directors exercise good
fiduciary judgment on behalf of the stockholders”

5. From Ceremonial to Monitor to Leader

6. Monitor to Leaders
 Boards are increasingly taking an active role & responsibility on factors like
CEO succession, Executive compensation, & Goal setting. This increased
level of board leadership reflects the growing complexities of the marketplace.
This was earlier the responsibility of the Top Management.
 In part, it is also a necessary response to new regulations. For example, the
federal Sarbanes-Oxley Act of 2002 holds Directors responsible for ensuring
the integrity of their company’s financial controls.
 New York Stock Exchange rules imposed in 2003 require board audit
committees to oversee financial statements.
 The Dodd-Frank Act of 2010 makes it easier for shareholders to propose &
elect their own board candidates.
 Importantly, board involvement does not have to mean board
micromanagement. Effective Directors establish a constructive, collaborative
leadership partnership with top executives.
 They become educated and interested in such matters as company strategy,
asset allocation, risk management, and talent development. They also take
steps to ensure skilled leadership of the board itself.

7. Monitor to Leaders
 Given the current context the Director’s assume
three primary duties:
 Duty of care: Directors must exercise
reasonable caution in executing board
responsibilities that could potentially harm
others.
 Duty of loyalty: Directors must exercise good
fiduciary judgment on behalf of stockholders.
 Duty of leadership: Directors must focus
attention on key dimensions of enterprise
management. At the same time, effective
Directors know when to lead, when to
partner, and when to stay out of the way.
They set aside personal pride so as to focus
relentlessly on what is right for the company.

9. Director’s Checklist for Leadership Decisions
 When to take charge
 Central or Core Idea
 Involvement in Selection of the CEO
 Board competence, architecture & modus operandi
 Ethics & Integrity
 Compensation Architecture
 When to Partner
 Strategy, Capital allocation
 Financial goals, Shareholder value, Stakeholder balance
 Risk Appetite
 Resource allocation
 Talent development
 Culture of decisiveness

10. Director’s Checklist for Leadership Decisions
 When to stay out of the way
 Execution & Implementation
 Operations & Routines
 Areas of delegated authority
 Non-strategic decisions
 Excluded by Board charter

12. First Things First- Define the Central Idea
The central idea of a corporation is the seed that
blossoms into a clear framing of the company’s
full-blown strategy and the many implications for
how to execute it. It is the animating force from
which hundreds of strategic and operational details
emanate.

13.  The central idea of an organization or the group articulates why it
exists, whom it serves, how and why it should be nurtured, how it
can be profitable while minimizing risk, & what direction it should
take to succeed in a competitive marketplace.
 Boards should not only ensure that the central/ core idea is clear,
compelling, and comprehensible, but internalize and rely on it as a
touchstone in their own decision-making. Ideally, the central idea
should be simple, tangible, and short—a maximum of several
hundred words.
 The best central ideas exert “Centripetal force.” This means they
draw management and board onto common ground and get them
moving toward a shared purpose.
 Conversely, a weak central idea exerts a “centrifugal force” with the
potential to pull the organization apart. Because of its importance,
boards should regularly revisit their companies’ central idea.
First Things First- Define the Central Idea

14.  They should also produce a document that sets forth the
central idea and expresses it in terms of both strategy and
execution—including specific actions needed to realize key
goals.
 By taking ownership of the central idea, boards reinforce the
notion of company leadership as a partnership between
Directors and Executives.
 They insert Directors irreversibly into an active leadership
role, and recruit new Directors who share their mindsets
First Things First- Define the Central Idea

15. Recruit Directors Who Build Value
 Today’s board members need a mindset & a skill sets which are
different from Directors of the past.
 They must bring to their roles not just a readiness to monitor, but a
willingness & ability to exercise leadership in key matters of
Strategy and Execution.
 In the authors’ opinion, high-potential director candidates for
forward-looking enterprises should be qualified to:
 Contribute to the central idea by thinking clearly and
strategically about the firm, its value proposition, and its
competitive position.
 Contribute to boardroom discussion while steering clear of
operational detail.
 Help formulate new direction as necessary and offer experience
with major strategic and executional issues.

16. Recruit Directors Who Build Value
 Work in partnership with executives, based on a previous
track record of collaboration.
 Bring intellectual and experiential diversity to the board.
 Engage constructively in the face of high-stakes, high-stress
challenges.
 Help the board become more effective—for instance, by
offering conversational intelligence.
 Add value to both the boardroom and the executive suite.
In the past, sitting board members may have had limited
involvement with director recruitment. But today, finding and
vetting top candidates has become a major responsibility of the
board’s governance committee.

17. Almost all Directors look promising before they
enter the boardroom, but not all perform equally
well once inside. Sometimes a prince in other
realms can even turn into a petty gabber at the
table, the very opposite of what English novelist
George Eliot had championed:
“Blessed is the man who having nothing to say
abstains from giving wordy evidence of the fact.”
Root Out Dysfunction

18. Root Out Dysfunction
 A Person while highly accomplished in business, may be
unsuited for the boardroom. Because a board can only be as
strong as its weakest link, it is imperative to identify and find
ways to deal with these poor-performing or dysfunctional
members.
 This should be a regular responsibility of the board leader,
occurring in stages.
 First, the leader should have a private conversation with the
disruptive member, making the individual aware of behaviors in
need of change.
 Next, the leader may offer intervention, usually coaching, to
help the director improve. But if intervention fails, the leader
should be prepared to advise the director to leave the board.

19. Root Out Dysfunction
 A good process is that boards should implement an ongoing
process of Director Evaluation, a practice already adopted by
most of the American companies as of 2011.
 One approach is similar to peer evaluations in 360-degree
performance reviews: members assess the contributions of their
colleagues by using a matrix with key criteria on the left and
director names across the top.
 Examples of useful evaluative criteria include whether each
director brings useful skills & experience to the boardroom; is
prepared for meetings; understands the company’s central idea;
asks good questions; helps develop the business; moves
discussions forward; and facilitates relationships between
members and with management.
 Sometimes it is beneficial to invite a neutral third party, such as
outside counsel or a governance consultant, to ask questions of
the participants.

20. Root Out Dysfunction
 The difference between leading and overreaching on a board is
not always obvious, but most boards create implicit behavioral
norms. Often, Directors who violate such norms are driven by
personal motives.
 Among the most common of these motives is a determination to
prove one’s expertise and grasp of detail, leading to operational
questions that are too deep & inappropriate for the boardroom.
 Another is a desire to be considered for an executive position. A
third is anxiety on the part of an insecure director who fears
making a mistake or being blamed for a company problem.
 Evidence suggests that evaluation and intervention can go a
long way toward rooting out boardroom dysfunction. However, it
is far more efficient to deselect or avoid recruiting unsuitable
Directors in the first place.

21. Leading the Leaders

22. A Leader of the Board
 CEOs who lead in the boardroom as well as in the executive
suite have long been common in USA Corporations.
 However, that norm is being replaced as more firms are
creating either an independent board chair or a designated
board leader.
 As of 2010, over 90 percent of Standard & Poor 500
companies had a designated lead director; this was partly in
response to a 2003 New York Stock Exchange rule that non-
executive Directors must meet at least once each year
without executives present, and publicly disclose the name of
the director chosen to preside over the meeting.
 Board leaders have different titles and job descriptions, but
their primary function is to organize & speak for the other
members apart from the CEO, other executives, or board
chair.

23. A Leader of the Board
 They have the power to convene meetings and to review
management performance without the presence of the CEO.
 Because of the growing importance of board leadership, it is
critical for the individual in that role to have the right
personality, temperament, and skill set; he or she must be
able to build and maintain a constructive relationship not only
with the CEO, but also among other Directors.
 Like any high-level company or team leader, an effective
board leader should have excellent skills in strategic thinking,
persuasive communication, and decisive decision-making.
While focusing the board on strategy and working
collaboratively with the CEO, the leader should be able to
avoid micromanagement.

24. A Leader of the Board
In general, 6 qualities help to define the best board leaders:
1. Executive experience. Most leaders have served as chair,
president, or CEO of another company. They have well-
honed business judgment & deep Strategic and Executional
knowledge.
2. Respect and confidence. Leaders earn the respect &
confidence of other board members because they are
excellent facilitators, able to inspire others & draw them
toward judicious decisions.
3. Collaboration & restraint. Strong board leaders hold back
their own opinions in order to encourage the participation &
collaboration of others. They avoid dominating boardroom
discussions.
4. Personal bonding. Leaders create personal connections that
facilitate the ability to speak for the board as a whole.

25. A Leader of the Board
5. Personal comfort. Leaders should be authentic: this means they
are comfortable setting aside their own interests and ambitions,
committing exclusively to the mission of the enterprise.
6. Resilience. Board leaders commonly face at least one significant
crisis during their tenure. Thus, they need the ability to head off
trouble when possible and the resilience to face disaster and
bounce back from it if it comes.
Apart from the above basic qualities of effective board leaders, it is
suggested adding another:
 A capacity for candor & a willingness to demand candor from
others. Directors who suspect that information is filtered or
hidden from them will lose trust in the leader. Also, a CEO who
is not kept fully and honestly informed about director opinions
and deliberations will lose confidence in the board-management
partnership.

26. CEO Succession “ The Ultimate Decision
 The top most challenges or task of the board’s
responsibility that of choosing a Chief Executive.
 Even if they retain a consultant, today’s Directors must
take an active part in the process.
 Some companies successfully grow their own talent,
presenting Directors with strong candidates on the
inside.
 This is often the most favorable scenario, because
insiders are already familiar with the firm’s strategy &
mission.
 In order for it to happen, Directors need access to
good internal data that documents the performance &
potential of top managers.

27. CEO Succession “ The Ultimate Decision
 But whether CEO/MD candidates emerge from
inside or outside, boards must involve themselves in
due diligence; Directors should demand in-depth
information and personally check the references of
serious contenders.
 Otherwise, they risk making a mistake that can be
nearly irreparable—the wrong CEO can cause
serious, long-term damage to the firm.
Board leaders standing too tall on their own soapbox can inhibit
a free flow of ideas. At the same time, it is important for a lead
director to exercise individual and collective restraint so that
board directives do not tread on management’s toes.

28. Ten Principles for finding the Right CEO
 People set strategy- Directors & Executives who are
strategically adept are in the best position to lead the
enterprise in the right direction.
 Implement a CEO and successor evaluation methodology-
The company’s evaluation system should be linked to its
central core idea & be able to discern the capacities of
individual candidates.
 Include in the CEO’s evaluation a succession plan
assessment-Developing the next generation of leaders
should be among the CEO’s key tasks.
 Place the board leader in charge of the succession process-
CEO succession decisions should not be crisis-driven.
Instead, board leaders should undertake this responsibility as
part of their fundamental, ongoing partnership with
management.

29. Ten Principles for finding the Right CEO
 Retain potential inside successors in addition to an effective
CEO. In order to keep executives with high potential, it will be
necessary to offer them incentives including extra compensation.
 Seek data on inside candidates from all executives who have
worked with them. This process may be guided by a third party.
 Verify data with both outside sources and candidates- It is critical
for Directors to be personally involved in the vetting process.
 Maintain confidentiality- To protect CEO candidates, Directors
should communicate orally about the search and steer clear of
journalists.
 Embed succession planning in corporate culture- Talent
planning, coaching, and mentoring should be viewed by both
Directors and executives as an ongoing responsibility of
leadership

30. We believe that the concept of the Universal
Chief Executive is as misleading as the idea
that a gifted athlete should be able to excel at
more than one position on the sports field or
even several kinds of fields. Strategic fit
between a candidate and the shoes to be filled
is the crux.

31. Director’s Checklist for CEO Succession-( 1/2)
 Are company Strategy & Executive succession explicitly
linked.
 Is a Board process is place for evaluating the CEO &
potential successors?
 Does the Board explicitly assess the CEO’s management of
succession plan for the next generation of company
leaders?
 Is the Board working to retain a high-performing Chief
Executive- but also to keep capable successors ?
 Does the Board have a member who could serve as CEO in
the wake of an unexpected exit if no insider is yet ready for
succession ?
 Has the Board compiled data on the inside CEO candidates
from those who had worked with all of them?

32. Director’s Checklist for CEO Succession- ( 2/2)
 Have Directors had direct contact with both the CEO
candidates & the information sources to verify information
about them?
 If Executive Search consultants are retained, have they
been vetted to ensure that there are no conflicts of interest?
 Does the Board ensure candidate confidentiality ?
 Has the Board gathered independent references on the
outside candidates?
 Is succession planning embedded in the company’s culture?

33. A Question of Fit
 Selection of CEO/MD- a Strategic fit between the job to be done
and the person to do it.
 This requires a focus on two dimensions:
 Leadership Requirements given the Organization/ Business
Context
 The current competitive landscape, & each candidate’s
capabilities.
 Importantly, leadership requirements must be considered first.
Otherwise, the board risks hiring someone who is well suited to
solve the problems of the past— but likely to flounder when faced
with the challenges of the future.
 Often a leadership committee of the board is created to assess the
company’s most critical strategic issues and decide what specific
talents and experience is needed to address those issues.
 The committee takes responsibility for vetting candidates in light of
the necessary match-up.

34. Spotting, Catching or Exiting a Falling CEO
 Directors should look / watch for when the CEO begins
to falter & there are usually warning signs which should
not be ignored.
 Directors reaction or response should not be slow for
actions. They fear the consequences of forcing an exit,
or cannot agree on how to proceed.
 In reality, this is precisely the wrong mindset. Effective
Directors must be constantly vigilant, ready to deal
decisively with emergent issues even if the issues are
eventually resolved.
 It is important the Board works on what is right and not
what is convenient .

35. General Indicators – Falling CEO
 Lack of clear strategy
 If the CEO is unable to articulate the firm’s strategy coherently
and succinctly, the board will be hampered in its decision-
making and unable to assess tactical proposals.
 Failure to execute.
 The most common early warning sign of CEO failure, a failure
to execute, usually results from several bad habits. These
include a lack of focus on key priorities; dislike of follow
through; and inadequate anticipation of & adjustment to
setbacks.
 Wrong people calls.
 A CEO may rely too much on a single senior officer or adviser
who has significant shortcomings or filters diverse views.
Another mistake is to promote an ill-prepared functional
executive into a line position.

36. General Indicators – Falling CEO
 When Directors notice one or more of these indicators, they
should test their concerns quickly, albeit cautiously, with
others. Also, they need to seek more information about what
may be causing the apparent problems.
 As general practices that can facilitate early detection and
intervention,
 Boards should include candid discussion of the CEO’s
performance during their executive sessions;
 Focus the CEO’s annual evaluation and feedback on
strategic thinking and other leadership capabilities as well
as financial metrics;
 Meet and appraise the CEO’s top management team; and
engage all Directors in any decision to revive or relieve a
struggling CEO, even in the middle of a crisis.

37. Value Creation

38. Turning risk into Opportunity
 Risk management –is a critical board priority in an era
characterized by financial, environmental, and technological
disasters.
 Managing /Mitigating risk is as much about seizing opportunities as
averting catastrophes.
 Effective Directors do not reflexively avoid taking chances; instead,
they learn to balance options.
 Setting strategic boundaries too narrowly can cut off good avenues
for expansion, while setting them too widely can expose the firm to
excessive uncertainties.
 Directors must decide which risk-related metrics they will focus on,
and at what granular level. They also need to be wary of low-
probability but high consequence events, like airplane crashes.
 Often it is helpful to create a risk-appraisal advisory board,
composed of highly knowledgeable individuals who can provide
diverse thinking and fresh insights.

39. Turning risk into Opportunity
 While most common among family-owned
businesses, advisory boards are increasingly being
used by multinational firms and in emerging
markets.
 Because they do not have shareholder oversight
responsibilities, they may be more willing than
Directors to drill deep into operational details.
 Also, advisory boards are free to focus on specific
regions, or on difficult challenges.

40. Staying out of the way
A challenging but critical task for today’s Directors is to find the
right balance between leadership and meddling.
One helpful criterion is to involve the board in operational
decision-making when the challenge is of clear strategic
significance—otherwise, Directors should usually stay out of the
way.
Many firms use planning devices to identify decisions that should
be made at the board level and those better left to management.
For example, annual calendars can schedule meetings on key
topics—like company strategy or executive compensation—to
ensure that Directors discuss these topics.
Committee charters may help define specific decisions for which
board committees are responsible.
Decision protocols can explicitly identify items under the Directors’
purview, such as financial statements, annual dividends, or
acquisitions and divestitures.

41. Staying out of the way
 Often, the lead director and CEO reach an informal
understanding of matters that should be kept out of the
boardroom.
 The single most important factor in cordoning off appropriate “no-
fly zones” is the Directors’ trust in their leader and top
management to keep them informed and involve them when
necessary— while holding them at arm’s length when this is in
the best interest of the company.
 If unexpected issues arise that are outside the bounds of an
existing decision protocol, like regulatory changes or competitor
moves, the lead director and CEO usually make a judgment call
together as to whether the topics merit board-level consideration.
 In general, they can help ensure the right balance between
leading and meddling by providing the right information;
facilitating a high level of discussion; focusing on the central idea;
and reinforcing a no-micromanagement norm.

42. The Leadership Difference
 It is time to redefine Corporate governance to
explicitly include the role of collaborative company
leadership.
 This revised definition should be institutionalized by
transforming the traditional governance committee
into a leadership & governance committee, with
responsibility for board candidate recruitment,
director evaluations, and board leader oversight.
 The committee will need highly experienced
members, along with an appropriate charter and
budget that reflect its increased obligations.

43. The Leadership Difference
 Today’s Corporate board must decide early on
where it will lead, partner, or stay out of the way.
 It must designate its own leader; establish decision
protocols; create collaborative relationships with top
management; and ensure that every member is a
contributing member of the team.
 Without wading deeply into daily operations, all
directors should be prepared to play an ongoing role
in realizing the company’s strategic goals—goals
that are increasingly the product of board-
management leadership partnerships.

45. 1. Does the prospective director have the capacity to think strategically and
clearly about the organization as a whole, its constituents, value
proposition, etc.
2. Will the candidate be able to contribute tangibly to discussion without
veering into operational detail?
3. Is the candidate familiar with and experienced in the specific strategic and
execution issues flowing from the central idea—and capable of helping
formulate a new direction when disruptions in the context dictate?
4. Does the director have a proven track record of working collaboratively?
5. Will the candidate add intellectual and experiential diversity to the board?
6. Will the candidate be ready to engage constructively when vital issues are
on the line, the stakes are high and leadership becomes even more
essential?
7. Will the candidate help the board become more effective by asking good
questions and avoiding unrelated issues that highlight his/her area of
expertise?

47. Learning’s for Application
 Boards must commit to Co-creating Leadership as a partner. The
Independent Directors should not get into micromanagement.
 Having said this they must contribute , collaborate with the CEO/MD and
other Senior Leaders in the areas of Company/Group Strategy, ERM, and
Human Resources.
 Directors need to take ownership of the firm’s central idea. The central idea is
a statement of why the company exists and what will make it successful.
 Directors should ensure that the central idea is compelling, internalize it, &
use it as a touchstone in their decision-making.
 A leadership mindset & a willingness to collaborate are critical qualities to be
sought in today’s director candidates. Prospective Directors should be able to
think strategically about the firm, its value proposition, and competitive
position.
 Given the expanded role of Directors, it is more important than ever before to
root out those who are dysfunctional or who fail to contribute. Boards can
benefit greatly from a regular, meaningful evaluation process for their
members. The board leader should take responsibility for dealing with a
problematic director.

48. Learning’s for Application
 It is good for the boards to nominate one of their members to serve in a presiding role.
This lead director is empowered to convene meetings without the CEO present, review
management performance in confidence, and speak on behalf of the board.
 When choosing a CEO, Directors must focus first on Job Role and deliverables for the
current & future of the organization and then leadership requirements, then on
candidate capabilities.
 A Leader may be highly gifted, but lack the skills needed by a company at a particular
point or the context in its strategic evolution.
 In a business climate rife with unprecedented threats— financial, regulatory, and
environmental—boards must take a leadership role in risk management. At the board
level, risk management does not necessarily mean risk avoidance. It means balancing
options so the firm can exploit opportunities without taking on excessive uncertainties.
 Boards must continually maintain the right balance between leadership and meddling.
Decision protocols are helpful in explicitly defining appropriate areas for board
involvement. But ultimately, Directors must trust in the board leader and CEO to stake
out the right “no-fly zones.”
 It is time to redefine the basic concept of corporate governance to incorporate the new
reality of board leadership. To institutionalize this new reality, boards should
reconstitute the traditional governance committee as a “leadership and governance
committee.”

49. Mail your comments to ramaddster&gmail.com