The Director's Manual A Framework for Board Governance

The Director's Manual: A Framework for Board Governance offers current and aspiring board members essential up-to-date governance guidance that blends rigorous research-based information with the wisdom found only through practical, direct experience. The book's flexible approach to solving governance issues reflects the authors' belief that no two boards and the cultural dynamics that drive them are the same. As such, the advice offered reflects recognizable leadership dynamics and real world, relevant organizational situations.

The book's two authors, Peter C. Browning, an experienced CEO and member of numerous boards and William L. Sparks, a respected organizational researcher, combine their individual experiences and talents to create a book that is both innovative and applicable to directors in any industry sector. Specific best practice guidance is designed to help board members and their directors understand the unique strengths and challenges of their own board while at the same time provide targeted information that drives needed improvements in board performance and efficiency. Specifically, this book will help board members:

• Explore practical advice on key issues, including selection, meeting schedules, and director succession
• Consider board performance from multiple perspectives, including cultural and group dynamics
• Discover how to effectively manage classic problems that arise when making decisions as a group
• Access a comprehensive set of assessment questions to test and reinforce your knowledge

The Director's Manual: A Framework for Board Governance offers practical advice to guide you as you lead your organization's board.

Peter Browning (Charlotte, NC; www.peterbrowning.com) is founder and Managing Director of Peter Browning Partners, LLC, a board advisory service. Their Board Advisory Services will help directors answer tough questions in the areas of board governance, board performance and dynamics, and leadership transition and succession planning. Peter is also a founding member of the Lead Director Network, a member of the faculty for The Conference Board's Directors' Institute and a frequent participant in governance seminars, serving on panels addressing a wide variety of corporate governance and compensation issues. He is a lifetime member of The University of Chicago, Council on the Booth Graduate School of Business; and served on the Executive Committee of the National Association of Manufacturers.

William Sparks (Charlotte, NC; www.queens.edu) is a consultant on issues such as leadership, team development, succession planning, change management, and organizational culture. He is considered an expert in his field, helping high profile corporations such as the U.S. Navy, Transamerica, GlaxoSmithKline, Duke Energy, General Motors and the Department of Energy. He has consulted these clients through his own firm, William L. Sparks & Associates, as well as through Peter C. Browning & Associates, where he is a managing partner. Based on his extensive background and knowledge of the subject matter, Dr. Sparks founded Queens' graduate program in organization development (MSOD) in 2008. He is also responsible for the development of the leadership curriculum for all of the McColl School of Business' graduate programs.

Acknowledgments ix

Peter C. Browning ix

William L. Sparks x

Preface xi

Why We Wrote This Book xi

Chapter 1 The Changing World of Board Governance: How We Got Here 1

What’s in This Chapter? 1

How and Why Boards Have Changed 2

Why These Events Are Important 3

A Barometer for CEO Compensation 5

2002—A Board Governance Tipping Point 9

Impact of the 2008 Financial Meltdown 14

Chapter Summary 17

What’s Next? 18

Chapter 2 Role of the Board 19

What’s in This Chapter? 19

Home Depot’s Leadership Question 20

Two Key Guiding Principles 22

Why Boards Exist 23

Three Critical Questions That Boards Ask 24

Is the Right CEO Running the Company? 25

Is a Robust Succession Plan in Place? 29

Determining the Right Strategy 30

Chapter Summary 31

What’s Next? 32

Chapter 3 Key Board Leadership Roles 33

What’s in This Chapter? 33

Public Outcry for Action 35

Changes in NYSE Listing Requirements 36

The Debate over the Separation of Roles 37

Nonexecutive Chairman, Lead Director, or Presiding Director 40

The Challenge of Board Leadership 42

Chapter Summary 45

What’s Next? 45

Chapter 4 Board Culture 47

What’s in This Chapter? 47

Understanding Board Culture 48

Examples Illustrating Schein’s Model of Culture and Board Dynamics 50

The Three Elements of Board Culture 51

The Leadership and Board Performance Cycle 58

Transforming Board Culture 63

Chapter Summary 66

What’s Next? 67

Chapter 5 Group Dynamics and Board Decision Making 68

What’s in This Chapter? 68

Why Working in Groups Is Difficult 69

Groupthink: Managing Conflict in the Boardroom 72

Understanding and Avoiding Groupthink 74

Getting Past The Abilene Paradox 76

Chapter Summary 81

What’s Next? 81

Chapter 6 Board Structure and Schedule 82

What’s in This Chapter? 82

Board Size 83

Meeting Requirements and Preparation 84

Effective Meetings and Service 90

Chapter Summary 91

What’s Next? 92

Chapter 7 Assessing Board Performance 93

What’s in This Chapter? 93

The Evolution of Board Assessments 94

Customizing the Assessment Process 96

Finding Your Own Best Practice 98

Chapter Summary 101

What’s Next? 101

Chapter 8 The Challenge of the Disruptive Director 103

What’s in This Chapter? 103

Disruptive Members a Common Issue 104

The Ying and Yang of Conflict 105

An Effective Dissenter 106

Five Types of Disruptive Directors 107

Dealing with Disruptive Directors 109

How Assessments Help 110

Chapter Summary 111

What’s Next? 112

Chapter 9 The Other Succession Challenge: The Board of Directors 113

What’s in This Chapter? 113

Why a Board Needs to Plan for Succession 114

Demographics and Board Service Realities 115

Enron, the 2008 Financial Collapse, and Dodd-Frank 115

Building a Board Succession Plan 117

Educating, Onboarding a New Member 123

Chapter Summary 124

What’s Next? 124

Chapter 10 What’s Next in the Boardroom? 125

What’s in This Chapter? 125

Ongoing Scrutiny of Executive Compensation 127

Continuing Demands for More Proxy Information 129

More Shareholder and Investor Activism 130

Greater Demands for Proxy Access 132

Sharper Focus on Risk Management 133

Ever-Increasing Scrutiny of Board Composition 134

The Way Forward 134

Chapter Summary 135

What’s Next? 136

Appendices Board of Directors Assessment Forms 137

Appendix A Board of Directors Self-Assessment 138

Appendix B Audit Committee Assessment 152

Appendix C Compensation Committee Assessment 154

Appendix D Governance/Nominating Committee Assessment 156

Appendix E CEO Assessment 158

Appendix F Lead Director Assessment 163

Appendix G Nonexecutive Chairman Assessment 165

Appendix H Peer Assesssment 167

Notes 169

About the Authors 179

Index 183

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