Group 4:

Rajjan Singh
Rahul Arya
Prasha
Snehashish

Managing Itself
A Boards First Priority
Boards duty: provide oversight
Managements duty: run the company
Ultimate responsibility for directing the companys affairs as

defined by law
Advisors

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Monitors

Indian Institute of Management Raipur

Managing Itself
A Boards First Priority
Specifics of the boards role and modus operandi vary with
Size of the company
One size does not fit all
Stage of the company
Strategy of the company
Talents and personalities of the CEO and the board
Critical determinants of board effectiveness
Motivation

Capabilities

Effectiveness

Individual and Collective

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Indian Institute of Management Raipur

Defining the Best In-Class Boards

Observation of Heidrick & Struggles
Challenge
the
Companys

Business model
Strategies
Operating performance
Leadership development

Set a tone at the top that reverberates throughout the

organization
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Indian Institute of Management Raipur

Defining the Best In-Class Boards

Bain & Company study (2004):
Concentrate on value growth
Practice seven habits that build effectiveness
Own the strategy
Build the top team
Link reward to performance
Focus on financial viability
Match risk with return
Manage corporate reputation
Manage themselves

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Indian Institute of Management Raipur

The Right Leadership

The Key to Board Effectiveness
Spencer Stuart: the chairs responsibilities cover
Managing the
board

Communication

Succession
planning

Board
evaluations

Focal point for the board || Mentor for the CEO

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Indian Institute of Management Raipur

Sociology of the Board

Formal Rules

Informal Rules

Used to govern board behavior

Influence individual behavior after the group
has reached a decision
Punishment for violation is less well defined;
mainly through exercising peer pressure

Include explicit rules regarding :

how often are meetings held
how the meetings are structured
how issues are decided by discussion
and vote
who participates on what committees
Well defined and fairly clear punishment for
violation

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Indian Institute of Management Raipur

Sociology of the Board

Group influences on individual behavior
Group norms :
strongly influence individual behavior
dictate what perceptions, beliefs, and judgments are deemed appropriate
Social Inhibition

Presence of more experienced and powerful group members can discourage individuals from
participating up to their full potential

Can be expressed in several different behaviors :

loafing (minimizing effort while hiding behind work of others)
self-handicapping (knowingly accepting a very difficult challenge to avoid the risk of failing at
a simple task) or
conforming simply to get along

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Indian Institute of Management Raipur

Time and Information Deficits

Barriers to Board Effectiveness

Time constraints :
to be knowledgeable about companys financial results, competitive
position, customers, products, technologies etc .
independent board members holding significant leadership positions in
their own organizations could not spend a large amount of time on board
matters
Inadequate information :
historical information such as balance sheets, operating statements,
share of market information, minutes of prior meetings etc. or summaries
of proposed actions

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Indian Institute of Management Raipur

Time and Information Deficits how to deal with it

Dashboards & Scorecards
Web-based dashboards and scorecards can display critical information
in easy-to-understand charts and graphics on a timely basis

Users can also drill down for additional details

Can be tailored to specific needs keeping a basic menu of common
information
Access to External Auditors
External experts such as counsel, consultants, and other expert
professionals should be retained to investigate issues which the board
believes should be examined
Experts should have a direct line of communication and reporting responsibility to the board and not the management
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Indian Institute of Management Raipur

Building the Right Team Board Composition

Should be tailored to the needs of the company
Individual directors possessing knowledge in core areas, such as

accounting and finance, technology, management etc.

Director qualification standards should be included in the
companys corporate governance guidelines as per NYSE
Appropriate training for each director; an orientation-training
program
Ongoing training on relevant new laws, regulations, and changing
commercial risks

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11

Indian Institute of Management Raipur

Board Self Evaluation

Director performance evaluation process to ensure each director

meets the boards qualifications for membership when the

director is nominated or re-nominated
Evaluation of the board and committees to determine each has
fulfilled its basic required functions
Using services of law firms (in cases of shareholder lawsuits)
Advisable to ask external counsel to work with external experts
specializing in boards and director performance effectiveness
Effective evaluation process is :
controlled by the board itself
confidential and collegial
led by a champion
focused on identifying areas of improvement
focused on evaluating individual director performance
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Indian Institute of Management Raipur

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Indian Institute of Management Raipur