Board Chairman & Director

CORPORATE GOVERNANCE

BOARD RESPONSIBILITIES & BEST PRACTICES

In general, the best boards serve two primary roles to guide and to govern. Some private equity boards are more involved with shareholders serving as board directors. Some Public company boards are less involved with out side representatives serving as elected fiduciaries to represent the shareholders. Regardless of involvement the board has two primary functions as it strives to serve the enterprise in the best manner… to guide and to govern.

Guidance takes on three key areas: strategy, company leadership (CEO) and results. It is critical that the board, working with the CEO and CFO, provides guidance on the overall strategy of the company. Strategy is the blueprint for resource allocation and execution so it is critical to have alignment. The board basically has one employee, the CEO. It is also critical the two work in harmony with the board hiring and guiding and the CEO leading the enterprise. Finally, the board guides results by aligning with the CEO on what can be achieved by when. The best boards I have observed guide and coach as opposed to dictate and manage.

Governing takes on four key areas: oversight, audit, compensation, and transactions. The best boards know that the best companies have high integrity and can operate independently; however, as a service to the shareholders, it is critical that boards have strong oversight and audit involvement. This is nothing more then check and balances. If a material deficiency exists, it is the critical to work with management to fix and improve. If no deficiency exists, and the company is well managed, then the task is complete once all checks are complete. It is also a board role to establish compensation for the CEO and to review recommendations for the executive team. Finally, if a transaction occurs to buy assets, sell assets or to sell the overall enterprise, the board will play a key role in valuation and negotiation.

 

BOARD ROLE IN RESTRUCTURING

To me, restructuring a company is basically simple if the board follows a few simple principles. These rules apply to everyday board leadership and intensify during a restructuring process. When I refer to restructuring, I am focused on the balance sheet and the debt structure… when a company is no longer a “going concern” and has debt interest or accounts payable expenses that exceed its ability pay on a timely and consistent manner.

The two most important principles the board needs to focus on are duty of care and duty of loyalty with the objective of delivering optimal value for the estate and the shareholders. Each board member must to be fully informed and use their best judgment to make decisions to exercise a duty of care. In addition, each board member must put the best interest of the estate above all other interests to exercise a duty of loyalty.

In a solvent company, the directors owe a fiduciary responsibility to the company and the shareholders vs an insolvent company where the directors owe a fiduciary responsibility to the company as an enterprise North American Catholic Educational Programming Foundation, Inc. v. Cheewa/la, 930 A.2d 92 (Del. 2007).

There is some debate about the so called “zone of insolvency” however, board members that focus on duty of care and duty of loyalty to optimize value of the company as an enterprise will most likely fall in the ambit of the “business judgment rule” throughout the process. This rule recognizes director’s decisions as informed and in the best of interest the enterprise, limiting liability and respecting director’s decisions. On the other hand, if directors do not work to optimize value of the estate and provide preferential treatment to various stakeholders, they may fall under the “facts and circumstances rule” that questions director decisions, decreases effectiveness and increases liability.

 

 

Leadership and Marketing

REDEFINING THE PLAYING FIELD

WITH TEAMS AND BRANDS

TEAMS – In my view, transformational leaders are thoughtful and provocative. They listen well so they thoroughly understand the situation. They resist inserting their own view and experience and let the facts and circumstances guide their perspective. They are also quick to transform the conversation to what’s possible… taking the team from the paradigm of status quo to the dynamic action of quantum acceleration. This is simply the discipline of working toward a significant outcome of tomorrow with the action plan of today.

Transformational leaders are Inspirational and Influential. They inspire others with a view of the future that is unconcealed by the full team so everyone has ownership. They are influential and understand how to guide and coach employees to optimal performance as opposed to command and control that dictates and micro manages activity.

Finally, transformational leaders challenge others to learn more, be more and do more. High performing employees, especially the millennial of today, seek a more meaningful experience from work. Leadership is not being in the middle of the pack, it is the ability to be in front of the pack… to get employees to grow personally and produce professionally in ways they never envisioned.

BRANDS – Brands need to be “uniquely prominent” and products need to be “specifically relevant” to succeed. Each needs to work in harmony to produce the most powerful positioning to the consumer. There are three specific benefits that together, if optimized, will build the most powerful presentation to the marketplace. These three are product, emotional and identity benefits. A winning product benefit will compel the target consumer to purchase by clearly explaining what it is and what it does different then other products. An emotional benefit will create a feeling that connects with the target in a way that is inspirational. And finally, the identity benefit creates a “badge” that the target consumer wants to where, one that fortifies their own personal identity. For example, Evian Natural Spring Water is from the French Alps it provides minerals from the earth. The water gives you a chance to feel healthy each day. The identity is premium, fashion oriented and exclusive… available in glass bottles in the best restaurants. Overall, the proposition was very salient and relevant to the target consumer.