Boardroom Dynamics - Notes

BOARDROOM DYNAMICS 1
BOARDROOM DYNAMICS
UNIT DESCRIPTION
This paper is intended to equip the candidate with the knowledge, skills and attitudes that will
enable him/her to positively and effectively influence and effect changes in the boardroom in
the context of the existing dynamics of the Board.
LEARNING OUTCOMES
A candidate who passes this paper should be able to:

 Demonstrate an understanding of why focusing board dynamics is becoming
increasingly important for organisations.
 Demonstrate an understanding of the importance of boardroom dynamics for
organisations.
 Critically evaluate how boardroom dynamics might affect the quality relationships,
decision-making, conversations, culture, diversity and other factors.
 Apply formal and informal methods to positively influence dynamics and enhance
boardroom performance
COURSE OUTLINE
1. The emergence of boardroom dynamics in corporate governance
1.1 Defining boardroom dynamics
1.2 The evolving focus on corporate governance
1.3 The three phases of board evolution
1.3.1 Ceremonial board
1.3.2 Liberated board
1.3.3 Progressive board
1.4 Building blocks of a progressive board
1.4.1 Group dynamics
1.4.2 Information Architecture
1.4.3 Focus on substantive issues
1.5 Impact of boardroom dynamics on organisational performance
1.6 Interest in human factors (human resources, management of talent,
organisational culture, politics etc.)
1.7 Shifts in approaches to leadership
1.8 Focus on ethics
1.9 A broader model for corporate governance
1.10 Organisational failures and impacts on boardroom dynamics
1.11 Role of the corporate secretary in Board room dynamics
2. Evolution of Codes of Corporate Governance

2.1 Evolution of codes - global trends
2.2 Incorporation of boardroom dynamics in codes of corporate governance
2.3 Impact of codes of governance on board culture, behaviors and effectiveness
2.4 Evaluating human capital
2.5 Self-regulation in corporate governance
3. Governance Structures
3.1 Governance theories related to board structure
3.2 Board Structures: Unitary and two tier Boards
3.3 Components of governance structures
3.4 Board size
3.5 Committee structure
3.6 Director considerations
3.7 Best practices when creating and implementing governance structures
3.8 Evaluating governance structures in organisations
4. Skills, Competencies and Diversity of the Board

4.1 Human capital aspects of the board
4.1.1 Director competencies
4.1.2 Director skills and experience

4.1.3 Evaluating individual board members
4.2 Personal characteristics of the board.
4.3 Defining and understanding the measuring of diversity
4.4 Types of diversity
4.5 Areas of diversity and their relationship to boards
4.6 Diversity thinking in a boardroom setting
5. Understanding Boardroom Dynamics

5.1 Psychology of the board
5.1.1 The importance of board dynamics relative to board structure,
demographics and attributes.
5.1.2 Psychological theories underpinning board dynamics
5.1.3 Characteristics of boards and board meetings
5.1.4 Board team processes
5.1.5 Board team outcomes
5.2 Individual and team resilience
5.3 Well- being and resilience of the board
5.4 Developing behavioral agility
6. Board Decision Making

6.1 Decision making as a core competence of a board
6.2 Evidence-based decision making
6.3 Cognitive bias
6.4 Individual differences in relation to decision making
6.5 Decision making tools
6.6 Board team decision making: Key factors and tools
7. Stakeholder Conversations
7.1 Developing dialogue over debate
7.2 Building trust through adult/adult conversations
7.3 The systems inside the board
7.4 The systems outside the board
7.5 Emotional intelligence as a core board competence
7.6 Managing conflict
7.7 Stakeholder communication
8. Culture in the Boardroom

8.1 Governance and culture
8.2 Defining board culture
8.3 Board culture dynamics
8.4 Application of Schein’s Three Levels of Culture model
8.5 Company culture
8.6 Country culture - Hofstede’s Cultural Dimensions
9. Board Diversity
9.1 Understanding diversity
9.2 Types of Diversity
9.3 Influences of board diversity (culture, law
9.4 Promoting diversity within the board
10. The Effect of Meeting Design on Boardroom Dynamics

10.1 Introduction to meeting design
10.2 Design of board meetings
10.3 Physical characteristics
10.4 Attendee characteristics
10.5 Trends in technology
10.6 Use of virtual boards for remote teams
10.7 Face-to-face versus virtual/audio interaction
11. The Role of the Governance Professional in Influencing the Boardroom Dynamics
11.1 The 21st Century governance professional
11.2 The strategic role of the corporate secretary
11.3 Application of theory
11.4 Influencing dynamics in a positive way
11.5 Leadership influence
11.6 Ethical dilemmas
12. Effective Talent Management

12.1 Board talent management overview
12.2 Skills and competencies of board members
12.3 Recruitment of board members
12.4 Introduction of board members
12.5 Board learning and development
12.6 Performance management of board members
12.7 The role of the corporate secretary/ governance professional in effective talent
management
12.8 Ethical dilemmas in relation to managing talent
13. Board Evaluation

13.1 Methods and processes options of board evaluation
13.2 Evaluating director personal characteristics
13.3 Evaluating board dynamics
13.4 The corporate secretary as a board consultant
14. Power and Politics in Organisations

14.1 The art and science of power in organisations

14.2 Sources of power in organiSations
14.3 Power and influence.
14.4 Managing change through power.
14.5 Leading with power.
15. Contemporary Issues and Case Studies in Boardroom Dynamics

Introduction
The aim of this module is to provide the advanced knowledge, understanding and skills needed
for the company secretary/governance professional to support boardroom performance by
enabling both effective individual behaviors and group processes.
In recent years, high-profile corporate failures, maturing codes of governance, and an

increasing interest in human capital intangibles have led to an increase in calls for governance
professionals to focus on how the board works in practice as well as in theory.
Technical considerations are necessary but not sufficient to engender good governance. An
appreciation of and competence in more behavioral, cultural and psychological aspects of
boardroom practice is essential to being an effective modern company secretary/ governance
professional.
This module explores boardroom practice in detail with a particular focus on understanding the
dynamics of, and between, members of the board and how these factors contribute to an
effective board and the sustainability of an organization.
The module also covers what boards and company secretaries/governance professionals can do
differently and how they can influence and effect change within the remit of their role.
Learning outcomes
After successful completion of this module you should be able to:

1. Demonstrate an understanding of the importance of boardroom dynamics for
organizations.
2. Demonstrate an understanding of the different facets of boardroom dynamics.
3. Critically evaluate how boardroom dynamics might affect the quality of relationships,
decision-making, conversations, culture, diversity and other factors.
4. Apply formal and informal methods to positively influence dynamics and enhance
boardroom performance.
CHAPTER ONE
1.1 Defining Boardroom Dynamics
People often use the term ‘board dynamics’ when they do not really know what is going on.
However, here are some definitions of board dynamics that may help you initially orientate to
what may be a new area and perspective of corporate governance.
Following the 11 Cs model (which will be discussed here in), board dynamics as a noun and as
an area of study is:
1. The theory and application of the behavioral aspects of board functioning.
As an adjective describing the dynamics of boards, board dynamics are:
2. The psychological processes that influence how boards function.
If we combine these first two definitions, a slightly more technical definition is that board
dynamics are:
3. The psychological processes that moderate structural and individual inputs to board
functioning.
Furthermore, if we recognize that psychology is fundamentally about how people and groups
relate to each other and that what happens in the boardroom can reverberate outside of it,
then we reach this most complete definition of board dynamics as:
4. The interactions between board members individually and collectively, and how these
influence, and are influenced by, their wider stakeholder system.
And finally, here are two additional, less technical definitions that add some explanatory colour
following the themes that have been discussed in this chapter so far:
5. Board dynamics opens the black box of the boardroom behavior to see how things
actually play out rather than what is supposed to happen on paper.
6. Board dynamics is about how boards behave, and indeed about how they misbehave,
rather than about what tasks they do. It is about how they discuss issues rather than
what issues they discuss.
1.2 The Evolving Focus on Corporate Governance

The topic of corporate governance is a vast subject that enjoys a long and rich history. It’s a
topic that incorporates managerial accountability, board structure and shareholder rights. The
issue of governance began with the beginning of corporations, dating back to the East India
Company, the Hudson’s Bay Company, the Levant Company and other major chartered
companies during the 16th and 17th centuries.
While the concept of corporate governance has existed for centuries, the name didn’t come
into vogue until the 1970s. It was a term that was only used in the United States. The balance of
power and decision-making between board directors, executives and shareholders has been
evolving for centuries. The issue has been a hot topic among academic experts, regulators,
executives and investors.
Corporate Growth Places Emphasis on Developing Corporate Governance

After World War II, the United States experienced strong economic growth, which had a strong
impact on the history of corporate governance. Corporations were thriving and growing rapidly.
Managers primarily called the shots and board directors and shareholders were expected to
follow. In most cases, they did. This was an interesting dichotomy, since managers highly
influenced the selection of board directors. Unless it came to matters of dividends and stock
prices, investors tended to steer clear from governance matters.
In the 1970s, things began to change as the Securities and Exchange Commission (SEC) brought
the issue of corporate governance to the forefront when they brought a stance on official
corporate governance reforms. In 1976, the term “corporate governance” first appeared in the
Federal Register, the official journal of the federal government.
In the 1960s, the Penn Central Railway had diversified by starting pipelines, hotels, industrial
parks and commercial real estate. Penn Central filed for bankruptcy in 1970 and the board
came under public fire. In 1974, the SEC brought proceedings against three outside directors for
misrepresenting the company’s financial condition and a wide range of misconduct by Penn
Central executives.
Around the same time, the SEC caught on to widespread payments by corporations to foreign
officials over falsifying corporate records. During this era, corporations started to form audit
committees and appoint more outside directors. In 1976, the SEC prompted the New York Stock
Exchange (NYSE) to require each listed corporation to have an audit committee composed of all
independent board directors, and they complied. Advocates pushed to get governance right by
requiring audit committees, nomination committees, compensation committees and only one
managerial appointee.
The 1980s Brought a Corporate Governance Reform Counter-Reaction

The 1980s brought an end to the 1970s movement for corporate governance reform due to a
political shift to the right and a more conservative Congress. This era brought much opposition
to deregulation, which was another major change in the history of corporate governance.
Lawmakers put forth The Protection of Shareholders’ Rights Act of 1980, but it was stalled in
Congress.
Debates on corporate governance focused on a new project called the Principles of Corporate
Governance by the American Law Institute (ALI) in 1981. The NYSE had previously supported
this project, but changed their stance after they reviewed the first draft. The Business
Roundtable also opposed ALI’s attempts at reform. Advocates for corporations felt they were
strong enough to oppose regulatory reform outright, without the restrictive ALI-led reforms.
Businesses had concerns about some of the issues in Tentative Draft No. 1 of the Principles of
Corporative Governance. The draft recommended that boards appoint a majority of
independent directors and establish audit and nominating committees. Corporate advocates
were concerned that if companies implemented these measures, it would increase liability risks
for board directors.
Law and economic scholars also heavily criticized the initial ALI proposals. They expressed
concerns that the proposals didn’t account for the pressures of the market forces and didn’t
consider empirical evidence. In addition, they didn’t believe that fomenting litigation would
serve a purpose in improving board director decision-making.
In the end, the final version of ALI’s Principles of Corporate Governance was so watered down
that it had little impact by the time it was approved and published in 1994. Scholars maintained
that market mechanisms would keep managers and shareholders aligned.
The “Deal Decade” Leads to Shareholder Activism

The 1980s was also referred to as the “Deal Decade.” Institutional shareholders grabbed more
shares, which gave them more control. They stopped selling out when times got tough.
Executives went on the defensive and struck deals to prevent hostile takeovers.
State legislators countered takeovers with anti-takeover statutes at the state level. That,
combined with an increased debt market and an economic downturn, discouraged merger
activity. The Institutional Shareholder Services (ISS) was formed to help with voting rights.
Shareholders struck back with legal defenses, but judges often favored corporate decisions
when outside directors supported board decisions. Investors started to advocate for more
independent directors and to base executive pay on performance, rather than corporate size.
Financial Crisis of 2008

By 2007, banks had been taking excessive risks and there was growing concern about a possible
collapse of the world financial system. Governments sought to prevent fallout by offering
massive bailouts and other financial measures. The collapse of the Lehman Brothers bank
developed into a major international banking crisis, which became the worst financial crisis
since the Great Depression in the 1930s. Congress passed the Dodd-Frank Wall Street Reform
and Consumer Act in 2010 to promote financial stability in the United States.
The fallout from the financial crisis has placed a heavier focus on best practices for corporate
governance principles. Boards of directors feel more pressure than ever before to be
transparent and accountable. Strong governance principles encourage corporations to have a
majority of independent directors and to encourage well-composed, diverse boards.
Advancements in technology have improved efficiency in governance and they’ve created new
risks as well. Data breaches are a new and real concern for corporations. The first targets were
banks and financial institutions. As these institutions have bolstered their security measures,
hackers have turned their efforts to smaller corporations within a variety of industries,
including governments.
Today’s boards of corporations and organizations of all sizes are finding that the best way for
them to protect themselves, their shareholders and stakeholders is to use technology to their
advantage by taking a total enterprise governance management approach. Diligent, a leader in
board management software, provides for their needs with Governance Cloud, a suite of fully
integrated and highly secure governance tools. Diligent’s software solutions help boards put
their best foot forth in assuring transparency, accountability, compliance and efficiency.
The history of corporate governance continues to be rewritten. How we define corporate

governance will continue to be in a state of evolution in the coming years. Diligent will be
following the trends and regulations to help boards perform their best regardless of what the
future brings.
1.3 The three phases of board evolution

1. Ceremonial board
2. Liberated board
3. Progressive board
Introduction
Boards of directors have undergone a rapid transformation since the Sarbanes-Oxley Act of
2002. The shift in power between the CEO and the board is perceptible. Directors are taking
their responsibilities seriously, speaking up, and taking action. It’s a positive trend and an
exciting time for boards. But the evolving relationship between the CEO and the board has yet
to find the right equilibrium in most cases. It’s important that boards become active, but there
is danger in letting the pendulum swing too far. Astute directors and CEOs sense the tension.
They recognize that just as past practices have failed them, recent attempts to make the board
a true competitive advantage are not always hitting the mark.
The Real Risk of Value Destruction
The change in boardrooms today is not marked by the people but rather by the social
atmosphere. Boardrooms have more energy, liveliness, inquisitive interactions among
directors, and thoughtful engagement by CEOs. The difference today is a mindset, an emerging
collective desire to do something meaningful. It appears that boards of directors, as an
institution, are coming of age.
Much of the public outcry—and resulting regulation—of recent years is based on the failure of
boards to root out fraud, some of which destroyed whole companies. But boards are
recognizing that they have failed in another, arguably more widespread, way: by allowing
(sometimes inadvertently contributing to) faltering performance.
Entire industries collapsed in the wake of the dotcom bust; too many companies failed to adapt
their businesses to the different external environment after the recession began and after the
9/11 tragedy. No one could have foreseen global terrorism, but what about anticipating the
fallout from the go-go years of the New Economy, or not recognizing the importance of
emerging new channels? Couldn’t boards have prompted their managements to pinpoint and
consider these issues? In some cases, boards have made costly mistakes. How about hiring a
CEO from the outside who is a master of cost-cutting— when the company needed a leader
who could grow the business? Or tying the CEO’s incentives to the wrong goals? Or approving
a grand growth strategy with an unhealthy appetite for risk? Most boards want to do the right
thing, whether it’s complying with the new rules (and there are a lot of them) or contributing in
substantive ways on matters of choosing the CEO, compensating top management, ensuring
that the company has the right strategy, and providing continuity of leadership and proper
oversight. Their commitment and level of engagement marks a new stage in their evolution.
The good news is that these boards are unlikely to commit the sins of omission that were
common among the passive, CEO dominated boards just a few years ago. The bad news is that
they are now vulnerable to committing sins of commission. That’s because past board
experience has not fully prepared directors and CEOs for the challenges they face today.
Without clear guidelines to take them forward, well-meaning boards can actually erode the
vitality of the company and drain time and energy from the CEO. It’s a real danger, and
companies truly suffer when this happens. To achieve their full potential, boards must
continue to evolve. They must make a conscious effort to go to the next level.
The Evolution of the Board

Boards began their evolution in the pre–Sarbanes-Oxley era of passivity. Back then, they were
“Ceremonial” boards, because they existed only to perform their duties perfunctorily.
Sarbanes-Oxley has driven many boards to a second evolutionary phase; directors have become
active and “Liberated” themselves from CEOs who previously dominated the boardroom. But
there is also a third phase awaiting boards, when active directors finally gel as a team and
become “Progressive.”
1. Ceremonial Boards
A decade ago, when one non-executive director joined the board of a paragon of American
industry, a long-serving colleague told him, in private, “New directors shouldn’t speak up during
board meetings for the first year.” That attitude is untenable today and, in fact, that board is
much different now. But such comments are indicative of the culture of passivity that
permeated the Dark Ages of corporate governance.
Some readers may remember when such Ceremonial boards were commonplace. Management
had all its ducks in a row by the time a board meeting began. There was a scripted morning
presentation that was rehearsed to the second in a tight agenda. The CEO communicated
very little with the board between meetings, other than with the one or two confidants the
CEO trusted and worked with if the need arose.
These boards perfunctorily performed a compliance role. Many directors served for the
prestige and rarely spoke among themselves without the CEO present. They made sure to
fulfill their explicit obligations, including attending the required board meetings and rubber-
stamping resolutions proposed by management.
The general interest media rarely reported directors’ names. So back then, the prospect of
shame and embarrassment when a company ran into trouble wasn’t much of a threat.” Such
were the norms and expectations of directorship during this era. Most readers will recall a few
boards that fit this description at some point in time. Hopefully, it doesn’t sound like any boards
on which they now serve, though these boards do still exist.
2. The Liberated Board
Most boards left their Ceremonial status behind after the passage of Sarbanes-Oxley. A new
generation of CEOs now expects boards to contribute. And candidates for directorship now
expect active participation as a condition of their acceptance. There is a general sense of
excitement as directors embrace an active mindset.
The transition to liberation had really begun about a decade earlier. In 1994, the General
Motors board, advised by Ira Millstein, first published its “Guidelines for Corporate
Governance.” The document was widely praised as a model for corporate boards.
BusinessWeek even called it a “corporate Magna Carta,” referring to the document signed in
1215 by King John that stipulated, among other things, that no one, including the King, is above
the law
The comparison was fitting; GM’s CEO and Chair, Robert Stempel, stepped down late in 1992
after losing the confidence of GM’s non-executive directors. When the non-executive directors
named one of their own as Chair, it signaled a distinct change in the general attitude of boards
as passive bodies. No one dreamed such a thing would happen at the world’s largest company.
Many directors around the country took note. In particular, the boards of several prominent
bellwether companies, including those at American Express, AT&T and IBM, followed GM’s
lead.
Still, not that many boards entered the ranks of the Liberated in the 1990s. Though board
watchers and activists such as Bob Monks, Nell Minow, Sarah Teslik, Richard Koppes (of
Calpers), and others pressed for reform, many companies under fire were reluctant to make
wholesale changes in their governance practices.
There was no urgency for change until the scandals broke at Enron, WorldCom, Tyco,
HealthSouth, Adelphia, and elsewhere. Then came the rapidly passed Sarbanes-Oxley Act of
2002, with its broad provisions on Audit Committee work, internal controls, and fraud
prevention, along with the ensuing reforms enacted by the Securities and Exchange
Commission and the stock exchanges, lawsuits filed against directors and corporate officers,
and the public embarrassment of some very experienced directors. With so much shareholder
and bondholder value evaporated in the scandals, the capital markets also began paying closer
attention to corporate governance and to the possibility of pricing the perceived quality of
transparency and governance into securities.
Directors saw their peers chastised and overwhelmingly heard investors’ calls to become active.
Although some boards remain Ceremonial today, the pendulum swung decidedly toward
Liberated boards. In many cases, incoming CEOs helped drive the change.
Liberation is good news. But while liberation can mean a high functioning team, it can also
mean each director singing a different tune. If it’s not handled effectively, liberation can
inadvertently make CEOs and management less effective, and can adversely affect the creation
of shareholder value. It happens. Liberated directors often play to their own strengths
individually, not as a collective body. They ask of their CEOs too many things, some of which are
plainly minutiae or irrelevant. The limited time that these CEOs have to run their companies
gets further diluted. This is the state in which so many Liberated boards sit today—though
certainly not by intention.
The Progressive Board
The intent of directors who have liberated themselves is for their boards to become what I call
“Progressive.” They comply meticulously with the letter of the law, and they also embrace its
spirit. Further, they aim, as Andy Grove, founder, former CEO, and current Chair of Intel, is
quoted by Fortune magazine as saying, “to ensure that the success of a company is longer
lasting than any CEO’s reign, than any market opportunity, than any product cycle”).
To achieve this broader mandate, these boards become uniformly effective as a team, and they
make their value evident while maintaining an independent viewpoint. Directors on a
Progressive board gel into a coherent and effective group. All directors contribute to a dialogue
that has lively debates, sticks to key issues while dropping tangents, and leads to consensus and
closure. They challenge each other directly, without breaking the harmony of the group and
without going through the CEO.
Directors find the give and-take in board meetings energizing. They enjoy the intellectual
exchange, and they learn from each other. They look forward to meetings. The board and the
CEO have a working relationship that is constructive and collaborative, but board members are
not afraid to confront hard issues.
The lead director, or whoever facilitates executive sessions, is a liaison between the board and
management who keeps executive sessions focused and running smoothly, and is very effective
at communicating the heart of the board’s viewpoint, not a collection of opinions from
individual directors, to the CEO. Feedback is constructive and highly focused in a way that helps
the CEO. CEOs respect the Progressive board’s role and contribution, and are collaborative in
their approach to the board.
The Progressive board adds value on many levels without becoming a time sink for
management. The diverse perspectives of directors on the external environment, including
legislative affairs, economic changes, global business, and financial markets, are a boon to
management’s strategy-setting and decision-making efforts. Directors contribute most where
their interest, experience, and expertise are greatest, and they know their viewpoints are
expected. Directors also add value through their judgments on and suggestions for the CEO’s
direct reports.
Progressive boards take their own self-evaluation—of the collective body as well as of
individual board members—very seriously. There is a sincere effort to implement the findings
of the evaluation on both a board and individual director level. In short, Progressive boards
move the essence of their governance activities to comprise not only complying with changing
rules and norms but also adding value to the long-term potential of the company. These boards
are a competitive advantage in and of themselves.
Becoming a Progressive board is not beyond reach. Such boards exist at some of the largest
companies in America, like General Electric, as well as at mid-caps like MeadWestvaco and
smaller public companies, like PSS/World Medical. The completion of this transformation is
very much up to the CEO and the board. The first step is to realize where you are today to help
a board realize where it stands and in what areas it could improve. Liberated boards like Jim
Doyle’s don’t need dramatic overhauls. But they do need to recognize what is holding them
back; the diagnostic can help. After that, it’s up to the directors and management to take
conscious steps to change. The next three chapters are designed to help boards speed their
transition.
1.4 Building blocks of a progressive board

There are three building blocks of a progressive board.
1. Group dynamics
2. Information Architecture
3. Focus on substantive issues
1. Group Dynamics
The tone of interactions among board members and between the board and management is a
fundamental difference between Ceremonial, Liberated, and Progressive boards. Group
dynamics underpins the board’s ability to do all the components of its job—whether it’s
compliance and monitoring or making contributions to strategy and CEO selection. Unless
individual directors can gel into a working group, they simply cannot be effective. That’s why
group dynamics is the first building block of a Progressive board. Whether or not the individuals
gel into an effective group is an unmistakable characteristic of a Progressive board. Every
director should feel comfortable adding to the discussion. As Jeff Immelt, CEO and Chair of
General Electric, says, “The boardroom has to be a place where every voice is heard. Our
meetings are very open. Directors can interact with anybody, at any time.”
2. Information Architecture
How boards get information, and in what form, is vital to how the board perates. The
mechanisms are typically very different for boards at different stages.
Sophisticated information architecture is key to successful boards. An easy rule of thumb is

that each director should profit from a balance of internal and external information, a balance
of information dependent from top management and information independent from top
management, a balance of formal information and of informal information. When this balance
is achieved, information design is usually solid.
Indeed information is best when it is designed in a way that informs the board about all the
essential activities undertaken by the company and the issues facing it. When thinking of
information design, boards typically think of information coming from management (how brief,
well focused and strategic it is, prioritized, with executive summaries, key issues to tackle and
options to consider). But information architecture should include also external information
(what can we source from outside the company, such as from social media). It should also
include formal information and informal information sources (such as informal networks: the
ability of the chairman of Singapore Airlines to maintain good relationships with union
representatives is an important source of information for the company).
For the formal internal information, jointly designed board briefings that include financials with
forecasts, a CEO report, risks and opportunity maps, materiality maps, analysis of the genepool
and summary of financial analysts’ views contributes to the quality of the information
architecture. Additionally, regular communications between management and the board, for
example management letters in between meetings adds to efficient information. Committee
reports are also fundamental in fomenting the effective architecture of information. Adequate
reports, nevertheless, encompass analysis of specific issues rather than just recommendations.
A key checkmark is whether the board is actively involved in designing the information and
whether that information design changes with the firm, its environment and its strategy.
Informal channels of information are key as well and should be well elaborated themselves; for
example meetings with employees and informal meetings of board members, all need both
structuring, to give them potential, and some freedom, to give them creativity without
infringing on management’s rights. In short, sophisticated (but not necessarily complex)
3. Focus on substantive issues
What boards focus their time and attention on will determine whether boards are able to add
value consistently. Lack of focus affects the board. They become frustrated because their
discussion time is lacking on the central issues on which they believe they should devote their
scarce time.
Directors feel rushed and leave board meetings knowing they have not covered the right thing.
They lose confidence in the boards’ ability to add value at all.
1.5 Impact of boardroom dynamics on organizational

performance
There have being a strong presumption that the effective use of board as internal governance
mechanism is crucial to improved firm performance and profitability. Some of the board
dynamics reviewed here includes composition, size, CEO Duality and diversity.
The Impacts
1. Those directors and officers on the inside of board meetings would generally agree that
the quality of the interactions among the participants—or "boardroom dynamics"—is a
crucial variable in effective decision-making and achieving other desired meeting
outcomes.
2. Corporations whose boards follow certain principles and practices have higher
corporate Return on Investment (ROI) than those whose boards do not.
3. Board Size
The board size represents the total head counts of directors seating on the corporate board.
Size of the board is recognized as one of the unique features of board dynamics with
considerable but strategic impact on the board independence as well as the overall quality
of corporate governance
The size of board is vital to achieving the board effectiveness and improved firm
performance especially from resource dependency perspective which place more emphasis
on the board ability to co-opt limited and scares resource from various external links.
Board size affects the quality of deliberation among members and ability of board to arrive
at an optimal corporate decisions. Identifying the appropriate board size is of high
significance because size can be detrimental to board effectiveness beyond certain limit. An
optimal board size is a function of many variables such as firm age, size, industrial
classification as well as the degree of monitoring and value addition required amongst
others.
Small board size of about 5-9 members promotes critical, genuine and intellectual
deliberation and involvement among members which presumably leads to effective
corporate decision making, monitoring and improved performance.
4. Diversity of board
Board diversity involves having a well-balanced board membership that is made of

individuals not necessarily from different cultural background but those from different
professional fields which create synergy that helps board in carrying out its statutory
responsibilities. Thus, corporate board diversity represents both demographic (e.g. gender,
age, and ethnicity) and cognitive elements such as the industry experience, professional and
educational qualifications.
Keeping a well-diversified cognitive board create an in-house self-reliance whereby

everything firm requires ranging from effective monitoring, resource co-optation, to quality
decisions and sound corporate initiatives are all within reach. Further to the above, a well
diverse independent board is more vigorous in promoting corporate fair play.
5. Good board dynamics cannot be legislated, but it can be built over time. By having an
open and trustful atmosphere directors can fulfill their roles in a more efficient way
without being trapped in a rigid position.
6. Critical selection of board members based on skills and diversity (more women, young
people, and different cultural background), creates an open atmosphere and yearly
evaluation of the work becomes the new standard for good board dynamics.
7. Boardroom dynamics enhances individual decision making process in terms of integrity

and morality and the question of individual responsibility /accountability from a board
member’s perspective.
8. Facilitates collective responsibility/accountability within an corporation while taking

ethical business behavior into account in the decision-making process.
1.6 Interest in human factors (Gross national happiness,

human resources, management of talent, organizational
culture, leadership development and succession, politics etc.)
 Gross National Happiness (GNH)
Gross national happiness (GNH) is a measure of economic and moral progress that the king of
the Himalayan country of Bhutan introduced in the 1970s as an alternative to gross domestic
product.
Good governance is one of the nine domains of Gross National Happiness (GNH) aimed towards
enhancing the well-being of the Bhutanese people. Unlike other domains, governance cuts
across all domains/sectors and therefore, its effect on the society at large arises from the
cumulative efforts of all sectors.
Rather than focusing strictly on quantitative economic measures, gross national happiness
takes into account an evolving mix of quality-of-life factors.
The "four pillars" of GNH are good governance, sustainable development, preservation and
promotion of culture, and environmental conservation.
These pillars provide the foundation for the happiness, which is manifest in the nine domains of
GNH: psychological well-being, standard of living, good governance, health, community vitality,
cultural diversity, time use, and ecological resilience.
 Human Capital
Serving as members of boards, directors bring human capital to their companies. Directors
provide the companies with their human capital in the form of education, or their prior work
experience. The human capital improves directors’ ability to determine and take advantage of
business opportunities or monitor managerial behaviors. This, in turn, may have a significant
effect on firm outcome on governance–performance association.
 Talent Management
Boards have always been advised to stay out of organizational management and that includes
human resources issues. Yet, as organizational culture continues to emerge as critical to
organizational performance, boards are finding themselves having to engage in some non-
traditional behavior.
Boards in today’s world are expected to work with the CEO to define the organizational culture
expected and the measures that will assure adherence to the values.
More and more boards are holding CEOs responsible for leadership development and
succession programs, tracking regular measurements of employee engagement and innovation
and conducting regular outside reviews of human resources policies, pay and compliance.
 Corporate Culture
The board bears responsibility for ensuring the values of the credit union’s corporate culture
meets its expectations. Corporate culture refers to the way the organization goes about
treating its internal personnel and the expectations for behavior across the organization.
Defining these expectations is customarily done by working with the CEO to lay out explicit
values for how the board wishes the organization to run. Values like integrity, innovation,
employee development investments, respect, being member-centric, and stewardship, all tend
to show up in culture values statements.
In conjunction with defining the culture expected in the credit union, the board should have
regular metrics that confirm the team is meeting the cultural values as defined. Consistent
evidence suggests a clear relationship between a high-performing organizational culture
(consistency across the values publicly identified) and organizational performance in both
financial and member value.
 Innovation
Everyone talks innovation but not everyone sees it as an expectation and tracks how well the
organization does with it. A board should take this seriously with the CEO reporting quarterly
on innovation initiatives and their progress, including those that didn’t work out.
 Leadership Development and Succession
The board also bears responsibility for ensuring there is a robust leadership development
program and a well-defined succession plan all the way through to front-line supervisors. The
foremost employee engagement resource, investment in developing leaders pays immediate
dividends across all performance factors. Encouraging employee career development and
having clearly identified career paths represent some of the most important characteristics of
the highest performing organizations.
These aspects of “organizational culture” should not be left to happenstance but should be
defined, expected and measured in regular executive reports to the board. The frequency with
which a board may check in on development and success is a board’s prerogative. It could
range from annual to quarterly in high-performing boards.
1.7 Shifts in approaches to leadership
Leadership is one of the most complex and multidimensional phenomena. It has been studied
extensively over the years and has taken on greater importance than ever before in today’s
fast-paced and increasingly globalized world. Nonetheless, leadership continues to generate
captivating and confusing debate due to the complexity of the subject.
Researchers have proposed many different definitions and theories of leadership. Scholars
define leadership as ‘an influencing process aimed at goal achievement’, focusing on leadership
as a process directed at influencing a specific group of people to meet a stated objective’.
Effective leadership is recognized as key to the success of any organization. In fact, there has
been a shift towards acknowledging the importance of human capital and organizational
management.
Trait era: Great Man theory (1840s) and trait theories (1930s–1940s)
In the 19th century, research on leadership was focused on the innate characteristics of a
leader and on identifying the personality traits and other qualities of effective leaders.
The core belief of the Great Man theory is that leaders are born, not made or trained. In other
words only a few, very rare, individuals possess the unique characteristics to be effective
leaders and attain greatness by divine design. Examples were often drawn from popular
historical figures such as Julius Caesar, Mahatma Gandhi, Abraham Lincoln and Napoleon
Bonaparte. It was believed that these individuals were natural born leaders with innate
characteristics of leadership, which enabled them to lead individuals while they shape the
pages of history.
The Great Man theory then evolved into the trait theories. Trait theories argue that leaders can
be born or made. In other words, that the traits of successful leaders can be either inherited or
acquired through training and practice. The aim was to identify the right combination of
characteristics that make an effective leader and focus was on studying the mental, social and
physical traits of leaders. However, a consistent set of traits was not produced and by 1950, it
appeared that there was little advantage in continuing with this approach and hence it was
abandoned. Today, psychometric tools are an example of trait theory principles in action and
are often used in staff recruitment. These tools highlight key personality traits and are used for
personal performance and team development.
Behavioral era: behavioral theory (1940s–1950s)
Behavioral theory evolved from trait theories and asserts that leaders are largely made, rather
than born and that particular behaviors can be learnt to ensure effective leadership. It puts
emphasis on the actual behavior of the leader and not on their traits or characteristics, but it
largely ignores the situation and environment of the leader.
Today, this theory is exemplified in the numerous leadership-training programmes, which
involve the development of leadership skills and behaviours, thus supporting the belief that
leadership is largely learnt.
Situational era: contingent and situational theories (1960s)

It was later recognised that the environment plays a significant role in the leader-follower
dynamic and this belief dominated the situational era. As the name suggests, the situational era
is focused on leadership in particular situations, rather than on the traits or behaviours of
leaders. This implies that leaders must be able to assess the context in which they operate and
then decide what style will ‘fit’ the situation best. Because the best style is dependent on the
situation, this approach is known as the contingency theory of leadership.
New leadership era: transactional, transformational theories (1990s) and others (2000s)
For the first time, it was recognised that focusing on one aspect or dimension of leadership
cannot address all the complexity of the phenomenon. In a world that has become more
complex and challenging, a need emerged for leadership theories that support circumstances of
rapid change, disruptive technological innovation and increasing globalisation. This led to the
new leadership era, moving away from the above-mentioned traditional theories of leadership,
which define leadership as a unidirectional, top-down influencing process, drawing a distinct
line between leaders and followers. Instead, the focus became on the complex interactions
among the leader, the followers, the situation and the system as a whole, with particular
attention dedicated to the latent leadership capacities of followers.
Transactional and transformational theories
The above-mentioned context encouraged the popularity and adoption of two leadership
theories: transformational and transactional theories, and also gave rise to approaches such as
the Lean strategy and agile methodology to help deal with the fast pace of change and
increasing complexity of the challenges faced. Transformational leadership is a theory in which
leaders encourage, inspire and motivate followers. Examples of transformational leaders
include the likes of Jeff Bezos, Steve Jobs and Bill Gates.
Transactional leadership, on the other hand, relies on authority to motivate employees. The
leader exchanges reward for follower effort and punishes any follower who fails to meet their
goals.
Others
The continued shift in leadership concepts led to the development of shared, collective and
collaborative leadership practices. According to these, success in an organisation is more
dependent on coordinative leadership practices distributed throughout the organisation rather
than the actions of a few individuals at the top. Servant leadership became popular once again,
emphasising the importance of followers. Servant leaders seek to support their team members
and are most concerned with serving people first. More recently, inclusive leadership also
emerged, focusing on a person-centred approach. It is based on the dynamic processes that
occur between leaders and followers and focuses on empowering followers to becoming
leaders. Finally, contemporary leadership theory also includes complexity leadership, which
emerged as a means to deal with the complexity of our modern world. This theory takes a
whole-system view, considering contextual interactions that occur across an entire social
system.
Conclusion
Leadership theory is a dynamic phenomenon and continues to change over time. It has been
studied extensively over the years and several theories have emerged. Traditional leadership
theories include the Great Man theory, which maintains that leaders are born to lead thus
possessing certain inherent characteristics that destines them to lead. Trait theory evolved
from the Great Man theory and specifies that leaders are can be born or made and that the
combination of certain characteristics is needed to be an effective leader. Behavioural theory
then followed, asserting that leaders are largely made with a focus on the actions of the leader
as opposed to their personality traits. There was then recognition that certain environmental
factors are important and contingency and situational theories were added to the mix.
The modern era followed and involved a shift from focusing on the leaders and their attributes
to considering the complex and continuous interactions and interrelationships among the
leader, the followers and the situation. The resulting theories include shared, collective and
collaborative leadership as well as inclusive leadership. Finally, complexity leadership also
emerged, focusing on the whole system of an organization.
1.8 Focus on ethics

Ethics is the branch of knowledge and practice that seeks to answer the practical question
‘What ought one do?’ This question applies to both individuals and organizations. Ethics is the
choices we make and actions we take – as informed by the values and principles we hold and
the purposes we serve – as individuals, communities and societies. Ethical issues vary in scope.
Some relate to organizational matters, such as conflicts of interest. Others are of broad societal
concern, such as how to respond to climate change.
The ethical landscape traversed by company directors has always been complex. They are
legally bound to act in the best interests of the company as a whole. That is, their duty is to
protect and advance the interests of an entity that exists only in the ‘abstract’ realms of the
human mind. On the other hand, there is a diverse range of real people whose interests are
intimately linked to and affected by the corporation.
While in the ordinary course of business there is no direct, legal obligation to shareholders, the
practical reality is that directors are constantly being pressed to advance the interests of
shareholders, as well as employees, customers, suppliers and the wider community. It would be
comforting to think that all interests can be perfectly aligned – at least in the long term.
However, that is mere ‘wishful thinking’. The truth is that directors are frequently required to
make decisions that will annoy one group or another.
As always, the directors’ touchstone must be the interests of the company as a whole – not its
shareholders, not its employees, not anyone else. But how are those interests to be defined?
And on what basis are directors to exercise their discretion? Are they to draw on a personal set
of values and principles? Are they to attend to the standards of the communities within which
they work? Is there a framework of ‘absolutes’ that transcend all other considerations?
The answer is that directors are bound to apply the values and principles of the company.
However, unlike others, company directors have the capacity to define and amend a
corporation’s ethical framework. Indeed, the board of a corporation is, in effect, its mind and
conscience. All that a corporation does and its effects on the world, is ultimately traced back to
directors and their deliberations. Thus, the heavy ethical burden carried by directors.
Fortunately, there are tools available to directors to improve the quality and character of their
decision making. Those tools are informed by a rich tradition of thinking in which humans have
sought to analyze and improve the way in which we make choices – the field of ethics.
Ethics both informs the law and goes beyond its limits. For the most part, law sets boundaries
for what may or must be done. Ethics concerns what should be done – even if not required or
prohibited by law. Directors will often seek legal advice about what can be done. Whether or
not to approach or cross the limits of the legal ‘envelope’ of possibilities is an ethical question.
The fact that something can be done does not mean that it should be done. At the most basic
level, boards can help individuals working within an organization – and the organization as a
whole – to consistently make decisions that are ‘good’ and ‘right’. They discharge that
responsibility by setting the organization’s core values and principles – and by demonstrating
their practical application through their own decision-making and conduct.
Acknowledging and addressing the ethical dimension of a sensitive issue can be challenging.
However, boards that fail to take account of such matters are not effectively fulfilling their
governance responsibilities.
1.9 A broader model for corporate governance

The 11 CS Model: board structures - board demographics - board attributes - board dynamics
Note: For simplicity, the model can be summarized by the 11 Cs of corporate governance being
configuration and compliance (board structures), capacity, capability and connections (board
demographics), competence, commitment and character (board attributes) and cohesion,
challenge and culture (board dynamics).
The two axes of technical versus behavioral and individual versus board create four specific
areas of corporate governance (board structures - board demographics - board attributes -
board dynamics) focus each of which comprise a list of components.
These components can be summarized into 11 areas all beginning with the letter ‘C’, hence the
model’s name: the 11 Cs model of corporate governance.
The framework of the model will also be useful in providing the structure for the following
chapters of the text and for you to orientate the newer behavioral areas of governance into
your existing knowledge of the traditional technical considerations.
The main questions four areas of the model are described in the figure below-:
1. Board structures
This quadrant is the traditional area of focus of corporate governance.
The key question that this area asks of boards is: ‘Does the board and committees have
appropriate configuration and is the board compliant?’ This question (and its subsequent
answers) are obviously a vital starting point for approaching corporate governance.
However, they are not enough if we are aspiring to better-quality governance. In short,
effective answers to these questions are necessary but not sufficient.
2. Board Demographics
The second area on the model is the dynamic interaction between technical and individual
factors, and is named the ‘board demographics’.
The board demographics factors are those that one would usually find in a corporate
curriculum vitae or indeed the brief pen portrait from the annual company report under the
‘Directors and senior management’ section. They are the high level technical expertise and,
potentially, professional network aspects of one’s career which pertain specifically to
someone’s board role.
This is what is known as professional capital and social capital. The broad question,
therefore, that this quadrant asks of a board is: ‘Do directors have capacity, capability and
are they well connected?’ As the answers to this question are usually within the public
domain, they are often used as the proxy for board potential and performance by
interested stakeholders such as investors, regulators, headhunters, the media and the
public more generally. However, we know that a track record can contain significant bias
and does not always predict future performance (hence the rise in popularity of tools such
as competency-based interviews, psychometric tests, blind auditions and anonymous
resumes in recent years).
3. Board Attributes
The third area in the model is the dynamic interaction between behavioral and individual
factors, labelled ‘board attributes’. Whereas the ‘board demographics’ captures some of a
director’s surface characteristics, the ‘board attributes’ dig deeper into the more
psychological and emotional competencies of a director’s personality as they play out in the
boardroom and beyond.
These are also sometimes known as their ‘behavioral capital’. The key question that this
quadrant asks of the board is: ‘Do directors display competence, commitment and
character?’. For a board to be high performing, these attributes need to be true for all its
members. However, there will also be some specific competencies required depending
upon the role that each director is taking in the boardroom.
4. Board Dynamics
The fourth and final area of this broader model of corporate governance is the dynamic
interaction between the behavioral and group level boardroom factors, labelled ‘board
dynamics’.
This factor is the ‘black box’ of corporate governance because it is the area which, even
though largely responsible for shaping boardroom culture and performance, has been
largely under-researched and under-acknowledged until now.
The main question that this quadrant asks of the board is: ‘Does the board model a culture
of cohesion and challenge?’ This question is one of many versions that could be asked to
capture the essence of board group and team working to ensure appropriate cultural
remodeling, prudent risk management and effective decision-making.
1.10 Organizational failures and impacts on boardroom

dynamics
In a perfect world, we would see boards operate smoothly and harmoniously with no
undercurrents or power plays, no elephants in the room, with all voices being heard and
valued. However, the greater complexity facing business today, tightening regulatory
environments, and increased public visibility and scrutiny, are leading to heightened pressures
in the boardroom. Under such demands, director behaviors, group dynamics - and the
boardroom cultures these create - are defining factors when it comes to board effectiveness.
1. Loss of Shareholder Confidence and Trust
When a company deviates from its corporate governance strategy it sends a signal to its
shareholders that it cannot be trusted. This erodes any confidence that the shareholders had in
the business and leads them to feel cheated or misled. If shareholders believe bad business
decisions are in the company's immediate future, they may jump ship to avoid any potential
loss.
2. Ineffective board cultures
Unbalanced, weak or inappropriate values, beliefs and behaviours held by board members,
embedded over time and through repetition, can perpetuate dysfunctional group behaviours
that are largely outside the realm of consciousness. Board culture affects how directors’ work
together, treat each other, and relate to management, and culture goes on to shape the way
the board sets priorities, makes decisions, provides oversight, and manages risk.
3. Difficulty Raising Capital
Lack of adherence to a company’s corporate governance strategies can also scare away
investors. For investors, one of the most important aspects when making an investment
decision is the level of implementation of corporate governance principles (public disclosure of
information, protection of shareholder rights, and equal treatment of shareholders) and
profitability, which ensures return on their investment.
4. Increased Government Oversight
A company with a reputation for lack of adherence to corporate governance strategies may
incur increased government oversight from departments looking to verify that the company is
operating within the bounds of the law. This puts the business in the spotlight if anything was
to ever go wrong.
5. Unhealthy company culture
Poor company culture is another major culprit in terms of corporate and board failure.
Businesses that place a hyper-intensive focus on driving profits often foster cultures of double
standards – which go on to facilitate questionable risk-taking.
6. Risk blindness
A crucial reason boards often fail is their inability to engage with risk in the same way they
engage with opportunity and reward. This so-called risk blindness perpetuates a wide range of
problems for companies. Risk blindness means that problems are ignored – which gives them
time to grow and to fester.
“Blindness is insidious because it bestows a sense of comfort (‘if I ignore it, it will go away’),
whereas in fact it makes everything worse. Most problems are a great deal easier to tackle
when they’re small.”
7. Unhealthy company culture

Poor company culture is another major culprit in terms of corporate and board failure.
Businesses that place a hyper-intensive focus on driving profits often foster cultures of double
standards – which go on to facilitate questionable risk-taking.
8. Information glass ceiling
Corporate failure is often facilitated by the presence of a so-called ‘information glass ceiling’, in
which internal audit teams or those responsible for risk management fail to report on risks that
are coming from above in terms of an organization’s hierarchy. When an information glass
ceiling is present, executives tend to overrule red flags generated through audit processes, or
information is heavily sanitized by the time it reaches board-level.
The refusal of managers to report and act upon internal compliance red flags demonstrate how
an information glass ceiling can lead to corporate failure.
9. Dysfunctional group dynamics - Unaddressed individual behaviors that trigger

reciprocal patterns between directors, creating tension, miscommunication, and
division, which then compromises effective decision making.
1.11 Role of the corporate secretary in Board room

dynamics
1. Typical existing studies outline the role of company secretary as having formal
responsibilities such as organizing board meetings; supporting the chairman/CEO,
directors and stakeholders; inducting or training non-executive directors; dealing with
latest governance developments; board evaluations; annual reporting; statutory
compliance issues; administrative duties; accurate Companies House filing; and stock
exchange listing.
2. The company secretary has to adopt additional higher-order skills when relating to
leadership practice.
The company secretary’s challenge is to resolve tension between being the invisible
power behind the throne, i.e. in the shadow of the chairperson, and knowing how to
diplomatically challenge individual board member effectiveness towards higher collective
board performance.
This includes resolving dilemmas, dealing with complexity, making judgments, acting as
advisor and/or confidante, and maintaining high levels of trust.
3. The role of company secretary is particularly critical, as it is the crucial link that binds
the other board roles together as a body; it always protects the interest of the
company and tries to seek consensus amongst the board members as a leadership
practice.
4. The law defines the company secretary as an officer with administrative duties and
responsibilities, but because of its foundation in law, this role sets the tone for, and is
central to, the provision of an underlying internal framework for corporate governance
structures. Hence, the company secretary is required to provide administrative and
legal governance support to the board of directors and the CEO.
5. The company secretary engages with internal and external stakeholders; negotiates
critical and asymmetric information between different interests; and balances the
board and management interface in a way that avoids undue antagonism, placates
differences, and achieves alignment between the demands of two, and often more,
bipolar cultures.
6. The role is mandatory for publicly listed companies, which are obliged to follow
statutory and reporting requirements.
Beyond that, there is flexibility and discretionary capacity. Characteristics and required
competencies include administration, business awareness, communication skills,
compliance, guidance, information impact, knowledge shaping, maintenance,
management, organization, process, procedure, qualification, relationship, and
shareholder and stakeholder engagement.
Activities include keeping the company register, filing, recording, monitoring, supervising,
educating, advising, managing, and coordinating.
7. As it channels information flows between the board of directors and executive

management, the role is significant to board members as an ‘up to date source of
information. The company secretary manages the information flow. Planning formal
communications with board members requires an understanding of who needs to be
informed; what information is needed; how to present it; and the frequency and form of
communication.
8. Although the company secretary often has a low profile in the boardroom, the role is
critical to board resolutions and actions.
In the majority of cases, it is the preparatory work in advance of board meetings that
influences outcomes, enabling the conversion of strategy into implementable action
plans.
Preparatory work influences the frequency, venue and duration of board meetings;
interactions between the CEO and the board; finding solutions to issues; ensuring a level
of consensus among directors; the form and technicalities of board proceedings; and
involvement of boards in self-evaluation.
It is the company secretary who facilitates timely meetings; ensures the discussion of
issues to the required depth; respects disagreements between directors; ensures that
directors participate in the decision-making process rather than just ceding the
decision to the CEO; and ensures that minutes are well formulated and documented to
monitor.
9. The company secretary is the lynchpin in the communication process between the CEO
and the board overcoming inadequacies, manipulation, reliability issues or delays that
may impede board effectiveness.
10. The company secretary possesses knowledge not only of processes and procedures,
but of associated ‘corporate memory’, enabling greater indirect ability to influence
board-level decision making through less observable behaviors, and acts of consensus-
building and prevention of conflict.
11. The company secretary takes the minutes, so if a board member wants to ensure that
his/her points are recorded elegantly, they need to ‘become their friend’.
CHAPTER TWO
2.0 Evolution of Codes of Corporate Governance

2.2 Incorporation of boardroom dynamics in codes of corporate governance
2.3 Impact of codes of governance on board culture, behaviors and effectiveness
2.4 Evaluating human capital
2.5 Self-regulation in corporate governance

The foundation of corporate governance can be traced to the pioneering work of scholars Berle
and Means (1932) who observed that once modern corporations have grown to very large sizes,
they could establish a separate system of control from that of direct ownership. This
observation created interest in the behavioral dimension of firms. As a term, governance,
originated from the work of Chaucer, where ‘governance’ was associated with being “wise and
responsible,” or doing that which is appropriate. Corporate governance is not a recent historical
development. While the concept is often presented as a new development, various
mechanisms for controlling executive actions have existed since the rise of the corporation.
One of the main drivers in the evolution of corporate governance over the centuries remains
corporate failures and systemic crises.
The first of these is the South Sea Bubble financial crisis reported in the 1700s that lead to the
legislation of new business laws and practices in England. These laws targeted financial
mismanagement identified as the main cause of corporate failures. This created the foundation
for the changes which would follow the 1929 stock market crash in the United States.
In the 1970s, there was a secondary banking crisis in the United Kingdom, the 1980s saw the
savings and loans crisis in the United States, and the mid-1990s was marked by the East-Asian
economic crises.
Corporate governance gained prominence in the 1980s and 90s due to stock market crashes
and general corporate failure across the world. These crises led to the realization that for
managers to run effectively and in the right direction, there must be an effective board. A long
history of company failures such as the collapse of Bank of Credit and Commerce International,
Enron, WorldCom, and Parmalat among others also created renewed focus on corporate
governance.
Corporate governance codes encourage organizational commitment to good corporate

governance and aspirations towards higher standards. They can provide guidance for financial
and nonfinancial disclosure, stakeholder relations and foster better engagement of minority
shareholders. They also can help clarify the roles of managers and directors.
The codes can be found in more than 140 countries worldwide, and more than 50 of them have
been developed with the IFC's assistance.
Originally, corporate governance codes were developed as complementary to laws and

regulations in the area of corporate governance. Codes were established and allowed to be
applied in a flexible manner so as not to constrain companies in their freedom to realize
strategies and create value. This flexibility, which became known as a comply or explain regime,
allowed companies to comply with the code requirements in various ways, and if not, to explain
why they had not applied the particular requirement—the most common approach.
South Africa and some other countries, on the other hand, require the apply-and-explain
approach, whereby companies must apply the code of corporate governance and explain how
they do so—a major difference in approaches. In some countries, such as the United Kingdom
and Malaysia, “stewardship codes” have been introduced, which aim to enhance the quality of
engagement between asset owners, asset managers, and companies to help improve long-term
risk-adjusted returns to shareholders.
As the development of corporate governance codes has matured, much time has been devoted
to discussion about distinguishing what should be placed in law or regulation and what should
be in codes, which have more flexible options in application.
Overview of Global Trends
The world expects to see the emergence or continued development of the following key global
governance trends:
1. Board quality and composition are at the heart of corporate governance.

Since investors cannot see behind the boardroom veil, they have little choice but to rely on
various governance criteria as a stand-in for board quality: whether the board is truly
independent, whether its composition is deliberate and under regular review, and whether
board competencies align with and support the company’s forward-looking strategy. Directors
face increased scrutiny around how equipped the board is with industry knowledge, capital
allocation skills, and transformation experience. Institutional investors are pushing to further
encourage robust, independent, and regular board evaluation processes that may result in
board evolution. Boards will need to be vigilant as they consider individual tenure, director
overboarding, and gender imbalance—all of which may provoke votes against the nominating
committee or its chair. Gender diversity continues to be an area of focus across many countries
and investors. Companies can expect increased pressure to disclose their prioritization of board
competencies, board succession plans, and how they are building a diverse pipeline of director
candidates.
2. Deeper focus on oversight of corporate culture.

Human capital and intangible assets, including organizational culture and reputation, are
important aspects of enterprise value, as they directly impact the ability to attract and retain
top talent. Culture risk exists when there is misalignment between the values a company seeks
to embody and the behaviors it demonstrates. Investors are keen to learn how boards are
engaging with management on this issue and how they go about understanding corporate
culture. A few compensation committees are including culture and broader human capital
issues as part of their remit.
3. Investors placing limits on shareholder primacy and emphasizing long-termism.

The role of corporations in many countries is evolving to include meeting the needs of a
broader set of stakeholders. Global investors are increasingly discussing social value; long-
termism; and environment, social, and governance (ESG) changes that are shifting corporations
from a pure shareholder primacy model. Institutional investors are more actively focusing on
long-termism and partnering with groups to increase the emphasis on long-term, sustainable
results.
4. ESG (environment, social, and governance) continues to be a critical issue globally and is at
the forefront of governance concerns in some countries.
Asset managers and asset owners are integrating ESG into investment decisions, some under
the framework of sustainability or integrated reporting. The priority for investors will be linking
sustainability to long-term value creation and balancing ESG risks with opportunities. ESG
oversight, improved disclosure, relative company performance against peers, and
understanding how these issues are built into corporate strategy will become key focus areas.
Climate change and sustainability are critical issues to many investors and are at the forefront
of governance in many countries. Some investors regard technology disruption and
cybersecurity as ESG issues, while others continue to categorize them as a major business risk.
Either way, investors want to understand how boards are providing adequate oversight of
technology disruption and cyber risk.
5. Activist investors continue to impact boards.

Activist investors are using various strategies to achieve their objectives. The question for
boards is no longer if, but when and why an activist gets involved. The characterization of
activists as hostile antagonists is waning, as some activists are becoming more constructive with
management. Institutional investors are increasingly open to activists’ perspectives and are
deploying activist tactics to bring about desired change. Activists continue to pay close
attention to individual director performance and oversight failures. We are seeing even more
boards becoming “their own activist” or commissioning independent assessments to

preemptively identify vulnerabilities. Firms such as Russell Reynolds are conducting more
director-vulnerability analysis, looking at the strengths and weaknesses of board composition
and proactively identifying where activists may attack director composition.
5. Investor stewardship.
Investors view governance not as a compliance exercise, but as a key component of value
creation and risk mitigation. Passive investors are engaging even more frequently with
companies to ensure that their board and management are taking the necessary actions and
asking the right questions. Investors want to understand the long-term value creation story and
see disclosure showing the right balance between the long term and short term. They take this
very seriously and continue to invest in stewardship and governance oversight. Several of the
largest institutional investors want greater focus on long-term, sustainable results and are
partnering with organizations to drive the dialogue toward the long term.
6. Board diversity.
Directors should expect more investors to vote against the nominating committee or its chair if
there are no women on the board (or fewer than two women in some cases). Investors want to
see an increased diversity of thought and experiences to better enable the board to identify
risks and improve company performance. In the US, gender diversity has become a proxy for
cognitive diversity. Some very large investors are starting to take a broader approach to
diversity, particularly as it relates to ethnicity and race.
7. Activist investing.
Shareholder activism remains part of the US corporate governance landscape and is continuing
to grow in countries like Canada. In Canada, the industries with the highest levels of activism
include basic materials, energy, banking, and financial institutions, and emerging sectors with
high growth potential (e.g., blockchain, cannabis) could be next. Proxy battles are showing no
signs of slowing down, but activists are using other methods to promote change, such as
constructive engagement. Canadian companies are also seeing an increase in proxy contests
launched by former insiders or company founders. Experts in Canada anticipate this trend will
continue and, as a result, increased shareholder engagement will be critical.
8. Executive compensation.
Investors are looking for better-quality disclosure around pay-for-performance metrics,
particularly sustainability metrics linked to risk management and strategy. In the US,
institutional investors may vote against pay plans where there is misalignment and against
compensation committees where there is “excessive” executive pay for two or more
consecutive years. Some investors are uncomfortable with stock performance being a primary
driver of CEO compensation since it may not reflect real leadership impact. In Canada, investors
are urging companies to adopt say-on-pay policies in the absence of a mandatory vote, even
though such adoption rates have been sluggish to date. Investors will likely continue to push for
this reform.
9. Revised governance codes.

A recent study found strong compliance rates for the German Corporate Governance Code,
except for the areas of executive remuneration and board composition recommendations.
German boards should expect more investor engagement and pressure on these matters,
including enhanced disclosure. Next year, the German code may include amendments
impacting director independence and executive compensation. The revised governance code in
the Netherlands focuses more closely on how long-term value creation and culture are vital
elements within the governance framework. Denmark’s code now recommends that
remuneration policies be approved at least every four years and bars retiring CEOs
2.1 Incorporation of boardroom dynamics in codes of

corporate governance
Although the discipline of boardroom dynamics, which I have defined in the recently published
The Chartered Governance Institute textbook of the same name as "the theory and application
of the behavioural aspects of board functioning", is becoming increasing recognised as
fundamental to good governance, to what extent are governance professionals actually
applying its lessons in their practice?
In order to provide an overview of the topic, this article will dip a toe into why an
understanding of boardroom dynamics is becoming increasingly important, what its component
parts actually are and how one might begin to positively influence it.
Four Factors
There are perhaps four main reasons why boardroom dynamics has gained recognition in
recent years. Firstly, of course, there have been (and unfortunately continue to be) multiple
governance failures even though board compliance boxes are ticked on paper.
A second driver of boardroom dynamics recognition is how behavioral aspects have been
increasingly included in the latest versions of country governance codes. Only ten years ago, in
2009, this was certainly not the case. The Walker Review of that year, set up to recommend
measures for improving the governance of UK banks and supported by research from the
Institute gathered from FTSE350 company secretaries, concluded that "...it is remarkable that
there is practically no guidance in the Code on the main drivers of, and factors affecting,
boardroom behaviours...Encouraging best practice boardroom behaviours, are critical aspects
of corporate governance, but seem currently to be a neglected area".
Thirdly, there is a widening gap between governance theory and leading research/practice. As
Bob Tricker, the father figure of modern corporate governance, has written, "both agency and
stewardship studies typically do not reflect the dynamics of governance – the interplay of
power, conflict and ideology".
And finally, there is an increasing organisational interest in human factors such as talent
management, company, culture, stakeholder voice, employee engagement, resilience and well-
being. Using this year's Annual Conference as a case in point, over a third of the sessions were
related to these more behavioural boardroom topics.
Taken together, these four factors show why boardroom dynamics has become such an
important issue for governance professionals to understand that there is now a module on the
topic in the Chartered Secretary Qualifying Programme. They also highlight that governance
professionals must acknowledge more than the traditional technical and individual aspects,
those represented by the 'Board structures' and 'Board demographics' quadrants of my 11 Cs
model of corporate governance below, and attend also to the individual 'Board attributes' as
well as the team 'Board dynamics'.
A Positive Influence
Through engaging with their emerging roles as a strategic leader, talent manager, board
consultant, cultural diplomat, team coach and, in order to maintain all these, a resilient
corporate athlete, the twenty-first century governance professional can exert a significant
positive influence on any board they work with. Some key evidence-based summarizing
principles of how to develop high performing boardroom dynamics are captured above in my
ABCDE of actions to focus on and those to avoid.
CHAPTER 3
3. Governance Structures
3.1 Governance theories related to board structure
1. Agency theory
Boards of commercial corporations were developed as a result of the industrial revolution, the
growing commercial complexity of business and the gradual separation of ownership, and risk,
from control. Trading, banking, transport and utility companies led the way before
manufacturing in assuming corporate form.
The earliest fully developed theory about boards was thus agency theory, at the heart of which
lies questions about the organization and ownership of property and the distribution of power
that goes along with that. Over the past few centuries, the holding of property has moved from
being an active to being a passive affair. Evolution of control has been classified as (1) control
through ownership, (2) majority control, (3) control through legal device, (4) minority control
and (5) management control.
When ownership is held by a very large number of individuals and bodies with none holding a
significant proportion, control is effectively handed over from owners to managers. Agency
theory is predicated on the notion that the shareholders' and managers' interests are likely to
be different and that the behaviors of both sets of actors are characterized by self-interested
opportunism.Those in control ‘can serve their own profits better by profiting at the expense of
the company than by making profits for it’.
Although boards were supposed to represent the interests of absent owners or shareholders
(the principals), and management became the agents of the board, what was seen was the
hazards of diverting the control of company resources away from the owners.
Presently
Coming now to the present day, agency theory, with its emphasis on conformance, suggests
that the monitoring role of the board, supported by processes such as external audit and
reporting requirements, is likely to reduce problems of management pursuing their own
interests or performing.
The emphasis is on avoiding performance problems stemming from poor management or
inappropriate use of managerial discretion. The theory is underpinned by a belief derived from
neoclassical economics that, as both principal and agent are utility maximizers, the latter is not
likely to always act in the interest of the former.
Agency costs are incurred in acting to minimize the gap between the two sets of interests.
Implications of agency theory for an understanding of board governance
Boards have a responsibility to mitigate the risks inherent in the separation of ownership from
management
The use of agency theory to investigate problems that have a principal–agent structure, for
example information asymmetry, outcome uncertainty and risk, offer an empirically testable
perspective on the challenges of co-operative effort.
Agency theory carries with it certain assumptions about human behavior and, for public sector
bodies, certain assumptions that governments make about human behavior.
Recent critiques of agency theory claim that it downplays the complexity of individual
motivations and permutations of organizational life and that it relates to a view about the self-
centeredness of human behavior in organizations which is now contested.
Relating closely as it does to the monitoring and compliance aspect of the board role, which is
commonly regarded as a cornerstone of board work, agency theory nevertheless continues to
hold sway and dominates the literature about board theories.
One possible reason for the continued primacy of agency theory is the development of a
modernizing behavioral variant. This argues that in some circumstances boards may opt for
behavior-based rather than outcome-based incentive schemes for its executives to achieve
alignment and optimal contracting.
Behavioral agency theory proposes that the traditional advocacy of incentives based on firm-
level outcomes may, particularly in view of the impossibility of complete ex-ante contracting,
lead to unintended consequences. Behavioural agency theory proposes that incentive
alignment can be achieved through outcome-based contracts, behavior-based contracts or a
combination of the two.
2. Stewardship theory
Stewardship theory was developed as a challenge to beliefs that managers are always self-
interested rational maximizers. According to stewardship theory, the goals of board directors
and of their managers are aligned, with the latter being intrinsically motivated to act in the best
interests of the organization and to focus on intangible rewards such as opportunities for
personal growth and achievement.
The theory relates to a very different human relations perspective from the one that underpins
agency theory, one in which, in general, people are motivated to do good and to act unselfishly,
as long as a number of organizational and cultural preconditions are satisfied.
In this model, managers and owners share a common agenda and work ‘side by side’; the
emphasis is on the board's role in developing strategy rather than on monitoring performance
and a preponderance of internal (or executive) directors with high levels of access to
information is favoured. Implicit in stewardship theory is the understanding that the owners
(principals) are prepared to take risks on how managers will run their business and provide a
return on their investment, indicating a level of trust that is absent in agency theory.
3. Resource Dependency Theory
Resource dependency theory derives from economics and sociology disciplines concerned with
the distribution of power in the firm and was developed particularly by Zahra and Pearce and
Pfeffer and Salancik.
According to resource-based theory, the organization is an amalgam of tangible and intangible
assets and capabilities. Strategic resources in particular are those that are valuable, rare,
inimitable and non-substitutable. In this context, the board can be seen as a strategic resource.
Given that all organizations depend on others to survive and thrive, resource dependency
theory suggests that managing external relationships to leverage influence and resources is the
prime purpose of the board, and hence board members are selected for their background,
contacts and skills in ‘boundary-spanning’.
The use of the board as a co-optative mechanism (also known as co-optation theory) reflects
the potential of the board in fostering long-term relationships with key external constituencies,
thereby co-opting important elements of the organization’s external environment. This is also
evidenced by multiple board membership known as board interlocks.
The theory focuses on how uncertainty caused by external environmental factors and
dependence on outside organizations can be minimized. Four benefits that board directors can
bring include advice, access to information, preferential access to resources and legitimacy.
4. Stakeholder theory
Stakeholder theory comes from nineteenth-century developments of alternative forms of

organization and control in the shape of mutual and co-operatives.
There is a view that an exclusive focus on shareholder interests has not held the key to good
corporate performance and effective accountability. In an age of vocal consumer groups,
employee activism, media monitoring and now social networking, the assumption that only
shareholders are capable of effective monitoring looks increasingly flawed.
According to stakeholder theory, board members work to understand and represent the
different interests of individuals and groups who have a ‘stake’ in the organization.
Stakeholders are all those whose participation is critical to the survival of the organization.
These include managers, employees, customers, suppliers (contractual stakeholders) and the
community, that is, consumers, regulators, government, pressure groups, media and local
communities.
The argument runs that the inclusion of a range of different stakeholders drives an inclusive
approach that represents a wide spectrum of societal opinions, balances competing priorities
and avoids dominance by one group with particular interests. Among the myriad of
stakeholders, stakeholder theory also argues that boards have to identify the critical
stakeholders (e.g. key staff groups) whose commitment is essential for long-term value
creation. According to stakeholder agency theory, managers are seen as the agents for all of the
stakeholders, not just the owners.
3.2 Board Structures: Unitary and two tier Boards
Board of directors comprises of a group of people who administers and governs the activities of
an organization. The organization can be a profit seeking, nonprofit seeking, governmental or a
non-governmental organization (mostly termed as Non-Government Organization or NGO).
One-tier board of directors (also known as unitary board of directors) is a single body of
directors that makes strategic decisions of a company. It includes both executive directors and
non-executive directors.
Two-tier board of directors is a system in which a company is governed by two distinct boards
of directors, a management board and a supervisory board. Management board is accountable
to supervisory board and makes decisions related to operational and tactical direction of the
company. The supervisory board makes decisions about long-term strategic direction of the
business.
Difference between one-tier and two-tier boards
The important points of difference between one-tier and two-tier board of directors are given
below:
1. Composition:
The unitary board of directors is composed of executive directors (employees of the company)
and non-executive directors (independent external directors). Both these directors sit on a
single board.
In a two-tier system, the supervisory board is directly elected by the shareholders and includes
senior board members and/or employee representatives. The supervisory is responsible for
the hiring and firing of the management board.
2. Segregation of roles:
In a one-tier or unitary board of management there is no clear separation of duties as both the
executive and non-executive directors sit on the same board. While in a two-tier board, two
different boards are present, with one clearly responsible for undertaking management roles
and the other for the purposes of check and balance and policy making.
3. Decision-making:
The process of decision-making in a unitary board is faster because all the decisions are made
and approved by a single board. Whereas, decisions made by the management board in a two-
tier system have to be approved by the supervisory board for implementation which, therefore,
can take time. This delay can prolong if the management and supervisory board disagree on a
certain agenda.
4. Stakeholder Indulgence:
The composition of unitary board of directors does not allow for different kinds of stakeholder
representation. This is because a single board cannot accommodate a large number of directors
and therefore non-executive directors are the only independent input in a unitary board.
However, in a two-tier system, as the management board and supervisory boards are different,
it provides a chance to add representatives of more stakeholders especially representatives of
employees.
5. Role of chairman and CEO:
In a one-tier board, the Chairman of board and the CEO (chief executive officer) sit on a single
board. While in a two-tier board system, the supervisory board is led by the Chairman of the
company and the management board is led by the CEO of the company.
6. Communication and supervision:
In a unitary board, the executives and non-executives sit on a single board. Therefore, all the
decisions have an ongoing input of both of these directors. In this way, the non-executive
directors who are primarily responsible for the supervision of executive directors can actively
seek their duty. In a two-tier system as the two boards meet separately, the supervisory board
cannot actively hold management board accountable and only gets the information which
management board disseminates to them.
3.3 Components of governance structures

The Board of Directors represents the membership of the organization. The board sets in place
policies, procedures, values and long-term planning to meet the mission of the organization.
The board does this through a governance structure or model. The structure a board decides to
implement will dictate not only the policies of the organization but also such things as the
relationship between staff and the board, and the role and use of committees.
While it is the board’s responsibility to determine the governance structure, activities of the
organization are carried out by board members, staff, and committees. There is no single right
structure for all non-profit organizations, and it may be necessary to change models over time.
What can often dictate how a board chooses to govern is the experience of board members and
staff, past experiences within an organization, how the organization wants to deliver its
programs and services, and how the board views power and authority within the organization.
Governance structures can be put into two basic categories—policy boards and administrative
boards. Policy governing boards develop policy and hire an Executive Director to implement the
policy whereas administrative governing boards play a more hands-on role in managing the
organization with the support of committees and staff.
Within these two broad categories of governance, there are four common types of board
models:
1. Policy Board: Sometimes referred to as Management-Team Board, this model is

commonly used in non-profit organizations. Several committees help carry out the activities
of the organization, and the relationship between the board and staff is one of a
partnership.
2. Policy Governance Board: Sometimes referred to as a ‘Carver Board’ after founder John
Carver, this model has a more formal structure. The board operates as a whole, using one
voice and rarely works with committees. The Executive Director is given a very clear scope
and role as well as limits about what she/he can undertake, and the main emphasis of the
board is on policy development. For a more complete definition of the Policy Governance
Board Model, visit www.carvergovernance.com/model.htm.
3. Working Board: Directors on this type of board play a more hands-on role with some of
the administrative functions of the organization such as public relations, financial
management, program planning and personnel. It’s not uncommon for these boards to not
have any staff.
4. Collective Board: Sometimes known as a cooperative or coalition, a Collective Board
also carries out many administrative functions of the organization. These boards are
comprised of like-minded people that support a specific goal. Staff and directors operate
together as a single entity. There is not usually an Executive Director, and often there is no
voting as everyone works within a consensus model.
3.4 Board size

The size of a board is critical to its effectiveness. A board needs to be large enough to allow for
a wide range of views and competencies and for each of the committees to be populated, but
not so large as to prevent active engagement and participation by all directors. In most
instances, we believe that the ideal board size is eight to 12 members in a unitary board.
When boards move further into double figures they become less effective: it is harder to
sustain effective debate when numerous people are at the table. Supervisory boards, however,
may have to be larger than this, especially where co-determination is a legal requirement. By
contrast, supervisory boards with no employee representatives often have fewer than eight
directors.
The trend for unitary boards is towards less formal boards with fewer directors around the
table. The boardroom is a place for debate and decision — not only for reporting and noting.
Each director is expected to make his or her individual contribution.
Just as boards are more accountable for corporate actions, so directors require a closer
engagement with the business if they are to carry out their responsibilities properly. The days
of the purely reactive board are numbered.
3.4 Committee structure

Committees appointed by the Board focus on specific areas and take informed decisions within
the framework of delegated authority, and make specific recommendations to the Board on
matters in their areas or purview. All decisions and recommendations of the committees are
placed before the Board for information or for approval.
To enable better and more focused attention on the affairs of the Corporation, the board
delegates particular matters to the committees of the board set up for the purpose.
Committees review items in great detail before it is placed before the Board for its
consideration. These committees prepare the groundwork for decision making and report at
the subsequent board meeting.
Just as every board is unique, every board’s committee structure is unique too. Most boards
continue the same committee structure from year to year with little thought given as to what
the committees do or whether they are still relevant. As a result, the committees have vague
objectives, committee meetings are often endless discussions with no results achieved, and the
members of the committees become bored or frustrated.
At the other end of the spectrum is the zero-based committee structure where the board
reviews its work plan each year and then establishes only those committees that it will need.
Similar to a zero-based budget, this frees the board from doing things the same way each year.
Of course, this only works if the association truly looks at what it needs in terms of board work
for the year and only forms those committees that are necessary.
If the committee structure has not been revisited in a few years, the board should consider
looking at the current committee structure and what the committees actually do. If there are
overlapping responsibilities or no work being done, then it is time to realign the committee
structure. Committees with no work can be abolished, and committees with overlapping work
can be merged. Committees should not take on a life of their own, nor should they overshadow
the board itself.
Standing and Ad Hoc Committees
There are generally two types of board committees:
 Standing committees (also called operating committees) are those committees that a
board uses on a continual basis. They can be set forth in the association’s bylaws or in its
board operations and policy manual, or they may be established by custom.
 Ad hoc committees are formed for a limited period of time to address a specific need.
When the work of the ad hoc committee is completed, the committee is dissolved. An ad hoc
committee may exist for less than a year or for a year or more depending on the extent of
the work assigned to it.
The bulk of the board’s work should be done through its standing committees. Some boards
have board development plans where members rotate through the different committees to
gain a broad understanding of the association. Others allow members to stay with the same
committee each year to develop a deeper knowledge of the subject area to provide greater
service to the association. A balance of the two strategies allows board members to gain
experience with different committees and to develop some expertise with the work of one or
two committees.
Ad hoc committees are often formed to amend the bylaws, recruit a new CEO, develop a
strategic plan, form a new subsidiary, launch a new division, consider whether to sell a building,
or work with other associations or coalitions. An ad hoc committee could also be formed to
study and find creative solutions to a particular challenge an association is facing, such as falling
membership levels or a particular challenge its members are facing.
Other Options
A board does not always need to add new committees to get its work done, nor must
committee members always be members of the board. Task forces and advisory councils can be
useful tools.
A task force can be formed if there is an objective that can be achieved in a relatively short
period of time. Planning a special event or analyzing a merger proposal are examples of work
that can be handled by a task force.
Advisory councils assist boards in carrying out their work by providing expertise and advice in
selected areas. Advisory councils do not have any governance responsibilities and are a good
way to include former board members, potential board members, subject matter experts, and
others in the work of the board without placing them on the board.
Not every volunteer makes a good board member. Sometimes a task force or advisory council is
a better use of the volunteer’s talent, experience, and time.
Committee Number and Size
The larger the board, the more committees it may want to have to ensure that all board
members can serve on a committee in a meaningful way. Boards should avoid the temptation
to form too many committees. To be effective (and to avoid burnout), board members should
generally not serve on more than two committees. Limiting service to one committee can give
board members the opportunity to focus on an area and develop expertise that can further the
work of the association.
The size of the board will determine how many committees are sustainable. A committee’s size
should be determined based on the number of members needed to accomplish the
committee’s work. When committees have too many members, the result is usually that only a
handful of people do the work of the committee and the rest of the committee’s members are
not engaged. It might take a year or two of trial and error to determine the right size for each
committee.
Ad hoc committees and task forces are a good way to involve non-board members in the
board’s work. This also gives the volunteer and staff leadership the opportunity to evaluate
association members for their leadership potential and interest them in further volunteer
opportunities. Keep in mind, however, that, in most states, the authorization to act on behalf of
the board may only be delegated to committees composed solely of board members.
Committees should perform regular self-assessments to determine if they are working

effectively, achieving their established goals, and providing value to the association. This can be
done at the end of each committee meeting or on an annual or more frequent basis.
Role of Committee Leaders
Committee chairs and vice chairs should provide actual leadership to the committee. These are
not empty titles but require real work in terms of translating the board’s goals for the
committee into meeting agendas and work plans. Committee chairs and vice chairs should work
with staff as appropriate to prepare background materials for committee meetings, schedule
committee meetings, prepare minutes and reports, and otherwise keep the committee
functioning.
Committee chairs have the difficult task of following up with absent committee members or
addressing behaviors that are disruptive to the committee’s work. Committee chairs also report
on the work of their committee to the Executive Committee and the full board. For this reason,
committee chairs are often board members.
Sample Committee Structure
This sample committee structure is intended to be used by boards with more than seven
members who find they need to work more effectively through committees. A board may not
need all of these committees. An association may use different names for its committees, but
board committees generally fall under these headings.
Standing Committees
Executive Committee
Depending on the size of the board, it may be advantageous to form a small (three- to seven-
member) Executive Committee that is authorized to meet and take action between board
meetings when it is impractical to get the full board together for a special board meeting. The
Executive Committee can also serve as an advisor to the chief executive officer and a liaison
between the CEO and the full board.
Audit Committee
Something of a rarity a decade ago, the Audit Committee is quickly becoming a standing
committee at many associations. It is usually a small committee of three to five members. Its
work is often seasonal, tied to the end of the association’s fiscal year. The Audit Committee
selects the outside auditor, meets with the auditor to receive the audit report and management
letter, and discusses the management letter with the full board and the senior staff.
The Audit Committee may also be charged with auditing the expenses of the board and the
chief executive officer.
Members of the Audit Committee should be financially literate, and at least one (and preferably
more) should be financial professionals.
Governance Committee
The Governance Committee is charged with the care and feeding of the board itself. The
responsibilities assigned to this committee vary with each board. As a general rule, the
Governance Committee would be responsible for board recruitment, orientation, board and
director self-assessment, continuing education, and board management.
Recruitment involves identifying current and projected vacancies on the board, assessing the
composition of the current board and identifying gaps in competencies or demographics, and
finding and recruiting potential board members. The Governance Committee is charged with
developing a position description for board membership to inform prospective candidates of
qualifications in terms of their experience and background and what will be expected of them if
they join the board. The Governance Committee can also serve as the Nominating Committee
for new board members and officers.
Finance Committee
Sometimes called a Budget Committee or a Budget and Finance Committee, this committee
oversees staff’s preparation of the annual budget and the performance of the association in
meeting its budgeted revenues and expenses. The Finance Committee often receives regular
reports on the association’s performance in meeting its budget and presents that information
to the full board.
The Finance Committee is different from the Audit Committee. In effect, the Audit Committee
is tasked with checking the work of the Finance Committee and the treasurer in overseeing the
financial management of the association. While there may be some overlap in committee
membership between the Audit Committee and the Finance Committee, the chair of the Audit
Committee should not serve on the Finance Committee. Ideally, the association has enough
financially literate board members that the membership of the two committees does not
overlap.
The Finance Committee may be charged with a wide range of responsibilities, such as managing
the association’s investments, setting compensation packages for staff, overseeing capital
campaigns, and raising funds. It may handle these responsibilities as a committee or through
the formation of subcommittees. A board may have a separate development committee to
oversee fundraising, or it may assign that responsibility to the Finance Committee or one of its
subcommittees.
Membership Committee
If an association has a Membership Committee, that committee may be tasked with developing
criteria for membership, credentialing members, overseeing elections, or developing and
delivering programs for members. There may be some overlap with the Program Committee
and the Governance Committee.
Membership Committees usually keep closely connected to the association’s membership and
work with the staff to identify and develop programs that meet the changing needs of the
membership. The evaluation of program delivery can also be assigned to the Membership
Committee.
If the association has an annual meeting or conference for its members, this activity may be
overseen by the Membership Committee or one of its subcommittees.
Program Committee
While staff often carries out the day-to-day activities that result in the development and
implementation of the association’s programs, the Program Committee may be charged with
long-range planning and general oversight of programs. Depending on the extent of the
association’s programs and the size of the board, there could be several committees devoted to
programs that may bear other titles (for example, government relations, technology, and
education). Each of these committees or subcommittees would be assigned a specific element
of programs to oversee.
A Program Committee is a good way to involve an association’s members in the association.

Non-board members can serve on the Program Committee or on its subcommittees.
Ad Hoc Committees
By their nature, ad hoc committees are formed when they are needed and dissolved when their
work is done. Below are some examples of ad hoc committees.
Bylaws Committee
The Bylaws Committee is charged with reviewing the association’s bylaws and current practices
to ensure that they are synchronized. Over time, it is not uncommon for an association’s
practices to evolve so that they no longer follow the bylaws. The Bylaws Committee assesses
why this has happened and recommends changes to either the association’s practices or the
bylaws. This group can also be used to review current best practices and governance trends and
make recommendations on those the association should consider adopting.
Capital Campaign Committee
A capital campaign is a coordinated effort to raise significant funds for an identified purpose,
such as the construction of a building, the establishment of a scholarship program, or some
other “big ticket” item outside of the association’s normal day-to-day fundraising activities. A
capital campaign will usually last for several years. An association may embark on a capital
campaign only once a decade. Therefore, a capital campaign committee is an ideal ad hoc
committee.
Donors who are not on the board can serve on the Capital Campaign Committee. Their
commitment is not open-ended, and they may be more willing to serve in this capacity. The
Capital Campaign Committee may work with the Finance Committee, the Membership
Committee, or the Program Committee.
Strategic Planning Committee
Since it should take less than a year to develop or update an existing strategic plan, this task can
be assigned to an ad hoc committee or a task force. Many associations will choose to make it an
ad hoc committee. Members of the Strategic Planning Committee are responsible for
developing or updating an existing strategic plan for the full board’s approval. They may also
monitor the implementation of the plan and report on its progress to the full board. This ad hoc
committee may work closely with the Finance Committee, the Membership Committee, and
the Program Committee.
3.5 Director considerations
Corporate management bears the day-to-day responsibility for managing the corporation’s
response to the problems. The board’s role is one of oversight, which requires monitoring
management activity, assessing whether management is taking appropriate action and
providing additional guidance and direction to the extent that the board determines is prudent.
Staying well-informed of developments within the corporation as well as the rapidly changing
situation provides the foundation for board effectiveness.
We highlight below some key areas of focus for directors.
1. Retune Your Company’s Risk Oversight Systems
As a director, you are tasked with implementing information and reporting systems reasonably
designed to provide the Board and senior management with timely, accurate information
sufficient to support informed judgments about the risks facing the company and monitoring
the information and reports these systems provide. Those systems may well need to be
returned to account for changes both to the environment in which the company operates.
2. Integrate ESG Considerations Into Board Processes and Strategy
The ESG landscape has evolved significantly over the past year. It is safe to say that the Board of
Directors of every public company, regardless of that company’s business or size, is expected to
be engaged actively in ESG management, from sustainability to diversity and inclusion.
Continued momentum towards more engaged ESG management, even in the face of a global
pandemic, has made clear it is not a passing trend.
3. Conduct a Ground-Up Reassessment of Corporate Strategy
In light of the fundamental shifts in companies and our economy and society over the past year,
directors should consider engaging with management to go beyond a regular annual strategic
review and conduct a ground-up reassessment of the company’s corporate strategy. Depending
on the company, the strategy may need only fine tuning or possibly a wholesale rewrite. Any
new, or increased, risks in the company’s business model could be addressed through portfolio
realignment or partnership/acquisition strategies, for example. A review of corporate strategy
should include a fresh look at near and long-term strategic goals, identify accountability
milestones for those goals and anticipated barriers to achieving them, and ensure the
alignment of capital allocation priorities in the plan with those goals and milestones.
4. Prepare for a New Environment of Engaged Shareholders
Opportunities for activist stake building have been enhanced with continued market volatility
and enhanced options liquidity, offering the potential for accelerated stake building and more
attractive valuations. Moreover, the universe of engaged shareholders has continued to grow.
First time activists made up almost a third of all activist campaigns worldwide in 2020,
continuing recent trends. Investors outside of “mainline” activist investment managers have
increasingly used activist shareholder tactics, and exercised their shareholder franchise to
register their approval, or disapproval, of corporate action. While in the past support among
many of these groups for core activist campaigns was largely tacit, these groups are increasingly
willing to speak up and join the fray publicly.
5. Health and Safety. With management, set a tone at the top through communications
and policies designed to protect employee wellbeing and act responsibly. Consider how
to mitigate the economic impact of absences due to illness as well as closures of certain
operations on employees.
6. Operational and Risk Oversight. Monitor management’s efforts to identify, prioritize

and manage potentially significant risks to business operations, including through more
regular updates from management between regularly scheduled board meetings.
Depending on the nature of the risk impact, this may be a role for the audit or risk
committee or may be more appropriately undertaken by the full board. Maintain a focus
on oversight of compliance risks, especially at highly regulated companies.
7. Business Continuity. Consider whether business continuity plans are in place

appropriate to the potential risks of disruption identified, including through a discussion
with management of relevant contingencies, and continually reassess the adequacy of

the plans in light of developments. Key issues to consider include:
8. Crisis Management. During this turbulent time, employees, shareholders and other
stakeholders will look to boards to take swift and decisive action when necessary.
Consider whether an up-to-date crisis management plan is in place and effective. A well-
designed plan will assist the company to react appropriately, without either under- or
over-reacting.
9. Strategic Opportunities. Consider with management whether and if so where

opportunities are likely to emerge that are aligned with the corporation’s strategy.
3.6 Best practices when creating and implementing governance structures
Right-sized governance structurfes will positively impact long-term corporate performance –

but companies must design and implement those that both comply with legal requirements and
meet their particular needs.
Here are the top 5 corporate governance best practices that every Board of Directors can
engage – and that will benefit every company.
1. Build a strong, qualified board of directors and evaluate performance.
Boards should be comprised of directors who are knowledgeable and have expertise relevant to
the business and are qualified and competent, and have strong ethics and integrity, diverse
backgrounds and skill sets, and sufficient time to commit to their duties. How do you build –
and keep – such a Board?
 Identify gaps in the current director complement and the ideal qualities and
characteristics, and keep an “ever-green” list of suitable candidates to fill Board
vacancies.
 The majority of directors should be independent: not a member of management and

without any direct or indirect material relationship that could interfere with their
judgment.
 Develop an engaged Board where directors ask questions and challenge management
and don’t just “rubber-stamp” management’s recommendations.
 Educate them. Give new directors an orientation to familiarize them with the business,
their duties and the Board’s expectations; reserve time in Board meetings for on-going
education about the business and governance matters.
 Regularly review Board mandates to assess whether Directors are fulfilling their duties,
and undertake meaningful evaluations of their performance.
2. Define roles and responsibilities. Establish clear lines of accountability among the
Board, Chair, CEO, Executive Officers and management:
 Create written mandates for the Board and each committee setting out their duties and
accountabilities.
 Delegate certain responsibilities to a sub-group of directors. Typical committees include:

audit, nominating, compensation and corporate governance committees and “special
committees” formed to evaluate proposed transactions or opportunities.
 Develop written position descriptions for the Board Chair, Board committees, the CEO
and executive officers.
 Separate the roles of the Board Chair and the CEO: the Chair leads the Board and
ensures it’s acting in the company’s long-term best interests; the CEO leads
management, develops and implements business strategy and reports to the Board.
3. Emphasize integrity and ethical dealing.
Not only must directors declare conflicts of interest and refrain from voting on matters in
which they have an interest, but a general culture of integrity in business dealing and of
respect and compliance with laws and policies without fear of recrimination is critical. To
create and cultivate this culture:
 Adopt a conflict of interest policy, a code of business conduct setting out the company’s
requirements and process to report and deal with non-compliance, and a Whistleblower
policy.
 Make someone responsible for oversight and management of these policies and
procedures.
4. Evaluate performance and make principled compensation decisions. The Board should:
 Set directors’ fees that will attract suitable candidates, but won’t create an appearance
of conflict in a director’s independence or discharge of her duties.
 Establish measurable performance targets for executive officers (including the CEO),
regularly assess and evaluate their performance against them and tie compensation to
performance.
 Establish a Compensation Committee comprised of independent directors to develop

and oversee executive compensation plans (including equity-based ones like stock
option plans).
5. Engage in effective risk management.
Companies should regularly identify and assess the risks they face, including financial,
operational, reputational, environmental, industry-related, and legal risks:
 The Board is responsible for strategic leadership in establishing the company’s risk
tolerance and developing a framework and clear accountabilities for managing risk. It
should regularly review the adequacy of the systems and controls management puts in
place to identify, assess, mitigate and monitor risk and the sufficiency of its reporting.
 Directors are responsible to understand the current and emerging short and long-term
risks the company faces and the performance implications. They should challenge
management’s assumptions and the adequacy of the company’s risk management
processes and procedures.
3.7 Evaluating governance structures in organizations
 Needs to be conform with ‘good practices’ for joint evaluation
 Should allow appropriate involvement, cooperation and ownership of the

stakeholders
 Should safeguard the independence, credibility and quality of the evaluation
 Should allow an efficient and effective evaluation process
There are a number of reasons why evaluating your governance structure every so often
is a good idea. It helps you to:
 be accountable to the members of your nation and community, and other

stakeholders
 improve your cultural legitimacy
 improve the quality of your work, your governance and your actual services
 strengthen your decision-making processes
 develop more effective governance policies and rules
 identify and update out-of-date procedures
 encourage people to update their skills
 inform everyone about your governance situation

 cope with unexpected crises and changes
 keep in track to achieve your goals.
It is best to evaluate your governance at regular interva ls so that you can immediately
consider what needs to be done and develop actions to address any problems or gaps
before they get out of hand.
Evaluating your governance should allow you to see what’s working and what needs
some more attention. This will help you find ways to improve how you do things.
CHAPTER 4
Skills, Competencies and Diversity of the Board
4.1 Human capital aspects of the board

Boards have many areas to oversee and many duties related to overseeing management. Rapid
changes in the economic environment are providing many new issues for boards to tend to. The
breadth of issues creates time management problems as boards scramble to prioritize the most
pressing issues. This is one of many reasons that CEO succession and overseeing human capital
management gets pushed out to the margin. Board directors send cultural messages by the
decisions they make. Pushing oversight over human capital management down the list of
priorities has a trickle-down effect on talent recruitment and employee development.
Board directors need to know the risks of failing in their duties to properly oversee human
capital. While this duty isn’t necessarily always the top priority, it’s an issue that boards need to
address. Boards can best address oversight of human capital by putting together an underlying
structure and making time to receive and review reports. Hiring and retaining the best
employees helps to build the most successful companies.
Knowing and Assessing the Risks: Board Oversight in Human Capital Management
High-performing boards know that one of the top three risks relates to human capital. A robust
risk management plan must include a comprehensive evaluation of human capital risks and
opportunities. The talent that employees bring to companies is a great driver for innovation
and growth that helps companies keep a competitive edge.
The talent strategy needs to align with the business strategy when addressing issues such as
talent gaps, talent shortages, mergers and acquisitions, and using replacement workers.
A healthy board culture begins at the top and filters down to the frontline employees. A
positive board culture promotes honesty and integrity, whereas a negative board culture
overlooks issues such as low engagement, poor ethics and careless risk-taking.
Some of the risks related to human capital management are as listed
• Shortage of critical skills within the company’s workforce

• Compliance and regulatory issues
• Succession planning/leadership
• Gap between talent capabilities and business goals/shortage of critical skills within the
company’s workforce
• Employee engagement
• Ethics
• Loss of critical knowledge through attrition
• Labor costs
• Intellectual property loss or violation
• Managing talent through mergers and acquisitions
• Behaviors and practices that undermine diversity
• Company’s inability to compete for critical talent
• Excessive turnover/failure to retain critical talent
• Alignment of pay and performance
• Executive compensation
• Outsourcing and vendor management
• Globalization/offshoring
• Unionization/labor relations
• Excessive risk-taking
• Use of contingent workers
Developing a Structure for Dealing with Human Capital Risks

It’s important for boards to define oversight needs for human capital management. Ordinarily,
boards will factor in such things as their business cycle, their strategic planning, the nature of
risks, their risk profile, their strategy for acquiring talent and the overall business environment.
Boards can do several different things to ensure the quality of the board’s oversight over talent.
As with any other issue that the board doesn’t have time to address, boards can set up a human
resources committee and charge it with addressing human capital. One of the duties of such a
committee could be to develop a common language and strong analytics capabilities to give
boards’ access to information on talent and encourage use of those tools by the human
resources, finance and risk management departments.
Final Thoughts on Human Capital Management

There’s no consistency of thought when it comes to whether overseeing human capital is the
primary responsibility of management or the board. While management usually takes the lead
in overseeing human capital, it doesn’t relieve board directors from their responsibilities as part
of overall oversight for the company.
Human capital management is an area that’s been getting more attention in recent years
because of its direct impact on corporate success. It’s an issue that’s reflective of modern
governance and one that’s worthy of the board’s attention.
4.1.1 Director competencies

The board is responsible for ensuring that it has represented on it the skills, knowledge and
experience needed to effectively steer the company forward. Directors will be appointed to the
board because their specific skills, knowledge and experience will fill particular gaps on the
board. It is important to acknowledge that not all directors will possess each necessary skill, but
the board as a whole must possess them.
What are competencies and why are they important?

What is a competency? Kiel et al. define the competencies of a director as being the
experience, knowledge, skills, attitudes, values and beliefs of the person. They provide a
framework for considering these competencies as follows:
 Industry: Experience in and knowledge of the industry in which the organization
operates;
 Technical: Technical/professional skills and specialist knowledge to assist with ongoing
aspects of the board’s role;
 Governance: The essential governance knowledge and understanding all directors
should possess or develop if they are to be effective board members. Includes some
specific technical competencies as applied at board level; and
 Behavioral: The attributes and competencies enabling individual board members to use
their knowledge and skills to function well as team members and to interact with key
stakeholders.
Competencies
• Strategic expertise – the ability to understand and review the strategy;
• Legal – the board’s responsibility involves overseeing compliance with numerous laws as
well as understanding an individual director’s legal duties and responsibilities;
• Risk management – experience in managing areas of major risk to the organization and
the use of risk management systems;
• Managing people and achieving change – including experience as either a CEO or senior
member of a management team in a similar or larger sized organization;
• Industry knowledge – experience in similar industries
While different directors can bring different technical skills and knowledge to a board, there are
personal qualities that are desirable in all directors:
• Integrity – fulfilling a director’s duties and responsibilities, putting the organization’s

interests before personal interests, acting ethically;
• Curiosity and courage – a director must have the curiosity to ask questions and the courage
to persist in asking or to challenge management and fellow board members where
necessary;
• Interpersonal skills – a director must work well in a group, listen well, be tactful but able to
communicate their point of view frankly;
• Genuine interest in the organization and its business;
• Instinct – good business instincts and acumen, ability to get to the crux of the issue quickly;
• An active contributor – there is no room on boards today for those who do not contribute.
4.1.2 Director skills and experience

1. Management skills
Effectively overseeing and delegating tasks helps to maximize time, resources and productivity.
Company directors need to have a thorough understanding of the strengths of each employee
and department to assign tasks and set achievable goals. Strong managerial skills include
providing your company with the training and resources they need to meet their goals. Strong
management skills also include the ability to prioritize tasks in order to yield optimal
performance in a timely manner.
2. Written and verbal communication skills
As a director, you are often in constant communication with others in leadership roles and
employees across the company. Strong written and verbal communication skills can be critical
when training new employees, discussing business strategies and providing directions on tasks.
3. Strategic decision-making skills
Company directors make critical decisions that impact the current state and future of an
organization. Strategic decision-making includes evaluating your organization's objectives and
assessing potential risks that come with each decision. Making well-informed and strategic
decisions can lead to opportunities for growth and continued success. If something about a
certain process isn't producing the desired results, a company director must be able to act
decisively and make prompt decisions accordingly.
4. Analytical skills
Extracting meaningful insight from information, intelligence or data about your company and
industry can help guide you to strategic decision-making that can lead to growth. A company
director should be able to interpret and recognize what information is most relevant to their
business objectives. Strong analytical skills can also play a key role in coming up with creative
solutions to any challenges the organization may be facing.
5. Adaptability
A company director should be adaptable so they can respond to changes in the workplace and
within their industry efficiently. Directors not only plan but also expect potential challenges that
may lead to necessary changes. Being able to adjust quickly to those changes can help to
maintain a productive workflow.
6. Creativity
Having a creative mindset can drive productivity and lead to success within an organization.
Company directors who exhibit and encourage creativity constantly strive to find fresh ways to
improve and streamline processes, seek future opportunities for growth and find creative
solutions to various challenges. Innovative thinking can also reshape business models that can
lead to meaningful change and provide your company with a competitive advantage.
7. Empathy
Empathy, especially in a leadership role, can be critical in improving communication,

strengthening workplace relationships and maintaining job satisfaction among employees.
Empathy shows the ability to understand the experience, perspective and feelings of others,
which can make people in the organization feel cared for and valued. Fostering a supportive
environment through empathy can lead to greater collaboration and improve productivity
8. Visionary leadership
Visionary leadership involves clearly stating goals, outlining strategic plans for achieving those
goals and providing the resources to deliver results. When company directors display visionary
leadership skills, they can unite their organization under common goals, which may help
increase employee engagement, productivity and even generate better outcomes more
efficiently. Providing teams with a clear sense of direction can empower employees to make
impactful contributions to the success of the organization.
4.1.3 Evaluating individual board members

Mounting stakeholders’ expectations, challenges faced by companies to operate under
fluctuating economic conditions, pressures of globalization and increased regulatory
requirements have brought the quality of performance of the Boards of Directors under greater
scrutiny. Boards have recognized that it would be important for them to continually assess how
effectively they are performing their roles against the objectives and the goals they have set for
themselves. This growing recognition has resulted in Board evaluations becoming widely
established internationally in rules-based as well as in principles-based jurisdictions, as a critical
structural tool for assessing Board effectiveness and efficiency. In some jurisdictions, the
directors are also evaluated along with the Boards
4.2 Personal characteristics of the board.
It is no secret: an effective board of directors is critical to the success of any organization. Clear,
strategic and focused leadership that meets (or exceeds) the expectations of shareholders and
stakeholders is imperative — especially in these times.
But what are the core characteristics that allow for value-creation in the boardroom? What are
some of the foundational elements that lead to board success?
Enhancing Governance with an Effective Board

1. The Right People
A truly effective board calls for a mix of directors with the right skillsets, interests, industry
knowledge/experience, behavioral qualities and strong value systems. An ideal board is
composed of directors who have the breadth and depth of experience to lead management
while commanding the respect and confidence of their peers.
But the reality is that there are a myriad of factors that impact the board’s composition — from
evolving regulatory requirements to closing a technical skills gap. However, regardless of
external or internal requirements, the selection of board members should be the end result of a
strategic exercise and a careful, deliberate process.
2. Diversity: Differing Perspectives
European countries, such as Norway and Germany, continue to advocate for gender quotas in
the boardroom. More countries are expected to follow their lead. But the global movement
towards diversifying boards isn’t merely a socio-cultural exercise. Studies have established
the positive impact of board diversity (gender and race, in particular) on company performance.
A diverse board yields different perspectives. This makes them less susceptible to “groupthink.”
Diverse boards exhibit a wider range of competencies, differing risk/reward orientations, and
approaches to stewardship — all of which make for better identification of opportunities and
innovative solutions in the boardroom.
3. Leadership: A Strong Chair
Great leadership attributes are required from the board, but more so from the Chair. The Chair
does not only facilitate meetings, although that is critical to his role. The Chair also has to be
effective in managing key relationships.
An effective board requires a Chair who can:
 support or work with a model of strategic governance

o strong focus on strategy development and oversight
 develop a partnership with the CEO
o acts as a “critical friend” to the CEO
 interface with shareholders
o serves as the collective voice of the board

 have the confidence and respect of the board
o governs with integrity
o exhibits wise (business) judgment and a strong commitment to the role
o communicates effectively
o tackles difficult subjects and poses challenging questions
 lead the board to collaborate and focus on the issues that matter
o sets the tone at meetings
o monitors board culture
4. Good Board Practices: A Healthy Culture Inside and Outside the Boardroom
An effective board cannot do without good and healthy boardroom practices. Some of these
practices include: regular attendance, director induction and education, measuring board
performance, and managing meetings.
5. Mission-Centered
Collectively, board members who believe in the vision, mission, and values communicate to
others what the organization should look likes.
6. Strategic Planning
Effective boards don’t micromanage the Executive Director, CEO, CFO, managers or employees.
The board’s primary role is to lead and guide the organization through strategic planning with a
focus on the future.
In practice, this means that the board needs to establish work plans and priorities. The board
agenda should be structured so that directors tackle the most important work first. After
addressing critical matters, the board should turn their attention to critical decisions that they
will need to make over the course of the next two to three years. The discussions should
include evaluating whether the board has the capacity to make those decisions effectively.
Placing focus on strategic planning also means that the executive director’s reports should
reflect content on the board’s strategic planning work.
7. Boards with Diversity

Diversity within a board is important because investors, media, and governmental organizations
place board members under a high degree of scrutiny. Boards are taking on increasingly
complex issues and they need a diverse board with experience in better understanding risk
from all angles.
Having diversity among the board better represents the interests of all the parties within the
organization including stakeholders, employees, and constituents.
Diversity among board members takes on many forms. Effective boards have board members
with expertise in the following areas:
 Legal
 Marketing
 Financial
 Communication
 Leadership
 Planning
 Industry expertise
Beyond these areas, effective boards have diversity among gender, ethnicity, or other groups,
depending on the organization.
The nominating committee needs to be in the loop with seeking board candidates that fulfill
the board’s needs for diversity.
8. Training and Development

Board development begins with selecting the right candidates. Once candidates accept
positions as board directors, offer them the opportunity of a comprehensive orientation. It’s
not a bad thing to have board directors with little or no board experience when they have the
expertise to offer in other areas. Inexperienced board directors have the potential to be
valuable assets to the board, especially when the board assigns them a mentor to guide them.
Effective boards encourage continual training and development. It’s important that board
directors know how to read financial and other reports. The board should focus its training
efforts towards areas where the board is weak.
9. Professionalism
The board manual usually spells out the descriptions, responsibilities, and expectations of
board members including details about being respectful and professional.
The board chair plays a significant role in setting boundaries for board discussions, which helps
to shape the culture of the board. The board chair also sets the expectations for the rest of the
board by modeling good behavior. The board chair’s responsibility includes conducting board
work efficiently, which includes making sure board members have board manuals, board
policies, and that board and committee members submit reports in a timely manner.
10. Self-Evaluating
How many times have you changed your perspective on an issue after dissecting an issue and
taking time to think it through? Annual self-assessments are crucial to identifying strengths and
weaknesses among the board. Effective boards perform self-assessments for the whole board
and for individual board directors on an annual basis.
Self-assessments should include evaluating skills in following industry trends, building and
monitoring strategy, overseeing programs and reports, collaborating with management,
understanding board structure, recruiting, participation, time commitment, and assessing
attitude. Non-profit organizations should also include self-assessments regarding knowledge of
fundraising.
11. Collaborative
Forming a diverse board can only be effective when the board encourages a culture of inclusion
during collaborations. Boards should value communication skills like questioning, analyzing, and
evaluating during board discussions. The board room atmosphere needs to be accepting of
dissenting opinions while allowing board work to move forward.
An effective board chair guides discussions that are positive and productive. Boards should
strive to form an open and collaborative relationship with directors.
Effective boards continually develop a shared and renewed commitment to best practices for
good governance and hold each other accountable.
4.3 Defining and understanding the measuring of

diversity
Diversity is a powerful force that has the potential to transform societies and economies. Board
diversity is justified as a key to better corporate governance. The best boards are composed of
individuals with different skills, knowledge, information, power, and time to contribute. Given
the diversity of expertise, information, and availability that is needed to understand and govern
today’s complex businesses, it is unrealistic to expect an individual director to be
knowledgeable and informed about all phases of business. It is also unrealistic to expect
individual directors to be available at all times and to influence all decisions. Thus, in staffing
most boards, it is best to think of individuals contributing different pieces to the total picture
that it takes to create an effective board.'
In implementing policies on board diversity, both the company’s chairman and the nomination
committee play a significant role.
The chairman, being the leader of the board, has to facilitate new members joining the team
and to encourage open discussions and exchanges of information during formal and informal
meetings. To create such a well-functioning team, the chairman further needs to commit and
support mentoring, networking and adequate training to board members.
The nomination committee should give consideration to diversity and establish a formal
recruitment policy concerning the diversity of board members with reference to the
competencies required for the board, its business nature as well as its strategies. The
committee members have to carefully analyse what the board lacks in skills and expertise and
advertise board positions periodically. They are strongly encouraged not to seek candidates
merely through personal contacts and networks in order to carry out a formal and transparent
nomination process.
The most important ingredient to the success of board diversity, however, would most
probably be the board members’ changing their mindset to welcome a more heterogeneous
board, as well as to place greater trust in one another and work together more effectively.
Key Insights
 Boards need to ensure they are not assuming that there is alignment between board
members on the definition of diversity on the board.
 The correlation between success with increased gender diversity and success with
increased ethnic diversity is zero – what works for one does not necessarily work for the
other.
 There is no ‘silver bullet’ that will guarantee success from greater ethnic and gender
diversity in the boardroom. Those boards who invest time and effort in building the
capability to work with multiple aspects of diversity reap significant benefits.
 Chairs are a critical component to unlocking the benefits that all types of diversity can
add to boardroom discussions and insights. They need to be good listeners, as well as
action-oriented.
 Cultivating a learning and development mindset in the boardroom helps directors get
over their fear of making a mistake, and into creating a more inclusive board culture.
 Boards should address the development needs of the board as a whole with a view to
enhancing its overall effectiveness as a team.
 Ensuring process conflict does not turn into personality conflict is one of the key
strategies for developing a functional diverse board.
 It is critical that boards discuss as a collective, and reflect individually upon the question:
‘What are we/am I doing or not doing that is preventing our/my commitment to
diversity being fully realised?’
 A multi-disciplinary approach to board evaluation and board development is critical to

help the board create the skills, mindsets and competencies to tackle the findings and
recommendations of the report.
Measuring Diversity
Knowing how to measure the success of a diversity or inclusion program is also a challenge.
How do you know when your workforce is diverse or inclusive enough?
Without clear and robust measures to track diversity and inclusion efforts and outcomes, a
tendency to revert to habitual and ingrained thinking and behavioral patterns limits the returns
from an organization’s investment.
Metrics help employers committed to diversity and inclusion stay on track by encouraging the
identification and management of bias blindspots—mindsets and practices that promote
homogeneity but which are largely hidden.
Eight steps to setting meaningful diversity and inclusion metrics:
I. Define which diversity dimensions you will monitor

Organizations will typically measure diversity dimensions for which data is readily available,
namely gender. However, diversity extends much further than gender, and an organization
should not limit its metrics to data captured by existing systems. Depending on business goals,
leading organizations extend diversity measurement to race, ethnicity, nationality, educational

attainment, tertiary institution, professional expertise, tenure, age, disability and health status,
sexual orientation, family status, carer and parental status, employment status (full time, part-
time, flexible working), immigration status, faith, veteran status, English proficiency, languages
spoken, etc.
II. Review data policies
Defining diversity broadly will likely necessitate the establishment of new data analytics, and
companies should consider the legal and ethical requirements regarding the storing of sensitive
information. In certain jurisdictions, it is illegal to capture sensitive information without an
individual’s consent. Companies must review their data policies to ensure information
voluntarily disclosed is stored in a manner that obscures identifying information (not reporting
on groups of smaller than five employees, ensuring IP addresses are not stored with data,
etc.).
III. Select metrics for three different purposes

An organization’s diversity and inclusion metrics should serve three purposes: diagnose risk
areas and opportunities, track the progress of initiatives, calculate return on investment.
IV. Establish baseline measures

It is impossible to track progress unless you have a baseline measure. If you have already
started your program without taking a baseline measure, however, you can compare your
metrics to results reported in other parts of the business or industry benchmarks.
V. Set targets
Goal setting theory (Locke and Latham) posits that motivation and task performance are
positively correlated with setting specific and measurable goals. To elicit a behavioral change,
people must have a clear idea of what is expected from them. Goals help individuals to focus
their efforts in a particular direction.
VI. Assign responsibility and establish accountability

Once targets or other goals are set, responsibility for their achievement should be assigned to
individuals who are held accountable through scorecards and other performance management
tools. Ultimate accountability for diversity and inclusion should be at the level of the CEO and
the Board of Directors.
VII. Track and analyze results

It is important to have a formal plan for measuring your progress—what metrics will be
calculated, by whom, and how often? However, merely tracking and reporting diversity and
inclusion metrics is not sufficient. The resulting data must also be analyzed to assess what is
working and what isn’t with the findings used to determine what modifications or additions to
the initial action plan are required.
7. Report results and outline new initiatives

Results of diversity efforts should be transparent internally. This fosters trust and encourages
accountability. Sharing results externally can also be valuable for industry benchmarking and
strengthening employer brand and an organization’s reputation in the marketplace.
8. Review metrics regularly

Employers should regularly review diversity and inclusion metrics, changing them as needed as
the diversity and inclusion program matures and as business goals change
4.4 Types of diversity

A good way to think of the four types of diversity is as dimensions or classifications that each
hold their own list of different applicable subsets.
1. Internal Diversity
Internal diversity characteristics are ones related to situations that a person is born into. They
are things that a person didn’t choose for themselves and are impossible for anyone to change.
Here are some examples of internal diversity:

 Race
 Ethnicity
 Age
 National origin
 Sexual orientation
 Cultural identity
 Assigned sex
 Gender identity
 Physical ability
 Mental ability
2. External Diversity
In the context of diversity, the term external is used to describe things that are related to a
person but aren’t characteristics that a person was born with. While external diversity can be
heavily influenced by other people and their surroundings, even forcibly so, they ultimately are
aspects that a person can change and often do over time.
Some examples of external diversity include:
 Personal interests
 Education
 Appearance
 Citizenship
 Religious beliefs
 Location
 Familial status
 Relationship status
 Socioeconomic status
 Life experiences
3. Organizational Diversity
Organizational diversity, also called functional diversity, relates to the differences between
people that are assigned to them by an organization—essentially, these are the characteristics
within a workplace that distinguish one employee from another.
Regardless of your position or the pay you receive, any form of work that you do solidifies your
belonging to an organization. Whether you’re working for a private, nonprofit, public sector, or
governmental organization, and even if you do volunteer work for free, you are a part of an
organized group. This could be as small as a group of two or anything higher, as long as it’s
more than one independent person, that constitutes an organization.
However, there are different subsets within organizational diversity, which include:
 Job function
 Place of work
 Management status
 Employment status
 Pay type
 Seniority
 Union affiliation
4. Worldview Diversity
Worldview diversity is another diversity type that changes with time—we conceptualize the
world differently as we have new experiences and learn more about ourselves and each other.
There are still nuances within our worldviews, but some examples include:
 Political beliefs
 Moral compass
 Outlook on life
 Epistemology
Simply put, the types of diversity in the workplace include:
 Cultural diversity
 Racial diversity
 Religious diversity
 Age diversity
 Sex / Gender diversity
 Disability
4.5 Areas of diversity and their relationship to boards

Diversity takes various forms in a boardroom and can be broadly categorised into the following
elements:
1. Skills, expertise and experience

Having the optimal mix of skills, expertise and experience is paramount to ensure that the
board as a collective is equipped to guide the business and strategy of the company.
Traditionally, boards recruit from C-suite executives. While the experience from C-suite
individuals is invaluable, it may be beneficial for boards to broaden their definition of “board-
ready talent”. Business unit heads, regional leaders, academics, entrepreneurs, government
leaders, and other non-C-suite executives can create a wider, more diverse pool with some very
talented individuals that could bring interesting and insightful perspectives into the boardroom.
2. Gender
This element is one of the more emphasized forms of diversity in the boardroom. Historically,
corporate boardrooms have largely been a male consortium. In recent years, this practice has
been challenged as many companies, boards and shareholders have recognized the benefits of
having a gender-balanced boardroom. Females are increasingly sitting shoulder to shoulder
with their male counterparts in the boardroom, bringing with them a unique style of
management and perspective.
3. Ethnicity
Ethnic diversity pertains to having a mix of individuals from various racial, cultural and religious
backgrounds. The ethnic mix of a board should ideally represent the area in which the company
operates.
4. Age
Age diversity is an often overlooked element in the boardroom. Board members tend to be
older, as many boards equate age with experience. Marginal evidence of generational diversity
in boardrooms, with so-called “younger” directors being in their fifties. While older directors do
provide a wealth of knowledge, having younger directors introduces a fresh perspective into
the boardroom which should not be underestimated.
5. Geography
Geographic diversity refers to having a mix of individuals from various geographic locations on
the board. Ideally, the geographic mix should align to the areas that the company operates in.
In an increasingly global workplace, neglecting this element of diversity would be particularly
imprudent for a multi-national company as it may result in boardroom perspectives lacking a
robust understanding of the company’s operating environment.
6. Independence
Many argue that achieving the right balance of independent directors is crucial to a well-
functioning board. Independent directors bring a balanced perspective to the boardroom as
they assess matters in a more objective fashion.
4.6 Diversity thinking in a boardroom setting

Over the years, regulators have placed great emphasis on addressing different matters relating
to the board of directors. Two prominent examples were: (i) stressing on the roles of non-
executive directors as well as the importance of independence of the board in the Higgs Review
in 2003; and (ii) emphasizing the significance of balancing skills and experience of the board
members as in the Walker Review in 2010. Until recently, there has been an urge for
diversifying the board. Intuitively, diversity means having a range of many people that are
different from each other.
There is, however, no uniform definition of board diversity. Traditionally speaking, one can
consider factors like age, race, gender, educational background and professional qualifications
of the directors to make the board less homogenous. Some may interpret board diversity by
taking into account such less tangible factors as life experience and personal attitudes.
In short, board diversity aims to cultivate a broad spectrum of demographic attributes and
characteristics in the boardroom. A simple and common measure to promote heterogeneity in
the boardroom – commonly known as gender diversity – is to include female representation on
the board.
Benefits of board diversity
Diversifying the board is said broadly to have the following benefits:
 More effective decision making.

 Better utilization of the talent pool.
 Enhancement of corporate reputation and investor relations by establishing the
company as a responsible corporate citizen.
1. More effective decision making
It is believed that a diverse board is able to make decisions more effectively by reducing the risk
of 'groupthink', paying more attention to managing and controlling risks as well as having a
better understanding of the company’s consumers.
Diversified board members are more likely to possess different personal characteristics, which
lead to dissimilar leadership, thinking, emotional styles and even risk preferences and
behaviors. Not only may this foster creativity in delivering solutions to problems, but also
provide a more comprehensive oversight to the operations of the organization through a
further enhancement of the company’s sensitivity to a wider range of possible risks such as
reputation and compliance risks.
2. Better utilization of talent pool
One of the problems of searching for suitable directors lies on the limited number of candidates
– there is especially a tendency to search for board members with typical characteristics, such
as male directors. If directors expand the pool of potential candidates by considering more
diversified attributes, like women and ethnic minorities to be included in the boardroom, it will
alleviate the problem of 'director shortage' and therefore better utilize the talent pool. It is
therefore vital for companies to initiate tapping into the under-utilized pool of talent through
board diversity.
3. Enhancement of reputation and investor relations by establishing the company as a

responsible corporate citizen
Having a heterogeneous board can enhance corporate reputation through signaling positively
to the internal and external stakeholders that the organization emphasizes diverse
constituencies and does not discriminate against minorities in climbing the corporate ladder.
This may somehow indicate an equal opportunity of employment and the management’s
eagerness in positioning the organization as a socially responsible citizen.
CHAPTER 5
5.0 Understanding Boardroom Dynamics
5.1 Psychology of the board
5.1.1 The importance of board dynamics relative
to board structure, demographics and
attributes.
Board dynamics are the way individual company directors interact with each other during board
meetings i.e. how they speak to each other, how they express their ideas and debates them,
how they reach conclusions. Board dynamics are healthy when:
 ideas are debated robustly, in a constructive way and respectfully;
 all board members have an opportunity to speak and express themselves;
 Relationships between board members are strong.
Healthy board dynamics increase board effectiveness, facilitate collaborative decision-making
and generate value for stakeholders.
Board Dynamics can help your board maximize the value it adds by:
 Bringing the right skillsets to the board – helping you define what capabilities you need
at your board table, providing objective assessment of your current directors or CEO and
helping you recruit the best board members or senior management.
 Creating a structure for success – determining the configuration, policies and
procedures that will support and nurture a highly productive board.
 Defining board deliverables – setting clear, achievable goals and developing the
assessment tools to regularly assess board performance.
In terms of structures, the composition of the board contributes to effectiveness. Structures are
evolving greatly as governance become more sophisticated. Well-managed board diversity of
opinion, experience, personality and genre greatly impact effectiveness. The independence of
board members is also crucial. But so is their structured access to the right individualsIn terms
of processes, there are many processes beyond the straight running of the board: evaluation
processes, the strategy process, the risk process, the board education process, the CEO and key
managers succession processes, the regulatory process, etc.
When it comes to board demographics, diversity on corporate boards is good for business, and
stakeholders are increasingly seeking transparency and engagement with regard to the
demographic composition of the board.
5.1.2 Psychological theories underpinning

board dynamics
1. Psychodynamics theory
Psychodynamic theory is actually a collection of psychological theories which emphasize the

importance of drives and other forces in human functioning, especially unconscious drives. The
approach holds that childhood experience is the basis for adult personality and relationships.
Psychodynamic theory originated in Freud’s psychoanalytic theories and includes any theories
based on his ideas, including those by Anna Freud, Erik Erikson, and Carl Jung.
Origins
Between the late 1890s and the 1930s, Sigmund Freud developed a variety of psychological
theories based on his experiences with patients during therapy. He called his approach to
therapy psychoanalysis and his ideas became popularized through his books, such as The
Interpretation of Dreams. In 1909, he and his colleagues traveled to America and gave lectures
on psychoanalysis, spreading Freud’s ideas further. In the years that followed, regular meetings
were held to discuss psychoanalytic theories and applications. Freud influenced a number of
major psychological thinkers, including Carl Jung and Alfred Adler, and his influence continues
today.
It was Freud who first introduced the term psychodynamics. He observed that his patients
exhibited psychological symptoms with no biological basis. Nevertheless, these patients were
unable to stop their symptoms despite their conscious efforts. Freud reasoned that if the
symptoms couldn’t be prevented by conscious will, they must arise from the unconscious.
Therefore, the symptoms were the result of the unconscious will opposing the conscious will,
an interplay he dubbed "psychodynamics."
Psychodynamic theory formed to encompass any theory deriving from Freud’s basic tenets. As
a result, the terms psychoanalytic and psychodynamic are often used interchangeably.
However, there is an important distinction: the term psychoanalytic only refers to theories
developed by Freud, while the term psychodynamic references both Freud’s theories and those
that are based on his ideas, including Erik Erikson's psychosocial theory of human
development and Jung's concept of archetypes. In fact, so many theories are encompassed by
psychodynamic theory that it is often referred to as an approach or a perspective instead of a
theory.
Assumptions
Despite the psychodynamic perspective’s association with Freud and psychoanalysis,

psychodynamic theorists no longer put much stock in some of Freud’s ideas, such as the id, ego,
and superego. Today, the approach is centered around a core set of tenets that both arise from
and expand upon Freud’s theories.
Psychologist Drew Weston outlined five propositions that generally encompass 21st century
psychodynamic thinking:
 First and most importantly, a great deal of mental life is unconscious, meaning people’s
thoughts, feelings, and motivations are often unknown to them.
 Individuals may experience conflicting thoughts and feelings towards a person or
situation because mental responses occur independently but in parallel. Such internal
conflict can lead to contradictory motivations, necessitating mental compromise.
 Personality begins to form in early childhood and it continues to be influenced by
childhood experiences into adulthood, especially in the formation of social relationships.
 People’s social interactions are impacted by their mental understanding of themselves,
other people, and relationships.
 Personality development includes learning to regulate sexual and aggressive drives, as
well as growing from a socially dependent to an interdependent state in which one can
form and maintain functional intimate relationships.
While many of these propositions continue to focus on the unconscious, they also are
concerned with the formation and understanding of relationships. This arises from one of the
major developments in modern psychodynamic theory: object relations. Object relations holds
that one’s early relationships set expectations for later ones. Whether they are good or bad,
people develop a comfort level with the dynamics of their earliest relationships and are often
drawn to relationships that can in some way recreate them. This works well if one’s earliest
relationships were healthy but leads to problems if those early relationships were problematic
in some way.
In addition, no matter what a new relationship is like, an individual will look at a new
relationship through the lens of their old relationships. This is called "transference" and offers a
mental shortcut to people attempting to understand a new relationship dynamic. As a result,
people make inferences that may or may not be accurate about a new relationship based
on their past experiences.
Strengths
Psychodynamic theory has several strengths that account for its continued relevance in modern
psychological thinking. First, it accounts for the impact of childhood on adult personality and
mental health. Second, it explores the innate drives that motivate our behavior. It’s in this way
that psychodynamic theory accounts for both sides of the nature/nurture debate. On the one
hand, it points to the way the unconscious mental processes people are born with influence
their thoughts, feelings, and behavior. On the other, it emphasizes the influence of childhood
relationships and experiences on later development.
Weaknesses
Despite its strengths, psychodynamic theory has a number of weaknesses, too. First, critics
often accuse it of being too deterministic, and therefore, denying that people can exercise
conscious free will. In other words, by emphasizing the unconscious and the roots of
personality in childhood experience, psychodynamic theory suggests that behavior is pre-
determined and ignores the possibility that people have personal agency.
Psychodynamic theory is also criticized for being unscientific and unfalsifiable—it is impossible
to prove the theory to be false. Many of Freud’s theories were based on single cases observed
in therapy and remain difficult to test. For example, there’s no way to empirically research the
unconscious mind. Yet, there are some psychodynamic theories that can be studied, which has
led to scientific evidence for some of its tenets.
2. Behaviourism Theory
Behaviorism, also known as behavioral psychology, is a theory of learning which states all
behaviors are learned through interaction with the environment through a process called
conditioning. Thus, behavior is simply a response to environmental stimuli.
Behaviorism is only concerned with observable stimulus-response behaviors, as they can be
studied in a systematic and observable manner.
The behaviorist movement began in 1913 when John Watson wrote an article entitled
'Psychology as the behaviorist views it,' which set out a number of underlying assumptions
regarding methodology and behavioral analysis.
Basic Assumptions
1. All behavior is learned from the environment:
Behaviorism emphasizes the role of environmental factors in influencing behavior, to the near
exclusion of innate or inherited factors. This amounts essentially to a focus on learning. We
learn new behavior through classical or operant conditioning (collectively known as 'learning
theory').
2. Psychology should be seen as a science:

Theories need to be supported by empirical data obtained through careful and controlled
observation and measurement of behavior. Watson (1913) stated that: 'Psychology as a
behaviorist views it is a purely objective experimental branch of natural science. Its theoretical
goal is … prediction and control.' (p. 158). The components of a theory should be as simple as
possible. Behaviorists propose the use of operational definitions (defining variables in terms of
observable, measurable events).
3. Behaviorism is primarily concerned with observable behavior, as opposed to

internal events like thinking and emotion:
While behaviorists often accept the existence of cognitions and emotions, they prefer not to
study them as only observable (i.e., external) behavior can be objectively and scientifically
measured.Therefore, internal events, such as thinking should be explained through behavioral
terms (or eliminated altogether).
4. There is little difference between the learning that takes place in humans and
that in other animals:
There's no fundamental (qualitative) distinction between human and animal behavior.

Therefore, research can be carried out on animals as well as humans (i.e., comparative
psychology). Consequently, rats and pigeons became the primary source of data for
behaviorists, as their environments could be easily controlled.
5. Behavior is the result of stimulus-response:
All behavior, no matter how complex, can be reduced to a simple stimulus-response

association). Watson described the purpose of psychology as: 'To predict, given the stimulus,
what reaction will take place; or, given the reaction, state what the situation or stimulus is that
has caused the reaction.
3. Cognitivism Theory
In psychology, cognitivism is a theoretical framework for understanding the mind that gained
credence in the 1950s. The movement was a response to behaviorism, which cognitivists said
neglected to explain cognition. Cognitive psychology derived its name from the
Latin cognoscere, referring to knowing and information, thus cognitive psychology is an
information-processing psychology derived in part from earlier traditions of the investigation of

thought and problem solving.
Behaviorists acknowledged the existence of thinking, but identified it as a behavior. Cognitivists
argued that the way people think impacts their behavior and therefore cannot be a behavior in
and of itself. Cognitivists later argued that thinking is so essential to psychology that the study
of thinking should become its own field. However, cognitivists typically presuppose a specific
form of mental activity, of the kind advanced by computationalism.
4. Humanistic psychology
Humanistic psychology (humanism) is grounded in the belief that people are innately
good. This type of psychology holds that morality, ethical values, and good intentions are
the driving forces of behavior, while adverse social or psychological experiences can be
attributed to deviations from natural tendencies.
Humanism incorporates a variety of therapeutic techniques, including Rogerian (person-
centered) therapy, and often emphasizes a goal of self-actualization.
The Development of Humanistic Psychology

Humanism arose in the late 1950s as a “third force” in psychology, primarily in response to
what some psychologists viewed as significant limitations in
the behaviorist and psychoanalytic schools of thought. Behaviorism was often criticized
for lacking focus on human consciousness and personality and for being deterministic,
mechanistic, and over-reliant on animal studies. Psychoanalysis was rejected for its strong
emphasis on unconscious and instinctive forces and for being deterministic, as well.
In 1957 and 1958, Abraham Maslow and Clark Moustakas met with psychologists who
shared their goal of establishing a professional association that emphasized a more
positive and humanistic approach. The discussions revolved around the topics they
believed would become the core tenets of this new approach to psychology: Self -
actualization, creativity, health, individuality, intrinsic nature, self, being, becoming, and
meaning.
After receiving sponsorship from Brandeis University, The American Association for
Humanistic Psychology was founded in 1961. Other major contributors to the development
of humanistic psychology were Carl Rogers, Gordon Allport, James Bugental, Charlotte
Buhler, Rollo May, Gardner Murphy, Henry Murray, Fritz Perls, Kirk Schneider, Louis
Hoffman, and Paul Wong.
Some fundamental assumptions of humanistic psychology include:
 Experiencing (thinking, sensing, perceiving, feeling, remembering, and so on) is

central.
 The subjective experience of the individual is the primary indicator of behavior.
 An accurate understanding of human behavior cannot be achieved by studying

animals.
 Free will exists, and individuals should take personal responsibility for self-growth
and fulfillment. Not all behavior is determined.
 Self-actualization (the need for a person to reach maximum potential) is natural.
 People are inherently good and will experience growth if provided with suitable
conditions, especially during childhood.
 Each person and each experience is unique, so psychologists should treat each case
individually, rather than rely on averages from group studies.
Humanism’s Contributions to Psychology

The humanistic approach has made several significant contributions to the field of
psychology. It presented a new approach to understanding human nature, new methods of
data collection in human behavioral studies, and a broad range of psychotherapy
techniques that have been shown to be effective. Some of the major concepts and ideas
that emerged from the humanistic movement include:
 Hierarchy of needs
 Person-centered therapy
 Unconditional positive regard
 Free will
 Self-concept
 Self-actualization
 Peak experiences
 Fully-functioning person
Humanism has inspired many contemporary modes of therapy, and most therapists value
Limitations of Humanistic Psychology

 Humanism’s reliance on the subjective experiences of individuals may make it
difficult to objectively measure, record, and study humanistic variables and
features. The emphasis on gathering qualitative data makes it almost impossible to
measure and verify any observations made in therapy. Not only might it be
challenging to compare one set of qualitative data with another, the overall lack of
quantitative data means that key theories cannot be supported by empirical
evidence.
 Other criticisms of the approach include its lack of effectiveness in treating severe
mental health issues and the generalizations made about human nature, as well as
the complete rejection of some important behaviorist and psychoanalytic concepts.
For example, although humanistic psychology holds that animal studies are useless
in the study of human behavior, some animal studies have led to concepts that are
applicable to people.
 Additionally, humanistic psychology focuses exclusively on free will and

the conscious mind, but research does show that the unconscious mind plays a
significant role in human psychology.
5.1.3 Characteristics of boards and board meetings

Top 10 Characteristics of an Effective Board of Directors
1. Remain consistently dedicated to refining and fulfilling the mission.

2. Develop and adhere to a clear and engaging board selection, recruitment and orientation
process.
3. Organize responsibilities, set goals and measure the performance of the Board as a whole
and its individual members.
4. Define and execute the processes and expectations for hiring, evaluating and compensating
the CEO.
5. Understand and act with the belief and knowledge that the Board governs while the staff
manages and these are separate, yet fully aligned functions.
6. Build a leadership pipeline for Board officer positions and offer mentoring/training and other
supports for to enhance the success of all Board members.
7. Create a cycle of respect, trust and candor among all members and an environment where
generative questions are welcomed.
8. Act as an ambassador for the organization and its ‘work’ while upholding the duties of care,
loyalty, and confidence.
9. Actively build relationships with individuals outside the organization that advance the
organization’s overall mission, vision, and constituents.
10. Embrace change while being willing to take risks that can lead to rewards.
What are the features of a board meeting?

For board meetings to be effective they need to:
 Have a purpose.
 Provide enough notice and appropriate materials for members to be prepared.
 Be chaired effectively.
 Follow proper meeting procedures and respect the time of board members.
 Have clear supporting documents such as an agenda, minutes and other reports.
Incorporated organizations are required by law to have members’ meetings. This often
translates into an Annual General Meeting (AGM) of the full membership and regular, more
frequent meetings of the board of directors. The number of meetings a board holds in a year is
outlined in its bylaws, but it’s often monthly or bi-monthly although it’s not unusual to only
meet quarterly. Board members attend and vote at board meetings.
Other members of the organization or special guests may be welcome to attend board
meetings but usually as invited visitors with no vote. The Executive Director attends board
meetings as well as an ex-officio (or non-voting) member of the board.
For board meetings to be effective they need to:
 Have a purpose
 Provide enough notice and appropriate materials for members to be prepared
 Be chaired effectively
 Follow proper meeting procedures and respect the time of board members
 Have clear supporting documents such as an agenda, minutes and other reports
 Ensure all participants have a voice and are respected
 Include some social interaction and networking time
 Accomplish results and/or have action items
 Be documented with minutes
Meeting purpose
The usual purposes of board meetings are to:
 Make decisions
 Set policy
 Solve problems
 Plan and evaluate
Meeting preparation
The role of planning and preparing for board meetings usually falls to the chairperson and the
Executive Director. The extent to which each is involved is dictated by the organization’s
governance structure. For example, the chairperson of a hands-on administrative board may
prepare the agenda after getting some input from the Executive Director while a policy-
governance chair may meet with the Executive Director prior to a meeting to determine board
issues versus staff issues are and then plan an agenda around only the board issues.
The key to preparation is for everyone to be clear about the role they play and what needs to
be done prior to the meeting. Examples include:
 Adequate notice has been provided to board members in a format that has been
previously agreed upon (i.e., two weeks prior to the meeting all board members are
emailed a reminder and package).
 Copies of all documents needed prior to the meeting are distributed to members
(agendas, past minutes, correspondence, proposed policies, committee reports, etc.).
 Facility space is booked or confirmed along with any equipment that may be needed for
the meeting (i.e., flipchart, LCD projector, coffee machine).
 Arrangements for food and refreshments are confirmed (if applicable).
 Special guests (if applicable) have been confirmed and arranged to appear at an agreed
upon time on the agenda.
Effective chairing
The chairperson is ultimately responsible for ensuring that meetings stay on track, timelines are
respected, everyone’s voice is heard, and goals are accomplished. Most organizations have an
elected chairperson in place for a term that is outlined in the organization’s bylaws. However,
some organizations have a rotating chair, appointing someone different from the board as a
whole at each meeting. In either case it’s important to have a clear job description of what is
expected.
During meetings, the chair should:
 Encourage participation by all board members

 Allow time for all views and sides of an issue to be heard and discussed before a vote
 Ensure members understand the discussions and terms of an issue by asking for
clarification when necessary
 Summarize discussions before voting or moving on to the next item
 Keep the meeting on schedule by adhering to the agenda and keeping board members
on topic
 Manage conflicts that arise during the meeting
 Ensure decisions are made clearly and explicitly (by vote or consensus) so that there is
no room left for misunderstanding or misinterpretation
 Read or call for motions, call for votes on an issue, ensure votes are counted and
recorded in the minutes (if required)
 Ensure that the recorder of minutes reflects attendance, motions and votes
Meeting procedures and quorum

There are certain procedures common to board meetings such as:
 Calling the meeting to order

 Reviewing and approving an agenda
 Ensuring there is a recorder and having minutes taken
 Reviewing and approving minutes from previous meeting
 Calling for motions, a seconder and voting on items when appropriate
 Adjournment
Agendas and reports

One of the best ways to hold effective meetings is to put thought into the agenda, distribute it
prior to the meeting, and then stick closely to it during the meeting. Ideally agendas should
note:
 Topics/issues to be covered at the meeting

 Action required for each topic/issue (i.e., information only, discussion, decision)
 The person responsible for leading the discussion or providing information
 A timeline associated with each item
Some organizations, in keeping with their governance structure, have standing items that
appear on the agenda such as a report from the governance or nominating committee. Some
organizations ensure there is time at every meeting to discuss the organization’s strategic plan
and succession plan, especially in relation to goals achieved related to the plans. It can also be
helpful to include the organization’s mission statement on the agenda as a constant reference
and focus.
Effective participation
Members of a board who don’t play a leadership or executive role still have responsibilities to
ensure the effectiveness of a meeting. This includes active participation but also to:
 Arrive on time and stay for the duration of the meeting

 Read materials prior to the meeting to be prepared for discussion
 Be respectful of others who are speaking and avoid interrupting, rudeness and side
conversations
 Have an open mind when listening to discussion and opposing perspectives
 Ask for clarification before voting or making a decision if unsure about something
 Carefully word motions
 Volunteer to help with items that require action and follow up on action items prior to
the next meeting
Networking/Social Time
Some boards have found it beneficial to include social/networking time on the agenda. This has
to be something closely monitored by the chair to ensure it is not too time consuming and
doesn’t take away from priorities of the meeting. It should be something that everyone agrees
upon.
An alternative can be to tag social time onto the beginning or end of a meeting. It is an optional
time for members to either arrive early or stay later to catch up with other board members and
share information. Boards may also opt to have a social gathering once or twice a year in place
of a regular meeting, such as a dinner or cocktail party in December or a BBQ/picnic during the
summer months. Board members who have social media accounts can also chose to link with
another using them mediums.
It is important for boards to have social opportunities as it builds a more cohesive team and
ultimately leads to more productive and effective meetings.
Minutes and action items

The long-standing debate about meeting minutes is deciding how much information to include.
It is a challenge to be able to reflect the intent of an action item without providing all of the
nitty- gritty discussion details. The key is to realize that minutes are legal documents of the
organization, but they are also intended to be read in the future, often by people who weren’t
at the meeting. While it’s important that all motions, decisions and action items are recorded,
it’s equally important that there be some context to how the decisions were made.
At a minimum, minutes need to include:
 The date and location of the meeting

 Members who were present for voting
 Motions put forth, the mover and seconder
 Amendments to motions
 The outcome of the motion (whether it was carried or not) and record of the vote
including dissenters and those who voted in abstention or by proxy
The responsibility of recording and distributing minutes is usually given to an appointed or

elected officer of the board called a secretary. On some boards, responsibility for taking
minutes is delegated to staff and the minutes are then reviewed and approved by the secretary.
As well, some boards that don’t have executive positions may appoint the secretary on a
rotating basis or may delegate the responsibility to a staff person.
In addition to the formal minutes of an organization, some organizations also prepare action
items. The action items may be part of the minutes or a separate document attached to the
minutes
General meetings
In addition to regular board meetings, organizations hold general meetings. These are often
referred to as Annual General Meetings (AGMs) because one must be held no later than 18
months after incorporation and annually thereafter. There must be no more than 15 months
between general meetings for organizations that are
General meetings include the broader membership of the organization and board members.
Every member in good standing of an organization is entitled to vote at general meetings, and
those not able to attend may vote by proxy (through another member who is present).
Membership criteria and eligibility are set out in an organization’s bylaws. Items usually
addressed at general meetings include:
 Presentation of an annual report of the board of directors

 Nominations and elections of new directors
 Presentation of the financial statements of the past fiscal year (usually by the
organization’s treasurer or auditor)
 Appointment of auditor for the next fiscal year
 Amendments, changes or additions to the organization’s bylaws
5.1.4 Board team processes

5.1.5 Board team outcomes
5.2 Individual and team resilience
There has been recent commentary that when it comes to creating stronger organizational
resilience, the focus needs to be on creating resilient teams rather than resilient individuals.
In our view, this dichotomy is not helpful. We need to create both. Fostering resilience in
organizations is achieved by strengthening resilience at the individual, team, and organizational
levels.
The inherent interconnections between these levels determine that resilience is not only an
individual characteristic but also a group quality.
A strong team will provide an environment that fosters and supports individuals to enhance
and maintain their resilience. For instance, a robust body of research highlights that the single
most powerful predictor of personal resilience is interpersonal support. A strong team can
provide this support. A strong team can also carry people when their personal resilience
wobbles. Up to a point, but not indefinitely. It is impossible to build team resilience unless the
individuals within a team hold robust resilience skills.
We know that people with stronger resilience:
 show greater flexibility and creativity

 see change as less threatening, and therefore are more adaptable
 make more positive judgements about others
 get sick less often.
Therefore, when combined at the team level, higher levels of individual resilience help the
team as a whole to bounce back and to thrive under pressure.
With skilled leadership, individuals and teams can then develop a culture of resilience within
the organisation as a whole.
Resilience integration includes identifying and reporting against resilience competencies:
 For individuals – maintaining personal resilience and managing impact on others

 For leaders – maintaining personal resilience and managing sources of pressure for
team(s) (including your own impact as a leader)
 For leadership teams – maintaining personal resilience and sources of pressure across
the organisation (including the combined impact of the leadership team).
When these resilience competencies are in place, teams will adapt and thrive, and
organisational resilience transformation occurs. We can “test” for transformation by assessing
if the organisation, and teams in the organisation, can:
 Meet key objectives while facing challenges

 Respond positively to change
 Adapt and recover faster from adversity
 Thrive successfully during transitions
 Turn crises into opportunities.
These hallmarks of a resilient organisation hold true for teams, and for individuals.
Back to our starting point then, rather than taking a singular focus, let’s create more resilient
teams, let’s better understand how we can best support individuals to hold their resilience, to
help teams maintain resilience over time, and to foster organisational resilience
transformation.
The 7 C’s of Team Resilience
Team resilience is the capacity of a group of people to respond to change and disruption in a
flexible and innovative manner. In the face of adversity, resilient teams maintain their work
productivity while minimizing the emotional toll on their members.
Teams need to regularly foster the following 7Cs of Team Resilience in order to ensure they are
capable as a team and ready for the unexpected:
Culture
The team has shared values, identity, history, and purpose that bind them together. Teams
share stories that help describe their history and identity. Team members can answer the
question “who are we together?”
Competence
Team members have the capacity and skills they need to meet demands, particularly during
times of crisis and high stress. They have the knowledge and abilities they need to be
successful. Team members share their competence with each other.
Connections
Team members know each other and have formed strong relationships. Teammates are treated
as individuals not as positions or titles.
Commitment
Team members are dedicated to each other and to a shared mission. They demonstrate respect
and loyalty to colleagues and will give something of value (time, money, effort) to support
others. They will keep their promises and protect teammates from harm even when it is hard to
do so.
Communication
All team members feel well-informed about what is going on in the workplace. Colleagues
willingly share information and encourage questioning, critical thinking, and dialogue.
Teammates welcome differing views.
Coordination
The team is synchronized across the organization and its goals are well-aligned with other
organizational goals. Teammates work through conflict to ensure they are working in sync with
each other.
Considera tion
Team members support their colleagues’ personal needs as well as professional goals. They
express gratitude and appreciation to each other.
5.3 Well- being and resilience of the board
The COVID-19 pandemic and subsequent economic crisis has rapidly changed our business and social
operating environment. Communities, organizations and individuals are being impacted in different
ways. Some are doing ok, others are struggling.
‘Always on’ has taken on a whole new meaning for many leaders. Directors who are leading, often
multiple organizations, through operational and financial stress will be more than likely feeling the
pressure. There is an adage that says if you want to have enough to give others you have to look
after yourself. This is wise advice.
Board wellbeing is rarely talked about and can often be overlooked. During these times it is
important that boards not only support their executive teams and employee wellbeing, but also
ensure that they are supporting each other and building the collective resilience of the board.
True culture shines through in a crisis and boards can show strong leadership and set the tone
through their actions during this time. This means prioritizing mental health and wellbeing and
showing that it is important to your organization.
During these times executives and other employees may also be feeling increased stress and anxiety.
Demonstrating and talking about prioritizing self-care is important. It is also important to monitor
organizational health and wellbeing and consider how you can support your people.
Five steps boards can ensure their wellbeing and build resilience
1. Provide access to support services: If an organization has support services such as EAP and
they are not already accessible to board members, consider making these services available
to board members for a time. Some boards may also choose to provide access to other
forms of independent support for directors during the crisis.
2. Develop contingency plans: Board workloads are likely to have increased significantly,
especially during the crisis, which will also be heightened for directors serving on multiple
boards. Many people are also juggling extra family commitments. Everyone’s circumstances
will be different, and at certain times some board members may need to miss board
meetings due to illness, personal crisis, or urgent commitments to another board.
3. Reach out and support each other: Break down the stigma and encourage each other to seek
advice and support from mentors and peers. Some boards may want to encourage a buddy
system so that directors can check in and support each other. Also make sure someone is
checking in on the chair and providing support as needed.
4. Be diligent about cyber hate: As the board makes tough decisions individual members may
find that they become subject to personal online abuse and harassment. If you know that
members of your board may be facing a backlash, raise the issue with the board as a whole.
5. Take care of yourself: Prioritising self-care and your mental wellbeing is critical to maintaining
the calm and resilience needed for sound decision making. Take time out and exercise, relax,
reflect and think.
5.4 Developing behavioral agility

In an evolving and hectic world, where the pace of life is faster than it has ever been before, it’s
increasingly important to be able to think on your feet and react and adapt quickly, positively
and effectively.
Behavioral agility is not just about your ability to change. It’s about your dynamic capability and
how to respond in a timely, innovative and sustainable way when you need to. So how can you
become a more nimble thinker?
The word AGILE lays out a very useful acronym for explaining the key components:
A is about adaptability, so that you can positively embrace change

G is about being genuine, and having the confidence to step out of your comfort zone
I is about innovation, so that you can improvise and solve problems
L is about being light and letting go of limitations and baggage
E is about endurance, so that you are resilient, strong and sustainable
Adaptability
It may feel that as soon as you adapt to one set of circumstances it’s all change again. That is
evolution and there is no progress without change. One of the biggest obstacles to the
opportunities this presents can be your attitude. If you’re resistant to developments then you’ll
be setting yourself up for a tough time.
You may experience change that you don’t like or even understand and there may be nothing
you can do to stop it. You may dig your heels in but there comes a point where the wave of new
advances is stronger than you are capable of conquering. In this situation, real intelligence
teaches us that whilst you may not be able to alter the situation, you can choose your response.
Being genuine
You were not born to be perfect, you were born to be real. In a world that is dominated by
social media, it can be a struggle to determine people’s real selves from selectively designed
images of the ideal. Never lose sight of who you really are. We are all people in progress and
there will always be aspects of you that can be worked on and improved. Having a high level of
self-awareness can actually improve self-esteem and confidence. Self-confidence will help you
to trust your own reactions which is a big part of being agile and making decisions. Being
genuine will also help you to be connect with others and be less judgmental and accepting.
Innovation
The ability to be able to innovate is critical to agility. In a world where there is less security and
more uncertainty and ambiguity than ever before, it‘s important to explore new ways of doings
things. Remember though that creativity is about thinking up new ideas; innovation is
about implementing them.
Staying light
Letting go of unnecessary baggage will allow you to be a far more nimble thinker. Agility
requires you to think and react quickly so that your responses are relevant to the current
circumstances. It isn’t about running about like a headless chicken, multitasking at breakneck
speed. It’s about being sharper and more focused. If our minds are overwhelmed and cluttered
it’s impossible to navigate some of the complexity that is rife. To be a nimble thinker one of the
most important things is to be able to distill complexity and make things simpler. As Albert
Einstein so eloquently put it: If you can’t explain it to a six year old you, you don’t understand
it well enough yourself.
Endurance
Agility is very much about endurance and the need to be strong and sustainable. It’s essential to
develop a core strength and resilience so that you can bounce back ready for the next
challenge. Develop the necessary toolkit to be able to survive and thrive through turbulent
times. Tough times don’t last, but strong people do and your ability to endure these is crucial.
Being enduring is about having the strength to see something through, despite setbacks along
the way.
CHAPTER 6
Board Decision Making
6.1 Decision making as a core competence of a
board
As corporate governance becomes increasingly important, those shareholders, beneficiaries and owners
want to see that a decision made on their behalf has been well thought through and is ultimately a well-
made decision. Other stakeholders, such as funders, local communities and the media may also take a
major interest in a particular board decision. It is therefore essential that all processes around board
decisions are seen to be effective, efficient and ethical.
Board members can also be held personally liable for the consequences of their decisions, so it is
important that every board member feels sufficiently informed to confidently make a decision. While
often only time will tell if the right decision has been made, a board can both claim and demonstrate
that a decision has been ‘well made’. Decision-making is both an art and a science, drawing on intuition
and experience as well as facts and reasoned analysis. By having a strong and robust approach to
decision-making, a board will enhance its credibility and strengthen its transparency and accountability.
What should Boards be making Decisions About?
Boards of all organizations are likely to be making decisions on vision, policy, strategic planning and the
annual budget. In large organizations, the board’s decision-making role will be limited to strategic-level
issues. Operational issues, like hiring contractors and buying plant, are left to management. For many
organizations, though, the lines are not so clear, as the operation may be relatively small. In these
circumstances, board members may well be involved in management, and the board as a whole much
more involved in management-level decisions. It remains essential for the board to know what board
business is and what this is not, and preferably to document in writing.
Why is the Decision Making Process Important?

This is because no one can ever know if the ‘right’ decision has been made until the outcomes are finally
known, and this may take a long time. The board, however, still has to make a decision, and will be held
accountable for it. Therefore, the board needs to focus on making a ‘well made’ decision. Things may
not always turn out as expected.
A well-made decision not only has the best chance of success, but provides the assurance to the
shareholders, beneficial owners and other stakeholders that the board has met its legal, ethical and
accountability obligations. Shareholders and beneficial owners also need assurance that all board
decisions are made in the spirit, and to the letter of the constitution or trust deed of the organization.
Outline of a Board’s Decision-Making Process

 Accept the issue
 Identify the type of issue

 Define the ‘problem’
 Understand and set the context
 Gather information, facts and advice
 Analyse
 Make the decision
 Record ‘
 Communicate and get action
6.2 Evidence-based decision making

Definition
Evidence Based Decision-Making is a process for making decisions about a program, practice, or
policy that is grounded in the best available research evidence and informed by experiential
evidence from the field and relevant contextual evidence.
What is the framework for thinking about evidence?

The framework includes contributions from researchers and practitioners to provide a more
comprehensive view of evidence that is appropriate and necessary for decision-making. To
inform public health decision-making, the framework is composed of three dimensions that
complement one another:
 Contextual Evidence
 Best Available Evidence
 Experiential Evidence
What are the stages of the decision-making process?

1. Gathering evidence: • Seek out best available research evidence • Collect contextual
information on factors important for the decision • Draw upon the expertise and knowledge of
stakeholders
2. Interpreting evidence: • Consider the strength of the research evidence based on the
dimensions of the Continuum • Explore the experience, preferences, and values of local
stakeholders lation affected by the decision
3. Applying what you learned from evidence: • Consider all three types of evidence to provide
the best opportunity to prevent violence before it occurs.
What are the characteristics of the decision-making process?

 Transparency
 Inclusiveness
 Participation Openness
 Explicitness
 Skilled Leadership and Facilitation Defined Process
6.3 Cognitive bias

What Is Cognitive Bias?
A cognitive bias is a systematic error in thinking that occurs when people are processing and
interpreting information in the world around them and affects the decisions and judgments
that they make.
Signs
Everyone exhibits cognitive bias. It might be easier to spot in others, but it is important to know
that it is something that also affects your thinking. Some signs that you might be influenced by
some type of cognitive bias include:
 Only paying attention to news stories that confirm your opinions

 Blaming outside factors when things don't go your way
 Attributing other people's success to luck, but taking personal credit for your own
accomplishments
 Assuming that everyone else shares your opinions or beliefs
 Learning a little about a topic and then assuming you know all there is to know about it
Types
Learn more about a few of the most common types of cognitive biases that can distort your
thinking.
 Actor-observer bias: This is the tendency to attribute your own actions to external
causes while attributing other people's behaviors to internal causes. For example, you
attribute your high cholesterol level to genetics while you consider others to have a high
level due to poor diet and lack of exercise.
 Anchoring bias: This is the tendency to rely too heavily on the very first piece of
information you learn. For example, if you learn the average price for a car is a certain
value, you will think any amount below that is a good deal, perhaps not searching for
better deals. You can use this bias to set the expectations of others by putting the first
information on the table for consideration.
 Attentional bias: This is the tendency to pay attention to some things while
simultaneously ignoring others. For example, when making a decision on which car to
buy, you may pay attention to the look and feel of the exterior and interior, but ignore
the safety record and gas mileage.
 Availability heuristic: This is placing greater value on information that comes to your
mind quickly. You give greater credence to this information and tend to overestimate
the probability and likelihood of similar things happening in the future.
 Confirmation bias: This is favoring information that conforms to your existing beliefs
and discounting evidence that does not conform.
 False consensus effect: This is the tendency to overestimate how much other people
agree with you.
 Functional fixedness: This is the tendency to see objects as only working in a particular
way. For example, if you don't have a hammer, you never consider that a big wrench
can also be used to drive a nail into the wall. You may think you don't need thumbtacks
because you have no corkboard on which to tack things, but not consider their other
uses. This could extend to people's functions, such as not realizing a personal assistant
has skills to be in a leadership role.
 Halo effect: Your overall impression of a person influences how you feel and think about
their character. This especially applies to physical attractiveness influencing how you
rate their other qualities.
 Misinformation effect: This is the tendency for post-event information to interfere with
the memory of the original event. It is easy to have your memory influenced by what
you hear about the event from others. Knowledge of this effect has led to a mistrust of
eyewitness information.
 Optimism bias: This bias leads you to believe that you are less likely to suffer from
misfortune and more likely to attain success than your peers.
 Self-serving bias: This is the tendency to blame external forces when bad things happen
and give yourself credit when good things happen. For example, when you win a poker
hand it is due to your skill at reading the other players and knowing the odds, while
when you lose it is due to getting dealt a poor hand.
 The Dunning-Kruger effect: This is when people who believe that they are smarter and
more capable than they really are. For example, when they can't recognize their own
incompetence.
At times, multiple biases may play a role in influencing your decisions and thinking. For
example, you might misremember an event (the misinformation effect) and assume that
everyone else shares that same memory of what happened (the false consensus effect).
Causes
If you had to think about every possible option when making a decision, it would take a lot of
time to make even the simplest choice. Because of the sheer complexity of the world around
you and the amount of information in the environment, it is necessary sometimes to rely on
some mental shortcuts that allow you to act quickly.
Cognitive biases can be caused by a number of different things, but it is these mental shortcuts,
known as heuristics, that often play a major contributing role. While they can often be
surprisingly accurate, they can also lead to errors in thinking.
Other factors that can also contribute to these biases:
 Emotions
 Individual motivations
 Limits on the mind's ability to process information
 Social pressures
Cognitive bias may also increase as people get older due to decreased cognitive flexibility.1
Impact of Cognitive Bias
Cognitive biases can lead to distorted thinking. Conspiracy theory beliefs, for example, are often
influenced by a variety of biases. But cognitive biases are not necessarily all bad. Psychologists
believe that many of these biases serve an adaptive purpose: They allow us to reach decisions
quickly. This can be vital if we are facing a dangerous or threatening situation.
Tips for Overcoming Cognitive Bias
Research suggests that cognitive training can help minimize cognitive biases in thinking.
Some things that you can do to help overcome biases that might influence your thinking and
decision-making include:
• Being aware of bias: Consider how biases might influence your thinking. In one study,
researchers provided feedback and information that help participants understand these
biases and how they influence decisions.
• Considering the factors that influence your decisions: Are there factors such as
overconfidence or self-interest at play? Thinking about the influences on your decisions
may help you make better choices.
 Challenging your biases: If you notice that there are factors influencing your choices,
focus on actively challenging your biases. What are some factors you have missed? Are
you giving too much weight to certain factors? Are you ignoring relevant information
because it doesn't support your view? Thinking about these things and challenging your
biases can make you a more critical thinker.
Reducing cognitive bias may also be beneficial in the treatment of some mental health
conditions. Cognitive bias modification therapy (CBMT) is a treatment approach based on
processes that are designed to reduce cognitive bias. This form of therapy has been used to
help treat addictions, depression, and anxiety.
6.3 Individual differences in relation to decision making

Human decisions are strongly influenced by past experience or by the subjective values attributed to
available choice options. Although decision processes show some common trends across individuals,
they also vary considerably between individuals.
“Individual differences” is a broad term, covering any variable that differs between people,
from decision style to cognitive ability to personality. The most common categories of
individual difference measures used in judgment and decision-making include: decision-making
measures, risk attitude measures, cognitive ability measures, motivation measures, personality
inventories, personality construct measures, and miscellaneous measures.
6.5 Decision making tools

Top Decision-Making Techniques & Tools
5. Marginal Analysis
Marginal analysis weighs the benefits of an input or activity against the costs. This type of
analysis helps business leaders determine whether and activity or input is providing the
maximum return-on-investment (ROI). Marginal analysis is an effective tool for decision-making
because it takes preferences, resources, and informational constraints into account, so
managers can make more optimal decisions based on this information.
To conduct a marginal analysis, you need to change a variable, such as the quantity of an input
you use, or the volume of output you produce. Once you’ve identified that variable, determine
what the increase in total benefits would be if one more unit of the control variable were
added. This is considered the marginal benefit of the added unit. Likewise, the marginal cost of
the added good should also be calculated. The marginal cost is – you guessed it – the increase
in total cost if one more unit of the control variable were added. If the marginal benefit
outweighs the marginal cost, then there is a “net benefit” and the marginal unit of the variable
should be added.
6. SWOT Diagram
When you are planning to make a significant change in your business, SWOT diagrams can help
you break down the situation into four distinct quadrants:

 Strengths: What does your company do better than its competitors? Think of both
internal and external strengths that you possess.
 Weaknesses: Where can your company improve? Try to take a neutral approach and
consider what factors may be hurting your business.
 Opportunities: Look at your strengths and think of how you can leverage them to create
new openings for your business. Also consider how eliminating a specific weakness could
open you up to a new opportunity.
 Threats: Determine what challenges stand in the way of achieving your goals. Identify
the primary threats to your organization.
A SWOT Analysis can help you identify the forces that influence a strategy, action, or initiative.
This information can then be used to guide you in the right direction and support your business
decisions. To get the full picture, it’s essential to take multiple viewpoints into account. When
you enlist the help of other team members and stakeholders, it is easier to spot trends,
patterns, and connections between the quadrants. Taking a collaborative approach can also
offer deeper insight into potential opportunities and threats you may not have been able to
identify alone.
7. Decision Matrix
When you are dealing with multiple choices and variables, a decision matrix can bring clarity to
the disarray. A decision matrix is similar to a pros/cons list, but it allows you to place a level of
importance on each factor. That way, you can more accurately weigh the different options
against each other.
How to Create a Decision Matrix:
 List your decision alternatives as rows
 List relevant factors as columns
 Establish a consistent scale to assess the value of each combination of alternatives and
factors
 Determine how important each factor is towards making your final decision and assign
weights accordingly
 Multiply your original ratings by the weighted rankings
 Add up the factors under each decision alternative

 The option that scores the highest wins
8. Pareto Analysis
The Pareto Principle helps in identifying changes that will be the most effective for your
business. The principle is named after economist Vilfredo Pareto, who found that an 80/20
distribution occurs regularly in the world. In other words, 20% of factors frequently contribute
to 80% of the organization’s growth.
An example of this principle applying to business management would be 80% of sales coming
from 20% of your customers. A business can leverage the Pareto Principle by identifying the
characteristics of the top 20% of their customers and finding more customers like them. When
you can identify what small changes will make the largest impact, you are able to prioritize the
decisions that have the highest level of influence. This allows managers to dedicate their energy
and resources on what will actually move the needle for their business.
9. Cause and Effect or Ishikawa Diagram

Cause and Effect or Ishikawa Diagram shows the causes of a particular event. It can be used for
product design and to check its quality to identify possible factors causing an overall effect. You
can group causes into categories to find sources of variation.
10. Decision Making Diagrams
What they do for you: They help you see all the alternatives and the associated costs.
The decision making diagram allows you to map out all the possible alternatives to each
decision, their costs and even chances of success or failure.
11. Vroom-Yetton-Jago Decision Making Model[1]
What it does for you: Helps you figure out the best method to make a decision and who to
involve.
Vroom, Yetton, and Jago created a decision model to help you decide how you were going to
make a decision. Should you make a decision individually or assemble the group and make a
decision together? These are the questions you should ask yourself, according to Victor Vroom
and his compatriots:
1. Is the quality of the decision important?

2. Is team commitment important for the decision?
3. Do you have enough information to make the decision on your own?
4. Is the problem well-structured?
5. Would the team support you if you made the decision alone?
6. Does the team share the organizational goals?
7. Is conflict among the team over the decision likely?
Note the significance of the annotations on the chart:
 Autocratic (A1): The leader makes the decision by themself using existing information
without any communication with the team.
 Autocratic (A2): The leader consults with team members to get information, but makes
the decision by himself or herself without informing the group.
 Consultative (C1): The leader consults the team members to get their opinion about the
situation, but he or she makes the decision for themselves.
 Consultative (C2): The leader consults the team members seeking opinions and
suggestions, but he or she makes the decision for himself or herself. In this type of
leadership style, the leader is open to suggestions and ideas.
 Collaborative (G): The leader shares the decision making process with team members.
He or she supports the team in making the decision and finding an answer that everyone
agrees on.
The model doesn’t allow for the personality characteristics of the leader, allow for large group
use, or provide questions that are precise enough. That said, it’s very flexible and allows the
leader the ability to make a good decision in a variety of different situations. It can also be
shared and duplicated.
6.6 Board team decision making: Key factors and tools

The board is the decision making body of the cooperative and the directors’ ability to work together as a
team is essential to the success of the cooperative. Different decisions need different levels of
cooperation among the board because some decisions require a majority vote, some only need
consensus, and some decisions can be delegated to committees. However, generally decisions can be
sorted into three different categories: strategic decisions, tactical decisions, and operational decisions.
Team decision making is a type of participatory process in which multiple individuals acting
collectively, analyze problems or situations, consider and evaluate alternative courses of action,
and select from among the alternatives a solution or solutions.
Board team decision-making should be distinguished from the concepts of teams, teamwork,
and self-managed teams.
There are five general guidelines that help in team decision making. These guidelines include the
following:
a. Different points of view are considered useful and resolved constructively.
b. Team members challenge suggestions they believe are not founded on facts or logic, but
they avoid arguing just to have their way.
c. Poor solutions or alternatives are not supported for the sake of peace and harmony.
d. Each team member understands the value of time and works to eliminate extraneous or
repetitious discussions.
e. Differences of opinion are explored and resolved; consensus is reached rather than
voting on or avoiding the issues.
Using Decision Making Tools
If a large amount of information is available to the board and they must sort through it all to make their
decision. It may be necessary to integrate decision making tools into your board room. Such tools
include: consultants, pro-con charts, T-Charts, PMI, matrix assessment charts, Buriden’s Donkey
method, measuring criteria, or a weighted decision table.
1. Outside Consultants
Occasionally the issue at hand will fall outside the technology, expertise, or activity of the company and
additional information is needed that is not readily available from traditional sources. Other times the
board may face an issue that is too personal and needs impartiality and objectivity. The board may have
tried and failed to address a certain issue on several occasions. It is times such as this that an outside
consultant may provide the resources the board needs to make an informed and unbiased decision.
Consultants are a tool for better decisions, not easier decisions. No matter how hard the issue may be
the board must make the ultimate decision.
What the consultant does is identify the options that may not have been previously identified. The
board can then use this additional information in making their decision. Consultants should be chosen
for their expertise, training, and background. Their style and suggestions should fit your culture because
if they do not they will not be accepted by the board or the members anyway. As with any other person
hired references should be thoroughly checked and former clients contacted.
2. Pro-Con Chart
The pro-con chart is a better-known kind of decision making tool that is widely used by various
organizations. It insures that all advantages and disadvantages are discussed. It also encourages the
board to consider both sides of an option before committing themselves to a decision. A team building
benefit of a pro-con chart is that it allows the board to work as collaborators summarizing information
rather than competitive debaters.
3. T-Chart
The tee chart is a version of the pro-con chart. The TChart allows the cooperative to take two different
options and compare the pros and cons of each rather than looking at the pros and cons of each option
individually.
4. PMI
PMI is another version of the pro-con chart that takes the decision making process one step further than
the t-chart. It splits each of the two options into plus, minus, and interesting rather than simply pro and
con. The plus and minus are the equivalent of pro and con, but the interesting category offers another
dimension to the project. The interesting category can include consequences, areas of curiosity or
uncertainty, neutral attributes, or exploratory ideas.
5. Decision Matrix
A Decision matrix can be used to compare various options. Decision matrixes are used by a wide variety
of major organizations. The decision matrix is taught as a part of Battle Planning at the U.S. Army
Command and General Staff College. A decision matrix separates complex decisions into components
and clarifies the trade-offs. All of the alternatives are placed in a row, and then all of the criteria are
placed in a column. Each alternative is ranked as either low or high in each criteria category allowing
multiple categories to be covered in an efficient manner.
6. Buriden’s Donkey
There is an old fable about a donkey that was placed between two equally nice bales of hay. This was an
especially indecisive donkey that could not choose which bale to turn to and eat because they were both
so attractive. This donkey stood there so long that he starved to death of indecision. This is the story
behind the Buriden’s Donkey method of decision making. It is a method that should be used when the
cooperative has to make a decision between two equal alternatives. If both choices are equally
attractive to the cooperative, the board should simply select one and move on. If the alternatives are
truly equal, either choice is the right one.
7. Measured Criteria
The measured criteria method is good for a board that cannot agree. Before the alternatives are
presented the board must list the criteria that a proposed plan must meet and assign a number to that
criteria on a scale such as one to ten or even one to one hundred with one being the least important and
one hundred being the most important. Then when the alternatives are discussed there is a base set of
criteria that they all must meet. Each alternative is compared with the criteria and is ranked by the
values assigned by the criteria. There is little argument that can result because the board members have
set and agreed on the criteria and the scale.
8. Weighted Decision Table
This is a slightly more sophisticated version of the measured criteria technique. In this decision tool a
table is set up with each criteria given a weight depending on its importance in the decision and each
alternative given a ranking for that criterion. Here the points assigned to the alternative are added to
the importance of the criteria to give a total number. This number can then be used to determine which
alternative is the most useful.
CHAPTER 7
7.0 Stakeholder Conversations
Stakeholder dialogues are a method for managing change processes through cooperation. Their
distinguishing feature is that they involve the stakeholders relevant to implementing a
measure. Stakeholder dialogues bring different perspectives together, and enable the
stakeholders to jointly seek solutions that are not partial and that do not ignore difficulties. In
fact, the differences and conflicts existing between stakeholders mean that stakeholder
dialogues possess major potential for identifying innovative solutions for sustainable
development. The pooling of funds and resources leads to greater efficiency.
This means that in complex situations, the stakeholder dialogue approach can provide a
constructive way of achieving planned objectives by creating scope for fresh options that are
viable for all concerned. The joint nature of the process increases not only the likelihood of a
consensus, but also the sustainability of the results. When stakeholders from various sectors
join forces, they bring their different experiences and expertise to bear in pursuit of shared
objectives. Moreover, exchanging perspectives in stakeholder dialogues can also promote
synergy effects within a sector.
7.1 Developing dialogue over debate

Opportunities and reasons for using stakeholder dialogues over debates

Stakeholder dialogues make it possible to take different perspectives, standpoints and interests
into account during planning and implementation processes. In so doing, they foster new and
innovative forms of communication and cooperation and integrate diverse competencies.
This form of cooperation offers a number of benefits since it contributes to more efficient and
sustainable change processes:
 Expertise is pooled. Challenges such as growing poverty, climate change, HIV/AIDS,

corruption and globalization call for the combined expertise of various actors.
Cooperation within stakeholder dialogues promotes more efficient use of funds and
resources, since these are jointly deployed.
 The results achieved in cooperation with others are often more solid, viable and
sustainable than individual solutions and are therefore more likely to be accepted by
participating stakeholders and by those around them. This enhances the acceptance and
reputation of the cooperation arrangement.
 Stakeholder dialogues increase the capacity of complex systems to find solutions. The
interplay of different competencies and joint design processes boosts learning ability as
compared with activities in just one institution or sector.
 The quality and credibility of opinion-forming processes grows when manifold
viewpoints are integrated and interests are balanced. Being familiar with different
arguments prevents people from adopting rigid positions. However, it also makes it
more difficult to put decisions into practice.
 It is easier to implement jointly agreed strategies if they have been developed through
an equitable and transparent dialogue. This obviates the need to first convince
stakeholders of the adopted decisions; they immediately identify with the results that
have been worked out together.
 Stakeholder dialogues increase actors’ willingness to commit themselves, because the
participating actors can help shape processes. They feel jointly responsible and are
therefore interested in shared success, and take action to multiply the results.
 Stakeholder dialogues dispel social rigidity and conflicts. Active participation in
stakeholder dialogues promotes joint exploration of options for the future. This
broadens the prospects of participants and opens up new options for action for
everyone concerned.
Behaviors That Support Dialogue

 Suspension of judgment while listening and speaking. When we listen and suspend
judgment, we open the door to expanded understanding. When we speak without
judgment, we open the door for others to listen to us.
 Respect for differences. Our respect is grounded in the belief that everyone has an
essential contribution to make and is to be honored for the perspective which only they
can bring. Role and status suspension. Again, in dialogue, all participants and their
contributions are absolutely essential to developing an integrated whole view. No one
perspective is more important than any other. Dialogue is about power with, versus
power over or under.
 Balancing inquiry and advocacy. In dialogue we inquire to discover and understand one
another’s perspectives and ideas, and we advocate to offer our own for consideration.
The intention is to bring forth and make visible assumptions and relationships, and to
gain new insight and understanding. We often tend to advocate to convince others of
our positions. Therefore, a good place to start with this guideline is to practice bringing
more inquiry into the conversation.
 Focus on learning. Our intention is to learn from each other, to expand our view and
understanding, not to evaluate and determine who has the “best” view. When we are
focused on learning, we tend to ask more questions, try new things. We are willing to
disclose our thinking so that we can see both what is working for us and what we might
want to change. We want to hear from all parties so that we can gain the advantage of
differing perspectives.
7.2 Building trust through adult/adult conversations
There are just a few elemental forces that hold our world together. The one that’s the glue of
society is called trust. Its presence cements relationships by allowing people to live and work
together, feel safe and belong to a group. Trust in a leader allows organizations and
communities to flourish, while the absence of trust can cause fragmentation, conflict and even
war. That’s why we need to trust our leaders, our family members, our friends and our co-
workers, albeit in different ways.
Ways of Building Trust
1. Be true to your word and follow through with your actions
The point of building trust is for others to believe what you say. Keep in mind, however, that
building trust requires not only keeping the promises you make but also not making promises
you’re unable to keep.
Keeping your word shows others what you expect from them, and in turn, they’ll be more likely
to treat you with respect, developing further trust in the process.
2. Learn how to communicate effectively with others
Poor communication is a major reason why relationships break down. Good communication
includes being clear about what you have or have not committed to and what has been agreed
upon.
Building trust is not without risk. It involves allowing both you and others taking risks to prove
trustworthiness. To navigate this, effective communication is key. Without it, you may find the
messages you’ve intended to send aren’t the messages that are received.
3. Remind yourself that it takes time to build and earn trust
Building trust is a daily commitment. Don’t make the mistake of expecting too much too soon.
In order to build trust, first take small steps and take on small commitments and then, as trust
grows, you will be more at ease with making and accepting bigger commitments. Put trust in,
and you will generally get trust in return.
4. Take time to make decisions and think before acting too quickly
Only make commitments that you are happy to agree to. Have the courage to say “no,” even
when it disappoints someone. If you agree to something and can’t follow through, everyone
involved is worse off.
Be clear about what you have on your plate, and keep track of your commitments. Being
organized is a necessary part of building trust with family, friends, and colleagues. It enables
you to make a clear decision as to whether to agree to requests of your time and energy.
5. Value the relationships that you have—and don’t take them for granted
Trust often results from consistency. We tend to have the most trust in people who are there
for us consistently through good times and bad. Regularly showing someone that you’re there
for them is an effective way to build trust.
6. Develop your team skills and participate openly
When you take an active role in a team and make contributions, people are more likely to
respect and trust you. It’s also imperative when building trust in a team to show your
willingness to trust others.
Being open and willing to make contributions and to engage demonstrates this. In other words,
take what others say into consideration, show that you are listening actively, suggest your
thoughts and feedback in a respectful way, and demonstrate that you are willing to be part of
the team.
7. Always be honest
The message you convey should always, always be the truth. If you are caught telling a lie, no
matter how small, your trustworthiness will be diminished.
8. Help people whenever you can
Helping another person, even if it provides no benefit to you, builds trust. Authentic kindness
helps to build trust.
9. Don’t hide your feelings
Being open about your emotions is often an effective way to build trust. Furthermore, if people
know that you care, they are more likely to trust you.
Emotional intelligence plays a role in building trust. Acknowledging your feelings, learning the
lessons that prevail, and taking productive action means that you won’t deny reality—this is the
key to building trust.
10. Don’t always self-promote
Acknowledgment and appreciation play an important role in building trust and maintaining
good relationships. Recognizing and appreciating the efforts of others shows your talent
for leadership and teamwork and increases the trust others have in you.
On the other hand, if people don’t demonstrate appreciation for a good deed, they appear
selfish. Selfishness destroys trust.
11. Always do what you believe to be right
Doing something purely for approval means sacrificing your own values and beliefs. This
decreases trust in yourself, your values, and your beliefs. Always doing what you believe is
right, even when others disagree, will lead others to respect your honesty.
Interestingly, when building trust, you must be willing to upset others on occasion. People tend
not to trust those who simply say whatever they think others want to hear.
12. Admit your mistakes
When you attempt to hide your mistakes, people know that you are being dishonest. By being
open, you show your vulnerable side, and this helps build trust with other people.
This is because they perceive you to be more like them—everyone makes mistakes. If you
pretend that you never make mistakes, you’ll make it difficult for others to trust you because
you have created an unnecessary difference between the two of you. When all that a person
sees is the “perfection” you project, they likely won’t trust you.
7.3 The systems inside the board

On the first tier is the board of governors or directors: these individuals are elected by the
shareholders of the corporation.
On the second tier is the upper management: these individuals are hired by the board of
directors. Let's begin by taking a closer look at the board of directors and what its members do.
Please note that this corporate structure is what's common in the U.S.; in other countries,
corporate structure might be slightly different.
Understanding the Basics of Corporate Structure

Board of Directors
Elected by the shareholders, the board of directors is made up of two types of representatives.
The first type involves inside directors chosen from within the company. This can be a CEO,
CFO, manager, or any other person who works for the company daily.
The other type of representative encompasses outside directors, chosen externally and
considered independent of the company. The role of the board is to monitor a corporation's
management team, acting as an advocate for stockholders. In essence, the board of directors
tries to make sure that shareholders' interests are well served.
Board members can be divided into three categories:
Chair: Technically the leader of the corporation, the board chair is responsible for running the
board smoothly and effectively. Their duties typically include maintaining strong
communication with the chief executive officer and high-level executives, formulating the
company's business strategy, representing management and the board to the general public
and shareholders, and maintaining corporate integrity. The chair is elected from the board of
directors.
Inside Directors: These directors are responsible for approving high-level budgets prepared by
upper management, implementing and monitoring business strategy, and approving core
corporate initiatives and projects. Inside directors are either shareholders or high-level
managers from within the company.
Inside directors help provide internal perspectives for other board members. These individuals
are also referred to as executive directors if they are part of the company's management team.
Outside Directors: While having the same responsibilities as the inside directors in determining
strategic direction and corporate policy, outside directors are different in that they are not
directly part of the management team. The purpose of having outside directors is to provide
unbiased perspectives on issues brought to the board.
Management Team
As the other tier of the company, the management team is directly responsible for the
company's day-to-day operations and profitability.
Chief Executive Officer (CEO): As the top manager, the CEO is typically responsible for the
corporation's entire operations and reports directly to the chair and the board of directors. It is
the CEO's responsibility to implement board decisions and initiatives, as well as to maintain the
smooth operation of the firm with senior management's assistance.
Often, the CEO will also be designated as the company's president and therefore be one of the
inside directors on the board (if not the chair). However, it is highly suggested that a company's
CEO should not also be the company's chair to ensure the chair's independence and clear lines
of authority.
Chief Operations Officer (COO): Responsible for the corporation's operations, the COO looks
after issues related to marketing, sales, production, and personnel. Often more hands-on than
the CEO, the COO looks after day-to-day activities while providing feedback to the CEO. The
COO is often referred to as a senior vice president.
Chief Financial Officer (CFO): Also reporting directly to the CEO, the CFO is responsible for
analyzing and reviewing financial data, reporting financial performance, preparing budgets, and
monitoring expenditures and costs.
The CFO is required to present this information to the board of directors at regular intervals
and provide it to shareholders and regulatory bodies such as the Securities and Exchange
Commission (SEC). Also usually referred to as a senior vice president, the CFO routinely checks
the corporation's financial health and integrity.
7.4 The systems outside the board
An outside director is a member of a company's board of directors who is not an employee or

stakeholder in the company. Outside directors are paid an annual retainer fee in the form of
cash, benefits and/or stock options. Corporate governance standards require public companies
to have a certain number or percentage of outside directors on their boards. In theory outside
directors are more likely to provide unbiased opinions.
An outside director is also referred to as a "non-executive director."
BREAKING DOWN Outside Director

In theory, outside directors are advantageous for the company because they have less conflict
of interest and may see the big picture differently than insiders. The downside of outside
directors is that since they are less involved with the companies they represent, they may have
less information upon which to base decisions and fewer incentives to perform. Also, outside
directors can face out-of-pocket liability if a judgment or settlement occurs that is not
completely covered by the company or its insurance. This occurred in class-action suits against
Enron and WorldCom.
Board members with direct ties to the company are called "inside directors." These can be from
the ranks of a company’s senior officers or executives, as well as any person or entity that
beneficially owns more than 10% of a company's voting shares.
7.5 Emotional intelligence as a core board competence

According to Daniel Goleman, an American psychologist who popularized the concept of EI, its
definition is: “the ability to understand and manage your own emotions, and those of the
people around you. People with a high degree of emotional intelligence know what they’re
feeling, what their emotions mean, and how these emotions can affect other people.”
Goleman also organized Emotional Intelligence into five key elements:
1. Self-awareness
2. Self-regulation
3. Motivation
4. Empathy
5. Social skills
Using this understanding of emotional intelligence, I am going to apply these five elements to
explain how leading and serving corporate directors can be more emotionally intelligent in the
boardroom.
1. Self-Awareness
By putting self-awareness into action, there will be sometimes where you already know the
answer to a discussion, however exercising this skill means being conscious of your biases,
stepping back and considering the subject matter with neutrality none the less.
2. Self-Regulation
Self-regulation is concerned with how you manage yourself, your emotions, your inner
resources, and your abilities. It also includes your ability to manage your impulses. Applying this
facet of EI to your boardroom behaviour means controlling your emotions and how you decide
to express them. If you find that you are overwhelmed by your emotions on a topic or matter
that you are passionate about, instead of impulsively speaking out on your feelings, try
remaining silent for 5 seconds.
Exercising self-regulation is that rather than acting on impulse, it’s far more effective to observe
others’ behaviours and find a different time/place to have discussions that concern a difference
of opinion.
3. Motivation
Self-motivation encompasses our personal drive to grow and achieve. It concerns our
commitment to our goals, our initiative, our readiness to act on opportunities, our optimism,
and our resilience. Motivation in the boardroom can be described as your commitment to lean
in.
4. Empathy
When you listen with empathy to another person, you give that person psychological air.” —
Stephen R. Covey
In an article on emotional intelligence authored by Korn Ferry, empathy was described “the
ability to sense others’ feelings and how they see things. You take an active interest in their
concerns. You pick up cues to what’s being felt and thought. With empathy, you sense
unspoken emotions. You listen attentively to understand the other person’s point of view, the
terms in which they think about what’s going on.”
This emotional intelligence component is a critical trait in being a board member. I find the best
way to demonstrate empathy at the boardroom table is to attend meetings in person since it is
very challenging to evoke empathy on a conference call. In-person, you can observe the other
person’s body language, as well as other critical non-verbal cues that enable you to get the full
picture of what the speaker is trying to convey. Understanding the other person’s full view is
key to being able to share and take an interest in their perspective, follow the source of their
emotional position on a topic, and ultimately make a more informed decision.
5. Social Skills
When dealing with people, remember you are not dealing with creatures of logic, but with
creatures of emotion.” — Dale Carnegie
Social skill, the ability to manage and influence others’ emotions effectively, is the final piece of
the emotional intelligence puzzle, which brings together all of the other components. It is a
composite of competence in communication, persuasion, building rapport, conflict
management, change management, teamwork, and leadership. At the boardroom table, this
means being able to establish positive relationships with other board members, gaining their
trust, and knowing how to balance when to be assertive with when to be a team player.
Emotional intelligence in the boardroom is all about minding your Ps and Qs. However, while
easily overlooked, this carries with it the payoff of a more cohesive board that effectively makes
better business decisions.
7.6 Managing conflict

Project managers encounter conflict regularly over schedules, project priorities, human
resources, requirements, and technical opinions, to name a few. Individuals, groups, and
organizations have different opinions, sometimes strong opinions. These conflicts may surface
internally, as well as externally.
Ways to Respond to Stakeholder Conflict

Whenever you face strong differences in opinions, determine how you will manage the conflict.
Here are common conflict management techniques:
 Recognize that conflict is not always a bad thing. Conflict can be an opportunity to
enhance clarity and alignment. Say your team is resource-constrained and your key
stakeholders disagree on which features to build first. This can be a great opportunity to
go back to the drawing board and evaluate and rank features to make sure the ones
with the most business value get implemented first.
 Pay extra attention to communication. Building lines of communication becomes more
critical in the era of remote work. Information exchange that used to happen organically
(“water-cooler” conversations, team lunches, informal touch-points) now have to be
engineered using communication technology. Invite your team members to have coffee
over Zoom or schedule an informal touch-point using MS Teams.
 Keep the project team on the same page. A Single Source of Truth for the team to lean
on is a great way to reduce confusion and potential conflict. Project management
software with real time reporting can be a great investment. Tools like JIRA and
SharePoint can provide virtual space where the team members can retrieve necessary
information to stay informed.
 Try short interactive meetings rather than lengthy project debriefs. More interactive
methods like SCRUMS and STAND-UPs resolve misunderstanding between technical and
business teams. Shorter, more frequent meetings provide teams an open forum to
remove roadblocks and collaborate.
 Focus on belonging and inclusion to create trust and respect within the team. As project
managers, we often work with multi-disciplinary teams and have to be aware of
different layers of diversity, including organizational and cultural. Aligning your team
around common project goals and team values will build a stronger synergy and break
up the silos.
 Withdrawing. Some project managers hate conflict and avoid it as much as possible.
Withdrawing from the conflict does not make it go away. The issues will surely surface
later in the project and will likely cause more damage than if addressed early.
 Smoothing. Other project managers are as smooth as silk. These project managers
emphasize the areas of agreement and fail to address the differences of opinion, thus,
kicking the can down the road.
 Compromising. Another method of dealing with conflict is to search for solutions where
the stakeholders will compromise.
 Forcing. Project managers may be given authority and power. These individuals are
prone to "lay down the law." Team members may comply, but typically these same
members find a way to undermine the decisions later.
 Problem-Solving. Turn the difference in opinions into a problem to be solved by the
stakeholders through careful examination of the alternatives.
7.7 Stakeholder communication
A stakeholder is an individual, or group of people, that all share a common interest in a project
or organisation, and share an interest in its outcomes. A stakeholder is anybody that affects or
is affected by a project or organisation. Each stakeholder has different interests and requests
and should be communicated with on an individual level that suits them.
Stakeholders are important because they provide your project and business with support and
input (from a business perspective and from a financial perspective). They broaden the range of
people involved in your project and have a collective best interest for the project and/or
organisation.
One of the main reasons a project can fail is because the stakeholder management has been
mismanaged. Knowing how to communicate with stakeholders is an important part
of stakeholder management.
Stakeholder communication is one of the project manager’s most important jobs because the
stakeholders define the success of a project. The stakeholders must be identified,
actively managed, and communicated with to ensure their buy-in to the final product, or you
might find yourself on the express to project purgatory.
Stakeholder communication contains 3 Components:
1. Stakeholder Identification
2. Stakeholder Analysis
3. Stakeholder Management
Benefits of Stakeholder Communication
 Better Understanding Your Goals

Stakeholders must understand what you are trying to achieve. Communication with
employees and labor unions, for example, builds an understanding of your goals and the
benefits to the audience if they help you achieve those goals. Communication with investors
and shareholders helps you attract the funding you need for important investments.
If you plan changes in your business that will have an impact on the local community,
communication with local government agencies, pressure groups and the community will
build an understanding of your aims.
 Creating Influence and Positive Relationships
Communication helps you to build positive relationships with people and organizations, such
as the media or special interest groups, who influence other stakeholders. Press releases,
interviews with journalists and meetings with interest groups build understanding and ensure
that communications from those groups reflect your point of view.
 Building a Dialogue
Communication with stakeholders builds dialogue. By setting up forums or inviting other

forms of feedback, you can gain a better understanding of your stakeholders’ interests and
attitudes so that you can fine tune your communications. Using forums or other social media
to communicate enables you to respond to critical comments or correct any
misunderstandings. Communicating through social media can also spread your message
further as stakeholders share attitudes with others.
 Influencing Sources of Power
Your communication program must focus on the stakeholders who have the greatest
influence on your success. If government agencies or industry regulators are considering
legislation that could cause problems for your business, for example, concentrating your
communications on those groups ensures that they take your point of view into account.
 Stronger Stakeholder Relationships
Communicating regularly with stakeholders and creating a positive understanding can help
you build effective long-term relationships with key groups. A strong relationship brings a
range of benefits. Communicating with customers can put you in a strong position when
customers are making purchasing decisions.
Supplier communications can help you to build a supply chain that is aligned with your needs.
Shareholder communications can give you easier access to funds.
CHAPTER 8
8.0 Culture in the Boardroom
What is culture?
Culture is the characteristics and knowledge of a particular group of people, encompassing
language, religion, cuisine, social habits, music and arts.
Definition: Culture is a whole system of knowledge, beliefs, ideas, values, powers, laws, rules
and meanings that are shared by the members of a society, and together form the
foundation for the way they live.
8.1 Governance and culture

Culture lies at the heart of governance. It informs a group’s rules and values about what
is the ‘right way’ of exercising power and governing —and what is the ‘wrong way’.
A particular culture is acquired and transmitted by people over the generations, through
written means and oral traditions, participation in group activities and the socialisation
of young children.
A shared culture enables people to communicate with each other, behave in an accepted
way and do things together towards common ends.
How Do Governance And Culture Interact?
Ideas about governance are different from one culture to the next.
Culture can change over time—sometimes slowly, sometimes quickly—through people’s

own choice or design, or because change is imposed from the outside.
As a group’s culture changes, so too may its governance arrangements. And occasionally,
making big changes to governance can cause changes in people’s culture.
Problems can quickly arise when very different systems of governance interact, with their
competing values and contradictory expectations about what is ‘the right’ way of
governing.
Sometimes changes to governance are welcomed and supported by the members of a

group or nation; for example, when the changes come from within the group itself and
are viewed as being culturally legitimate.
Sometimes the changes are seen to lack cultural legitimacy —particularly if they are
imposed from the outside—in which case they are unlikely to be accepted or followed by
group members.
8.2 Defining board culture

A board’s culture is defined by the unwritten rules that influence directors’ interactions and
decisions. These include the mindsets, hidden assumptions, group norms, beliefs, values and
artifacts (such as the board agenda) that influence the style of director discussions, the quality
of engagement and trust among directors, and how the board makes decisions.
Board culture also is influenced by the style of the board chair and/or the CEO. Boards can vary
by region; in some national or regional cultures, for example, a more direct style is well-
accepted, but in others, a more “diplomatic” approach is expected in the boardroom. Absent a
dramatic change to composition — from a merger or addition of activist-backed directors, for
example — board culture tends to evolve slowly because boards meet and interact
intermittently.
8.2 Board culture dynamics

Board culture has a significant influence on the way your board carries out its work and shapes
your board’s performance.
Whether you know it or not, your board has an internal culture. How your board members
communicate with each other, work as a team, and make decisions all define the culture of
your board. And the nature of that board culture has a significant influence on the way your
board carries out its work and shapes your board’s performance.
While there are many elements of a strong board culture, one of the most important goals is to
establish what BoardSource calls a “culture of inquiry.” This means that a board fully enlists
differences of opinion, unique vantage points and areas of expertise, and deep, informed
questions to cultivate strong collective wisdom. By doing so, boards with this level of inquiry
engage and energize their members, use meeting time productively, own and support their
decisions, embrace ongoing board development and growth, and ultimately make better
decisions. Without a culture of inquiry, the same board can risk group-think, inertia,
disengagement, and poor decision making.
Characteristics of a strong board culture include
 A board fully enlists differences of opinion, unique vantage points and areas of
expertise, and deep, informed questions to cultivate strong collective wisdom.
By doing so, boards with this level of inquiry engage and energize their members, use meeting
time productively, own and support their decisions, embrace ongoing board development and
growth, and ultimately make better decisions.
 Without a culture of inquiry, the same board can risk group-think, inertia,
disengagement, and poor decision making.
 a healthy and respectful partnership between the board and the executive
 trust and candor between board members
 thoughtful and productive resolution of issues or disagreements
 a willingness to address poor board behavior that is negatively impacting the board
A strong and positive board culture doesn’t happen on its own. It is cultivated and managed
over time.
 Power Culture
 Ethical Culture
In addition to the structures, policies, and processes that provide checks and balances, effective
governance includes an organization’s ethics, values, and corporate culture. Ethics problems can arise at
any level; however, most corporate efforts at addressing ethical issues have seemed to involve
developing comprehensive programs for the entire organization, with limited attention being explicitly
paid to those at the top.
Ethical behavior means acting according to what society, individuals, and businesses generally accept as
good values. Good values include traits like honesty, dignity, diversity, fairness, and respect for
individual rights, to name a few. Integrity drives ethical behavior naturally. That’s why the overall
company culture is the most important influence on ethical conduct at every corporation level.
A corporation’s culture starts at the top with the board of directors, CEO or executive director, and
other top managers. Everyone else within the corporation gets a sense of the corporation’s values
through what they say and what the corporation has to say through its media, advertising, employee
communications, and other messages.
The values within a corporate culture significantly influence the relationships between the corporation
and its vendors, customers, and employees. Good ethics means that people with the corporation are
honest, fair, and respectful toward everyone they deal with inside and outside the company. When
ethical behavior is genuine, it sparks ethical conduct in its employees.
 Performance Culture
“A highly charged vision is the prerequisite of a high-performance culture”

A unified team with a shared vision is the prerequisite of any high-performance culture. Other
essentials of high-performance cultures are an atmosphere full of positive emotions, passion
and commitment.
“Mistrust always comes from a lack of communication”
One of the key red flags that a board is in trouble is mistrust. Mistrust is often the result of poor
and intransparent communication. An overreliance on emails combined with a lack of face to
face interactions and physical meetings may lead to feelings of isolation and mistrust. Channels
need to exist to help board members develop a sense of trust in one another.
“Three important actions that make the difference”
Ralph points to three actions that he has observed in winning teams that make all the
difference:
 Strong feedback culture

 Strong review culture
 Strong sense of self-awareness amongst the team
How to influence board culture
 Creating a Healthy Board Culture

Make a decision about the type of board that is desired
This is a difficult task because there are so many factors that contribute to an effective board.
No board wants to become so rigidly defined as to lose necessary flexibility.
• raising awareness of values

• chairman role modelling
• Ensuring directors’ attitudes are in line with company goals
• Encouraging board diversity
8.3 Application of Schein’s Three Levels of Culture

model
Schein - Levels of Organizational Culture
Schein described three levels of organizational culture:
Basic underlying assumptions
These are the foundations on which culture is based. Handy described this as "the ways things
get done around here". The underlying assumptions are often difficult to describe, are
intangible and are often only really understood by people who've become accustomed to the
way the organization works.
Imagine you are new to an organization and you find it is taking time to "fit in". That's because
you haven't yet got to grips with these underlying assumptions that those in the organization
who've been there a while seem to take for granted.
Underlying assumptions are usually invisible. You won't find them written down anywhere.
People may not want to talk about them. But they exist and are often powerful.
Espoused Values
These are the public statements about what the organisational values are about. Many
organisations now communicate what their "core values" are - the espoused values by which
the organisation conducts its business.
Artifacts
Artifacts are the visible signs of an organisation's culture. They are visible; they can be seen,
heard and felt. For example, what the dress code is; what kind of offices and layout is used;
how employees address each other and how they communicate internally and externally.
8.4 Company Culture

Company culture can be defined as a set of shared values, goals, attitudes and practices that
characterize an organization.
Company culture can more simply be described as the shared ethos of an organization. It’s the
way people feel about the work they do, the values they believe in, where they see the
company going and what they’re doing to get it there. Collectively, these traits represent the
personality — or culture — of an organization.
A company’s culture influences results from top to bottom. We’ll dive into some specific
numbers that prove this statement in a moment, but first, consider the following stat:
Company culture is not:

Your core values - Core values are certainly part of your culture, but until you put them into
action they’re just words on paper. In fact, core values can negatively impact culture if they
aren’t adhered to. Employees will see this as the company paying lip service and failing to live
up to its own standards.
Your perks and benefits - Ping pong tables and beer on tap can be great, assuming they
represent what your employees really care about, but perks and benefits are not a substitute
for strong company culture.
The yardstick by which all candidates should be measured - Hiring for cultural fit has become a
hot topic over the past few years, but we’re already seeing companies shift away from this line
of thought.
What is company culture then?

A successful company culture is one that is bought into by everyone from the newest intern to
the CEO. It’s living and breathing your core values. The job of the company is to make sure that
every employee understands the expectations and acts accordingly. A truly great company
culture is one that inherently promotes curiosity, respect, teamwork and employee health.
A way to really boost your company’s culture is to put a concerted emphasis on diversity and
inclusion. In simplified terms, diversity and inclusion in the workplace is making a group of
individuals, with completely different backgrounds and experiences, feel safe and accepted in
expressing their uniqueness while at work. Allowing employees to express their differences,
learn from each other and feel safe while doing it creates a strong cultural bond that breeds
employee happiness and productivity.
8.5 Country culture - Hofstede’s Cultural Dimensions

Hofstede’s Cultural Dimensions Theory, developed by Geert Hofstede, is a framework used to
understand the differences in culture across countries and to discern the ways that business is
done across different cultures. In other words, the framework is used to distinguish between
different national cultures, the dimensions of culture, and assess their impact on a business
setting.
Hofstede’s Cultural Dimensions Theory was created in 1980 by Dutch management researcher,
Geert Hofstede. The aim of the study was to determine the dimensions in which cultures vary.
Hofstede identified six categories that define culture:
1. Power Distance Index

2. Collectivism vs. Individualism
3. Uncertainty Avoidance Index
4. Femininity vs. Masculinity
5. Short-Term vs. Long-Term Orientation
6. Restraint vs. Indulgence
Power Distance Index
The power distance index considers the extent to which inequality and power are tolerated. In
this dimension, inequality and power are viewed from the viewpoint of the followers – the
lower level.
 High power distance index indicates that a culture accepts inequity and power
differences, encourages bureaucracy, and shows high respect for rank and authority.
 Low power distance index indicates that a culture encourages organizational
structures that are flat and feature decentralized decision-making responsibility,
participative style of management, and place emphasis on power distribution.
Individualism vs. Collectivism
The individualism vs. collectivism dimension considers the degree to which societies are
integrated into groups and their perceived obligations and dependence on groups.
 Individualism indicates that there is a greater importance placed on attaining personal

goals. A person’s self-image in this category is defined as “I.”
 Collectivism indicates that there is a greater importance placed on the goals and well-
being of the group. A person’s self-image in this category is defined as “We”.
Uncertainty Avoidance Index
The uncertainty avoidance index considers the extent to which uncertainty and ambiguity are
tolerated. This dimension considers how unknown situations and unexpected events are dealt
with.
 A high uncertainty avoidance index indicates a low tolerance for uncertainty, ambiguity,
and risk-taking. The unknown is minimized through strict rules, regulations, etc.
 A low uncertainty avoidance index indicates a high tolerance for uncertainty, ambiguity,
and risk-taking. The unknown is more openly accepted, and there are lax rules,
regulations, etc.
Masculinity vs. Femininity
The masculinity vs. femininity dimension is also referred to as “tough vs. tender,” and considers
the preference of society for achievement, attitude towards sexuality equality, behavior, etc.
 Masculinity comes with the following characteristics: distinct gender roles, assertive,
and concentrated on material achievements and wealth-building.
 Femininity comes with the following characteristics: fluid gender roles, modest,
nurturing, and concerned with the quality of life.
Long-Term Orientation vs. Short-Term Orientation
The long-term orientation vs. short-term orientation dimension considers the extent to which
society views its time horizon.
 Long-term orientation shows focus on the future and involves delaying short-term
success or gratification in order to achieve long-term success. Long-term orientation
emphasizes persistence, perseverance, and long-term growth.
 Short-term orientation shows focus on the near future, involves delivering short-term
success or gratification, and places a stronger emphasis on the present than the future.
Short-term orientation emphasizes quick results and respect for tradition.
Indulgence vs. Restraint
The indulgence vs. restraint dimension considers the extent and tendency for a society to fulfill
its desires. In other words, this dimension revolves around how societies can control their
impulses and desires.
 Indulgence indicates that a society allows relatively free gratification related to enjoying
life and having fun.
 Restraint indicates that a society suppresses gratification of needs and regulates it
through social norms.
Country Comparisons: Hofstede Insights
Hofstede Insights is a great resource to understand the impact of culture on work and life. It
can be accessed here to understand how the different dimensions differ among countries under
the Hofstede’s Cultural Dimensions Theory.
CHAPTER 9
Board Diversity
9.1 Understanding diversity
Diversity is any dimension that can be used to differentiate groups and people from one
another.
In a nutshell, it’s about empowering people by respecting and appreciating what makes them
different, in terms of age, gender, ethnicity, religion, disability, sexual orientation, education,
and national origin.
Diversity allows for the exploration of these differences in a safe, positive, and nurturing
environment. It means understanding one another by surpassing simple tolerance to ensure
people truly value their differences. This allows us both to embrace and also to celebrate the
rich dimensions of diversity contained within each individual and place positive value on
diversity in the community and in the workforce.
Each individual in an organization brings with them a diverse set of perspectives, work and life
experiences, as well as religious and cultural differences.
The power of diversity can only be unleashed and its benefits reaped when we recognize these
differences and learn to respect and value each individual irrelevant of their background.
9.2 Types of Diversity

1. Internal Diversity
Internal diversity characteristics are ones related to situations that a person is born into. They
are things that a person didn’t choose for themselves and are impossible for anyone to change.
Here are some examples of internal diversity:
 Race
 Ethnicity
 Age
 National origin
 Cultural identity
 Assigned sex
 Gender identity
 Physical ability
 Mental ability
2. External Diversity
In the context of diversity, the term external is used to describe things that are related to a
person but aren’t characteristics that a person was born with. While external diversity can be
heavily influenced by other people and their surroundings, even forcibly so, they ultimately are
aspects that a person can change and often do over time.
Some examples of external diversity include:
 Personal interests
 Education
 Appearance
 Citizenship
 Religious beliefs
 Location
 Familial status
 Relationship status
 Socioeconomic status
 Life experiences
3. Organizational Diversity
Organizational diversity, also called functional diversity, relates to the differences between
people that are assigned to them by an organization—essentially, these are the characteristics
within a workplace that distinguish one employee from another.
Regardless of your position or the pay you receive, any form of work that you do solidifies your
belonging to an organization. Whether you’re working for a private, nonprofit, public sector, or
governmental organization, and even if you do volunteer work for free, you are a part of an
organized group. This could be as small as a group of two or anything higher, as long as it’s
more than one independent person, that constitutes an organization.
However, there are different subsets within organizational diversity, which include:
 Job function
 Place of work
 Management status
 Employment status
 Pay type
 Seniority
 Union affiliation
4. Worldview Diversity
Worldview diversity is another diversity type that changes with time—we conceptualize the
world differently as we have new experiences and learn more about ourselves and each other.
There are still nuances within our worldviews, but some examples include:
 Political beliefs
 Moral compass
 Outlook on life
 Epistemology
Simply put, the types of diversity in the workplace include:
 Cultural diversity
 Racial diversity
 Religious diversity
 Age diversity
 Sex / Gender diversity
 Disability
9.3 Influences of board diversity (culture, law)

Benefits of Board Diversity
The improved overall performance of firms with more diverse boards are attributed to the
following:
a) Better Understanding of Customer Orientation

In a global and highly connected economy, a diverse board will likely reflect its diverse
customer base and better understand its changing needs. This allows for complex problem-
solving in (and for) increasingly complex markets.
b) Higher Employee Satisfaction

When minority groups are represented in board roles, it helps foster an organisational culture
of inclusivity. In turn, this creates an environment where employees feel free to voice out
innovative ideas and creative solutions. This leads to increased self-confidence and higher self-
esteem.
c) Positive Reputation for the Firm
The moral and societal value of diversity cannot be overlooked in today’s socio-political
environment. A diverse board signals to the firm’s internal and external stakeholders that it is in
sync with their values, preferences, interests, and aspirations. This increases the stature and
reputation of the firm, which, some studies tie to better performance.
d) Less “Groupthink” and More Innovative Solutions
A diverse board is less likely to fall into “groupthink”, a term developed by social psychologist
Irving Janis in 1972. It is best described as the “…tendency for a group to make bad or poorly
thought-out decisions because its members aligned themselves with one other, insulating
themselves from outside opinion and reinforcing viewpoints they already share.”
Inherent to a diverse board is a variety of personal experiences, skill sets, values, and
convictions. This makes board members less likely to succumb to group pressures because
more distinctive, individual characteristics are at play. Because of the wider range of
competencies, differing risk-reward orientations and/or approaches to stewardship, diverse
boards are more likely to offer multifaceted perspectives that lead to better identification of
opportunities and innovative solutions. All of the abovementioned upsides lead to a cycle of
increased returns and better performance.
A Final Note
While it may seem that implementing diversity practices at the board level is a response to
media promotion or mounting pressure from stakeholders and regulators, there is enough
evidence to suggest that it is a socially responsible investment.
And yet is important to remember that board diversity is not about the token gesture of
appointing individuals to the board because they check off certain boxes on the basis of gender,
age, or ethnicity (i.e. “tokenism”). Factors such as competence, professional background, and
reputation remain critical and cannot be overlooked. When social and professional diversity
intersect, it amplifies the board’s effectiveness – and makes the case for good governance.
9.4 Promoting diversity within the board
Diversity in the boardroom has been a hot topic in recent years. Does the traditional boardroom of a
fairly homogenous group of individuals really produce the most effective decisions and strategy for a
company? Does such a boardroom have exposure to a wide enough range of perspectives to facilitate
robust discussions of issues that arise? Is there something missing?
In recent years, there has been an influx of regulatory reforms globally encouraging diversity in the
boardroom – specifically, gender diversity. The European Commission (EC) has introduced a Directive on
improving the balance of males and females among non-executive directors of companies listed on
stock exchanges. The EC Directive’s purpose is to significantly increase the presence of women on
corporate boards throughout the European Union by setting a binding minimum target of 40% females
among non-executive directors of companies, with a focus on public limited companies. These measures
aim to promote gender equality in economic decision-making, and to take full advantage of the talent
pool of candidates for a more equal gender representation on company boards. Gender quotas have
also been promoted via legislation in many European countries.
As discussed in Chapter 4, diversity takes various forms in a boardroom and can be broadly
categorized into the following elements:
1. Skills, expertise and experience

Having the optimal mix of skills, expertise and experience is paramount to ensure that the
board as a collective is equipped to guide the business and strategy of the company.
Traditionally, boards recruit from C-suite executives. While the experience from C-suite
individuals is invaluable, it may be beneficial for boards to broaden their definition of “board-
ready talent”. Business unit heads, regional leaders, academics, entrepreneurs, government
leaders, and other non-C-suite executives can create a wider, more diverse pool with some very
talented individuals that could bring interesting and insightful perspectives into the boardroom.
2. Gender
This element is one of the more emphasized forms of diversity in the boardroom. Historically,
corporate boardrooms have largely been a male consortium. In recent years, this practice has
been challenged as many companies, boards and shareholders have recognized the benefits of
having a gender-balanced boardroom. Females are increasingly sitting shoulder to shoulder
with their male counterparts in the boardroom, bringing with them a unique style of
management and perspective.
3. Ethnicity
Ethnic diversity pertains to having a mix of individuals from various racial, cultural and religious
backgrounds. The ethnic mix of a board should ideally represent the area in which the company
operates.
4. Age
Age diversity is an often overlooked element in the boardroom. Board members tend to be
older, as many boards equate age with experience. Marginal evidence of generational diversity
in boardrooms, with so-called “younger” directors being in their fifties. While older directors do
provide a wealth of knowledge, having younger directors introduces a fresh perspective into
the boardroom which should not be underestimated.
5. Geography
Geographic diversity refers to having a mix of individuals from various geographic locations on
the board. Ideally, the geographic mix should align to the areas that the company operates in.
In an increasingly global workplace, neglecting this element of diversity would be particularly
imprudent for a multi-national company as it may result in boardroom perspectives lacking a
robust understanding of the company’s operating environment.
6. Independence
Many argue that achieving the right balance of independent directors is crucial to a well-
functioning board. Independent directors bring a balanced perspective to the boardroom as
they assess matters in a more objective fashion.
Creating True Diversity through Inclusivity
Diversity doesn’t always mean inclusivity, and creating an inclusive board culture is vital to the
success of this effort. John expands on this during the podcast: “It’s what we call board health.
And board health is that notion that you create an inclusive environment, in and around the
board table, that you’re not necessarily diverse, just by having, you know, a token woman or a
token Black member, that’s not true diversity, we have to create true inclusivity.”
Historically, gender diversity has often overshadowed racial and ethnic diversity, as Jerusha
explains during the interview: “In the past, when people and organizations and companies have
gone to bat for diversity, it’s meant gender diversity, and then that gender diversity has turned
into the placement of white women on boards.” Broadening the meaning of diversity through
inclusivity efforts can help even this playing field.
While diversity and inclusivity are related and often discussed together, developing a
real culture of inclusivity, along with diversity, is key. Diversity describes the characteristics of
the people involved, while inclusivity describes how well those different backgrounds and
perspectives are accepted and welcomed by the company. A board of directors may be
interested in increasing diversity, but if a culture of inclusivity is not also developed, those
diverse voices may never be heard. Creating an inclusive board culture may begin by clarifying
what inclusion means and then aligning that with the company’s mission and strategic vision to
help promote inclusivity throughout the entire company.
How do we Create Diverse Boards?

A diverse board is one that accurately reflects its stakeholders. While ethnic and gender
diversity are two components of a diverse board of directors, another characteristic of an
effective board, is cognitive diversity—people who also possess different perspectives and
knowledge. It is important that all types of diversity are represented.
Step 1: Recognize the need to create more diverse boards. Consider who your stakeholders are
and evaluate if they are accurately represented on your board.
Step 2: Review your bylaws or other operating agreements and consider how a board member
is selected. Ensure that diversity is considered as part of your selection process and is
incorporated in the overall vision for the company.
Step 3: Expand your network and increase engagement.

CHAPTER 10
10. The Effect of Meeting Design on Boardroom
Dynamics
10.1 Introduction to meeting design

For most people with little experience with boards of directors, the belief is that the main work
of boards takes place at its official, formal meetings. In actual fact a great deal of important
board work takes place before and after those meetings. Nevertheless, the quality of formal
board meetings can make a considerable difference to a board’s success. At the very least,
having to sit in on a number of poorly run meetings can destroy the commitment of even the
most dedicated supporter of an organization’s cause. Meetings that are poorly organized, go on
too long, go off on tangents instead of sticking to the point, feature personal conflicts or
domineering individuals turn people off and can cause serious damage by leading to poorly
considered decisions.
A high percentage of agreement with the following statements indicates a board that might
have problems in carrying out its meetings effectively and efficiently.
 The agenda for board meetings does not get into the hands of board members in time
for them to familiarize themselves with the issues before the meeting.
 When the agenda does come, there is too much information to digest or not enough to
adequately familiarize board members about the issues.
 The agenda for meetings is too full of “routine” motions or items “for information only”
so there isn’t time to discuss more important matters.
 The agenda items of greatest importance often come up too late in the meeting when
board members are too tired to concentrate on them.
 We have problems when it comes to attendance at board meetings; too many members
miss too many meetings.
 Board meetings often go on too long.
 Once the board has finished discussing something, it is not clear who is going to do what
and when.
 There is too much unconstructive arguing among some members during meetings.
 Meetings are run too informally, for example with more than one person talking at
once, no time limits on discussions, etc.
 Meetings stick too much to formal “rules of order” so that thorough, probing
discussions are discouraged.
 A few members seem to dominate discussions and this discourages quieter board
members from contributing.
In essence, problems with board meetings can be grouped under the following headings:
1. Agenda clarity and timing
Critical to the success of any formal meeting is having a clear agenda that organizes the planned
content of the meeting. Also, if the agenda document is delivered to participants too late (or,
even worse, is not made available until the beginning of the meeting), people cannot prepare
adequately.
2. Supporting information
There is also a need for the agenda to contain enough documentation on the matters to be
discussed to get everyone “up to speed” on them before they are brought up. Nothing renders
a board ineffective more than members scrambling to read important materials at the same
time as an issue is being discussed or, worse, not having important material available for them
to read beforehand.
On the other hand, it is also possible to provide too much in the way of supporting materials
with agendas—materials that are not really relevant to the matter at hand but that the agenda
preparers misguidedly think “might be useful.” The regrettable tendency of many board
members, when faced with a huge pile of documents that do not obviously relate to the issues
at hand, is to give it a glance at best.
3. Meeting content
The most common problems with board meetings is that too much time is spent listening to
reports “for information only” (i.e., that do not require any decisions other than a motion to
“accept the report”), or discussing matters that could better be discussed and decided upon by
the CEO and her/his management team or a committee of the board. The ideal meeting puts
the most important matters requiring motions and decisions as close to the top of the agenda
as possible and provides enough time for careful deliberation.
To be sure, some of the matters that are “for information only” could be conceived of as
necessary in that they help the board carry out its due diligence function of ensuring that
everything is running well and according to plan. Identifying these matters requires careful
thought. However, certain reports from committees or managers may not necessarily have to
actually take up the time of board meetings to deal with them unless they contain motions
requiring board level decisions (see discussion of “consent agendas” under “Treatment” below).
4. Clarity and effectiveness of decisions made at board meetings
Even when the agenda and the meeting content are well-designed, board meetings can be less
than successful if the decision-making process is flawed. For example:
 Meetings that are dominated by a small group of “talkers” while quieter members with
useful things to say are not drawn into the conversation;
 Not enough time is scheduled for a full discussion of an issue;
 The discussion goes off on tangents that are not relevant to the issue;
 Decisions are reached but lack clarity about who is going to do what and when;
 No follow up is provided to permit the board to check on progress made in
implementing decisions taken at prior meetings.
5. Attendance
If there are problems with meetings in any or all of the four areas discussed above, they may
result in poor attendance at board meetings—too many people missing too many meetings.
Whatever the cause of poor meeting attendance, it is a good indicator of possible problems in
the way the board is working.
Additional: Challenges with Meetings
1. A lack of objectives.
We attend too many meetings that do not have any stated objectives. That needs to change. If
we are too busy to think of objectives, perhaps we are be too busy to attend a meeting that
does not have them.
Solution: Improve meeting clarity.
Include objectives in every meeting invitation. Tell the participants what actions or decisions
you will be trying to make. This should allow for clarity, and it should also set preparedness
expectations for the participants (and you).
2. Too much time is spent simply sharing information.
We attend meetings where the main purpose is information sharing. Sharing information is
important, but can it be accomplished without calling a meeting? A phone call, email, or
internal social network (if your company offers it), perhaps? Any of these avenues could then
lay the groundwork for in-person conversations, if further discussion is needed.
Solution: Reduce the number of meetings.
Try to limit meetings to 10% information sharing and 90% action and decisions. That should
lead to an overall reduction in the number of meetings, as well as hopefully an improvement in
effectiveness.
3. We revisit and rehash.
Sometimes, we have the same meeting over and over again. Why? It seems like one main
reason is that we like to revisit our decisions. Another issue is attendance; sometimes team
members cannot attend the original meeting. Busy executives in particular will not be able to
make every meeting.
Solution: Revisit decisions at key points or milestones.
Perhaps we should put a timeframe around implementing the decision, before we revisit the
original decision. This would allow for reflection after action has been taken, as opposed to
stopping action. As for attendance, if we cannot make the meeting, we should send a proxy. In
the spirit of progress, we need to empower and delegate to our team members.
4. There is a lack of accountability and follow through.

Not every meeting ends with owners, actions and timelines – but they should. By not having
clear next steps and owners, you end up creating numerous follow-up meetings to confirm
scope, see if anything is getting done (basically, babysitting grown professionals).
Solution: Wrap up meetings with next steps and owners.
If you end with next steps, owners and timelines, you improve the value of follow-up. The only
meeting that would be necessary is when an owner is behind. Then a meeting is called – not to
say we are behind, but to decide what action needs to be taken to get on track.
Create follow-up built around facilitating actions only when you are behind. Use technology as
a way to share information outside of meetings through email, voicemail and your company’s
social collaboration site, if you have one.
5. People show up unprepared.
Even when there are meeting objectives and agendas, sometimes people come unprepared.
Most meetings should not called to prepare participants; they should be called so that prepared
participants can actually make decisions. Meetings designed for decisions should be just that.
Solution: Meet when everyone is ready.
Make sure everyone understands the objectives of the meeting they’re asked to attend and
prepare for all meetings in advance. Anyone not prepared should acknowledge that up front
and accept the consequences. In some cases, admitting this and rescheduling can actually be
the most efficient for all parties, as competing priorities are a reality most of us encounter
6. Biased leadership
Nothing will restrain the input of participants faster than a leader who begins to
emphasize their personal answer. Participants will then hope the leader exposes an entire
position before they begin to make contributions, so that they know where they stand, and
avoid embarrassment about being “wrong”.
Solution
Leaders should embrace neutrality. If they want others’ input and opinions, then ask and listen.
If they don’t want others’ ideas, they should not have a meeting. There are more cost-effective
means for informing and persuading than hosting meetings. Being neutral is like being
pregnant, you either are or you’re not—there is no grey area.
7. Scope creep (strategic and tactical blending)

All too often, meetings dive deep into the weeds (ie, HOW or concrete methods) or challenge
the purpose (ie, WHY or ultimate intention). Nobody wants more meetings, they only want
results.
Solution
To avoid scope creep in the meeting, carefully craft a written statement reflecting the scope
(see item number one above). Carefully police the scope of an issue so that participants don’t
go too deep into the weeds. Thus ensure that others do not argue about the reason for
a project, as project approval is beyond the scope of most meetings. For
pertinent strategic issues that are beyond the scope of the meeting, capture them in a
“Refrigerator” (aka “Parking Lot”) to preserve them until you can meet in a workshop
forum that discusses strategic issues, their implications, and what needs to be done about them
(recommendations).
8. Poor or non-existent structure

Lack of structure applies both at the meeting level (ie, agenda) and within each agenda
step. Structure enhances flexibility and gives you a method for delivering ‘done’. Most leaders
are competent at soliciting ideas (ie, creating a list) but remain frail during the analysis activity.
Therefore, use our Meeting Pathway and Meeting Canvas regularly.
Solution
Determine in advance:
 What are you going to do with the list?
 How will you lead them to categorize items?
 Should you categorize, or perhaps push on to specific measurable details?
 If prioritizing, have you separately identified the criteria?
 How are you going to lead the group to apply the criteria to the options that lead to a
prioritized list?
9. “They’re all Priority One!”

A group would not prioritize a list of activities because they felt that all were very important
and that prioritizing them would allow some to drop off and not get done. The support
organization had only a limited number of resources and limited time. First of all, how do you
get a group to set priorities?
Solution
1. Separately develop the criteria that prove the importance of the activities.
2. Admit that all the actions are top priority or they would not have been discussed.
3. Ask them to prioritize the criteria, one relative to each, other using the Bookend tool.
4. Build a Decision-Matrix to align the criteria with the activities and develop a sense of
relative importance, without omitting anything.
10. “Don’t Measure Me”

An organization is culturally biased against SMART measures and hard objectives during
a business process improvement initiative. Hence, history has caused them to resist, cheat, or
fall victim to objective measures. Since the facilitator must get the group to define SMART
measures and objectives, what should they do?
Solution
1. Follow a method that allows the group to define their measures—by first defining the
rewards, benefits, risks, challenges, and then associated measures.
2. To ensure that key measures have been identified, ask participants to draw upon
benchmarking of competitors and other industries
3. Have the group identify their concerns with SMART objectives and develop strategies or
actions to address their concerns. Consider the Content Management tool.
11. Executive Solution
A workshop designed to focus on business process improvement opportunities. The workshop
develops goals, objectives, principles, and strategies of the initiative. The executive participated
in the workshop. However, after the workshop, the executive decides to change the output to
suit himself.
Solution
1. Publish the original results for distribution to all stakeholders as soon as possible.
2. Also, have the project manager intervene on behalf of the project team members.
3. Carefully document the risks and rewards associated with the mandated change.
4. Next time, emphasize ground rules about consensus building and educate the executive,
prior to the workshop, on empowerment, ownership, and accountability.
10.2 Design of board meetings
In the most basic sense, meetings are essentially communication tools used by groups and
teams to accomplish organizational goals. Like other tools, meetings have certain design
characteristics that are usually determined, or at least have the potential to be determined, by
the meeting leaders or organizers.
These characteristics include a variety of objective features, such as where the meeting is held,
if minutes are kept, how long the meeting lasts, if roles are assigned, how the room is
configured, and whether an agenda is distributed. Meeting organizers often make decisions
about these and other meeting characteristics, either consciously or unconsciously, and those
decisions may ultimately impact meeting outcomes.
10.3 Physical characteristics

Temporal Characteristics
Temporal characteristics relate to how meeting time is used. These characteristics include
meeting length, promptness of meeting start and end, and use of a break. Meetings that follow
good temporal courtesy (e.g., start on time, etc.) are viewed as less disruptive and may assist
with work scheduling and task coordination. At the same time, well-designed temporal
characteristics can maximize time focused on task-related activities (e.g., as opposed to waiting
on a late member).
Physical Characteristics
Physical characteristics pertain to aspects of the meeting setting and environment. These
characteristics include lighting, meeting space, meeting modality (i.e., face-to-face or
technology-facilitated), noise, refreshments, seating arrangement, meeting space arrangement,
and temperature. Research and theory suggest that environmental characteristics are
important determinants of employee attitudes and behavior and can shape temporary affect.
Furthermore, positive physical characteristics of the meeting setting can lead to greater
comfort for attendees and create an environment that facilitates the attendee's ability to focus
on the meeting task without distraction.
Procedural Characteristics
Procedural characteristics concern how the meeting is conducted. These characteristics include
a formal agenda, a meeting agreement, whether minutes are taken, and whether the meeting
is electronically recorded. Previous research has suggested that procedural characteristics (e.g.,
agenda use) are important to meeting effectiveness. In addition, running meetings effectively
by implementing appropriate procedural characteristics may increase focus on the meeting
task, assist in accomplishing meeting goals, and enhance follow-up processes.
Attendee Characteristics
Attendee characteristics include the presence of a facilitator or a leader and the number of
attendees. As the number of attendees increases, the participation per attendee decreases and
it becomes even more important that somebody is performing the role of a meeting facilitator.
Meetings are integral to workflow in businesses and educational institutions. They cannot, and
probably should not, be eliminated or avoided. In fact, 92% of workers value meetings as
providing an opportunity to contribute to organizational success. Therefore, meetings must be
made more efficient and productive.
10.4 Attendee characteristics
Attendee characteristics include the presence of a facilitator or a leader and the number of
attendees. Niederman and Volkema (1999) emphasized the importance of the leader in
controlling the flow of information, assisting in the decision-making process and helping
attendees reach the meeting goal. As the number of attendees increases, the participation per
attendee decreases and it becomes even more important that somebody is performing the role
of a meeting facilitator.
Meetings are integral to workflow in businesses and educational institutions. They cannot, and
probably should not, be eliminated or avoided. In fact, 92% of workers value meetings as
providing an opportunity to contribute to organizational success. Therefore, meetings must be
made more efficient and productive.
10.5 Trends in technology

When it comes to the relationship between technology and events, one thing remains the
same: technology underpins how your audience engages with your event at every step of the
way. This has proven even more imperative when it comes to virtual and hybrid experiences.
With a limit on human connection, technology helps to enhance the attendee's experience and
create the impact necessary to deem your event a success. Technology also provides the ability
to mine the data collected in order to continue designing more impactful events that truly
motivate and resonate.
Trends in Virtual Meetings
Virtual meetings, for both corporate and social purposes, were one of the biggest trends of
2020. And although we are optimistic about the reality of meeting face to face once again, both
virtual and hybrid events are here to stay - for now. Incorporating fresh tech trends, such as
extended reality and virtual environments, can help to create that wow-factor we've come to
miss with the absence of live experiences.
1. Artificial Intelligence
This has become THE event technology buzzword today—and for good reason. This technology
has been at the fingertips of consumers for years through voice activation and ridesharing
applications. More recently, it has become a tool that event stakeholders are including as part
of their event technology solutions for customers. AI has enhanced the personalization of the
attendee experience with more meaningful interactions and is now being used as a matching
engine to pair attendees with activities and experiences that align with their own interests and
goals for the event.
Now that meetings and events are being conducted in virtual formats, AI has become no less
important of a tool for planners and participants alike. Not only can AI lend a helping hand
when planning meetings, but leveraging AI for virtual meetings has the potential to make them
more efficient, productive, and intuitive. This technology can help streamline tasks like joining a
meeting or adding people to calls. During meetings it can automatically mute disruptive
background noise to keep audio clean, leverage facial recognition to help you easily identify
new faces on a screen, and keep detailed information on participants to help facilitate
smoother human interaction.
2. Virtual Environments
Attendee engagement has always remained a top priority when executing meetings and events.
When the pandemic forced the industry to transition away from live in-person events that
priority didn't change, but achieving high engagement became more of a challenge in a
primarily virtual format. Mobile and virtual environments have become an innovative solution
to that problem by providing opportunities to create paralleled experiences for attendees on
their laptops or tablets that mirror the types of experiences they would have had during a live
event.
Using virtual venues allows planners to elevate the attendee experience and immerse
participants in their environments, creating customized locations, avatars and in-platform social
interaction that facilitates more authentic connection to bridge the gap between virtual and
live experiences. Attendees have the ability to use their avatars to chat with other participants,
communicate with speakers, or raise their hands to ask questions during information sessions.
Tradeshows and conferences can build out virtual stands and booths where attendees can
interact with experts to access information, share experiences, and learn about products.
Virtual staff can even be present within these environments to help provide technical support,
assist with creating avatars, and familiarize attendees with their virtual world to help make the
most of the experience.
3. Augmented Reality
This is a technology that overlays a computer-generated image on a user’s view of the real
world, creating an enhanced reality. Event professionals have been implementing AR into their
events to improve event engagement within product demonstrations. With AR, attendees can
interact with new products in ways that create an emotional connection with the experience.
To change a user’s perspective on a product at a trade show, AR could allow an attendee to see
how it works from the inside out. Or, it could compare the product to different models
highlighting the unique differentiators.
Although initially utilized during live events, AR has been adapted to virtual and hybrid to
immerse attendees in their home environments and create a more accessible, immersive and
interactive event experience. AR events can be created from home by triggering experiences
from a mobile phone, tablet, or VR headset sent to participants at their remote locations. The
accessibility of AR allows for a wide range of possibilities to engage attendees including creating
entire tradeshow booths from home, showcasing new products and services, or integrating
gamification and virtual training features to significantly increase audience engagement.
In addition to making event experiences more accessible, AR utilized in virtual environments

also opens the door to gaining key insights into your event and attendees through accurate
data and analytical reporting. Whether you are trying to gauge progress on training or
engagement with a new product that’s launching, AR experiences can often have analytics
embedded in the experience to expertly track your attendees' experience.
Trends in In-person Events
For the time being virtual formats remain as the safer solution for meetings and events.
However, eventually hybrid and in-person events will return and they’ll likely be accompanied
by several technology trends that can help elevate the event experience and strengthen
attendee engagement. Below are some tech trends that have taken a bit of a backseat during
the rise of virtual meetings but are sure to return to live event settings in the future.
1. Projection Mapping
Projection mapping is similar to spatial augmented reality or video mapping, where an image is
projected onto objects or spaces that are often irregularly shaped. This can turn any 3D shape
into interactive displays, fully immersing attendees in the experience. This technology has been
around for decades, but has more recently been used by corporate event planners to up their
creative game and increase event engagement – and of course these types of displays are ultra-
social-media friendly! Here some creative examples of projection mapping in use.
2. Radio Frequency Identification (RFID)
This uses radio-frequency waves to wirelessly transfer data through a tag that can be
embedded in name badges, wristbands, plastic cards, etc. and collect data on your attendee’s
journey throughout an event. For example, RFID can be used to check-in attendees at breakout
sessions, giving event organizers a much better sense of where their audience is going and what
interests them. There are numerous benefits to RFID technology including faster attendee
check-in, immediate data on foot traffic and going cashless. But, most importantly, RFID allows
for higher levels of engagement. Attendees can interact on-site with sponsors and other
attendees through live polling and surveys.
3. Virtual Reality (VR)
An engaging and innovative way for attendees to interact at events. We see VR being leveraged
across events as a digital enhancement strategy to elevate the attendee experience with unique
technology advances that they may not have access to in their day-to-day lives. A VR headset
allows participants to engage with 360 degrees 3D images, immersing them into places and
experiences that are otherwise inaccessible. Additionally, VR is being used during large
tradeshows for interactive demonstrations of vendors’ products that would be difficult to be
brought on-site. Hotels and DMC’s are using them to showcase their properties or destination
to prospects without them ever having to get on a plane.
4. Facial Recognition
When incorporated effectively, facial recognition can be a successful tool to

propel event goals and meet the expectations of today’s event attendees. To implement this
type of technology, it’s necessary to collect clear images of participants in advance of the event
or during registration check-in.
Facial recognition can assist in streamlining the check-in experience, allowing participants to
simply walk up to a camera, scan their face and receive their badge. Meanwhile, exhibitors can
do a quick scan to capture that lead. Planners can also easily track attendees as they enter a
session, avoiding any bottlenecks at the door.
Additionally, this technology can provide fast attendee information which helps personalize
their experience. For example, as an attendee approaches a booth, facial recognition can
provide information such as goal for attending the event, to help start the conversation right.
Facial recognition also has the ability to scan your audience and compile data to read the
overall emotional charge of the room. You can then, in real-time, communicate this with
speakers or performers to allow a change in delivery to better engage the attendees.
5. Chatbots
Companies around the world are using chatbots to communicate with their audiences when
and where they want. In the past few of years, chatbots have become more common in the
event space and are slowly replacing stand-alone info booths at meetings, events and trade
shows as companies are recognizing the benefits of using chatbots as part of their customer
engagement strategy.
6. Mobile Applications
Applications have become a no-brainer when it comes to the meetings and event industry.
There are hundreds, if not thousands, of apps in the event space each offering customizable
solutions for any type of event (including trade shows and user conferences). Mobile apps are a
one-stop shop for information for participants—from accessing your agenda, to viewing the
attended list, to general event information, to receiving messages and special offers from
sponsors.
Beyond just providing important information conveniently, mobile apps are also interactive.
They allow companies to implement gamification such as challenges, rewards and leaderboards
to reinforce event goals and increase engagement leading to an immersive event experience.
While they have been part of event strategies for some time, mobile apps will remain a key
player in technology with a continued focus on creating personalized experiences.
7. Deep Attendee Personalization
Deeply personalizing the attendee experience at your next meeting or event is essential at
increasing your attendees’ event satisfaction and securing ROI. As Shane says in our interview,
“I would bet on deep personalization of the attendee journey and experience. This will change
the paradigm from the passive methodology of ‘measuring an attendees’ journey’ to actually
driving the journey and influencing the behaviors to align with the goals of the event.”
4 Ways to Personalize Your Attendees’ Event Experience
 Create customized registration paths and define attendee types to create a tailored
experience for attendees.
 Use a mobile event app to send personalized push notifications and session
recommendations to create a unique experience for attendees.
 Personalize every aspect of your event management technology (e.g. event registration
website, mobile event app, etc.) with your brand to create a consistent experience for
your attendees’.
 Personalize registration and website templates to save your planners time, and ensure
your website is user-friendly for your attendees.
8. Event Badging & Ticketing
Event badging and ticketing is always important to planners since it is an integral aspect of
organizing and capturing attendee data. In addition to noting the importance of RFID and NFC
wearable badging technology, Ivan also identifies a new ticketing trend for 2020. Ivan explains
“digital event ticketing via tokenization on mobile wallets using Apple VAS and Google Smart
Tap” is going to be a big trend in 2020.
In addition, sustainability is also on the minds of many planners, making it another trend for
2020. Check out the three ways event badging technology can help you create a sustainable
event.
3 Ways to Use Event Ticketing to Create a Sustainable Event
 Live Badge Printing Registration

 Increasing Attendee Satisfaction
 Exchange Information Digitally
10.6 Use of virtual boards for remote teams

Virtual board meetings allow each board director to attend regularly scheduled meetings from
their home, an office, or wherever they choose. Instead of reviewing notes after the fact,
board members use audio and video conferencing tools to join remotely
While meeting rooms have come a long way in modern workplaces, there is an additional
consideration for hybrid teams, those made up of both in-person and remote members.
Meetings with remote team members are usually conference calls or video calls.
Remote attendees must use a computer or other device with an internet connection to join, so
they can listen to presentations and add their own insightful ideas to the conversation.
For a fully digital meeting, all board members attend virtually. Alternatively, boards can take a
hybrid approach, where some board members are physically present while others join online.
Either way, the ability to go remote represents a wealth of opportunities for mission-driven
organizations and corporate boards.
The Benefits of Virtual Board Meetings
Your board may choose to hold a virtual board meeting for a wide variety of reasons, whether
it’s due to travel expenses, time constraints, or any underlying health concerns. Let’s dive a
little deeper into the range of benefits your board may experience when testing out remote
board meetings.
1. Increased Attendance
If you’re struggling to meet quorum, virtual board meetings might just be your catchall
solution! Going remote boosts accessibility and ensures as many board members as possible
can make it to the meeting. At the very least, having the option increases the likelihood of
participation. Plus, you’ll eliminate travel time and expenses, making attendees much more
willing to join.
In short, expecting your board to make the commute to your office can limit your potential
participant pool. Virtual board meetings expand it.
2. Greater Board Member Diversity

Remote board meetings open the door to a more diverse board. To start, they can keep your
board socially and geographically diverse.
With the capacity for people from other parts of the country (or even the world) to attend, your
board can pursue enhanced diversity. New perspectives will provide powerful insights, which
can ultimately help you think outside of the box and make more well-rounded decisions.
3. Enhanced Governance
Corporations and mission-driven organizations rely on digital meetings to make time-sensitive
decisions and communicate regularly. With the right tools in place, your board leaders can
exercise greater control over meetings and maintain focus in the boardroom, directly
supporting strong and capable governance of the company or organization.
Board leadership will largely benefit from:
 The ongoing availability of a secure online environment to keep in touch without having
to coordinate in-person meetings.
 A centralized platform to record meetings and share discussions and data.
Today’s virtual board meeting software landscape offers an abundance of tools that
organizations can use to their advantage to further their work. From chat features to minutes-
taking tools, meetings will be much simpler to plan and execute, allowing more time to
strategize and hold insightful conversations.
The Challenges of Remote Board Meetings
As with any technology-based solutions, there are a few setbacks to going remote. Going into
the virtual board meeting world, it’s important to be familiar with these challenges so you can
be one step ahead. Let’s take a deep dive into a few key obstacles.
1. Information Security Issues

All boards have private discussions regarding your organization’s strategies and financial
stability. Unfortunately in the case of virtual board meetings, technology naturally poses a risk
to proprietary and confidential information. In turn, board members may be reluctant to share
sensitive information or discuss controversial issues if there is an underlying risk of a breach.
2. Reduced Engagement
Some of the nuances of interaction can be lost during remote board meetings due to the lack of
face-to-face interaction. A virtual board meeting that includes members who passively listen
won’t help you accomplish your goals.
To be effective, board members need to participate wholeheartedly and share their insights
with the group. Additionally, when you’re taking a hybrid approach and only a handful of
attendees are remote, those who phone into meetings usually only listen and vote on motions,
which can lead to feelings of exclusion.
The short and simple solution is to incorporate video and encourage participation. This will add
that much-needed face-to-face element and serve as a reminder to in-person attendees that
remote participants are still part of the conversation. We’ll explore some additional steps to
help combat disengagement during your virtual board meetings below.
3. Technological Reliance
Adopting new technology often comes with unique hurdles. With virtual board meetings in
particular, organizers have to be hyper-aware of the specific technological requirements,
ensuring that board leadership and members have access to sufficient technology to attend.
Bear in mind that all members may not have adequate technical proficiency and may need a bit
of extra guidance as well.
How to Run an Effective Virtual Board Meeting
Since virtual board meetings differ from their in-person counterparts, there are several specific
details you’ll need to adjust to maximize engagement and productivity. Let’s explore some
actionable steps every executive director, CEO, and other board leadership can use to
effectively manage remote meetings.
1. Ask Whether Your Organization Allows Virtual Meetings.

First and foremost, you’ll want to be sure that you can legally conduct virtual board meetings.
Some mission-driven organizations and corporations specifically don’t allow these meetings in
their internal bylaws, and sometimes state laws prohibit them entirely. You’ll need to check
these two separate sets of regulations before spending the time setting up a virtual board
meeting:
While you’ll likely be permitted to make the shift to virtual meetings, checking your internal
rules and local regulations will allow your board to move forward with confidence that you’re
following all procedures and operating in an ethical manner.
2. Set An Appropriate Meeting Time.

As with any effective meeting, selecting the right time is crucial, especially if attendees are
located in multiple time zones. Make sure that the meeting time you choose is respectful of
everyone’s lunch hours and break times.
While it might not be possible to accommodate everyone’s schedules, do your best to make
your remote board meeting easily accessible to as many people as possible. If there is a strong
divide, you may determine that setting two separate meeting times is the most appropriate
solution.
3. Develop A Clear Agenda.

It’s always important to make sure that every attendee can easily track topics and discussions,
but with remote attendees, this is even more critical. To keep your meeting focused and on
track at all times, create a clear, dynamic agenda that’s accessible on any device with an
intuitive mobile interface or a dedicated app.
4. Use Video Conferencing Tools.

It is possible to host a virtual board meeting without using video. However, your meetings will
be much more successful and interactive with video conferencing tools.
For one, all participants will be able to see one another, building stronger connections. Adding
video also ensures that participants don’t overlook important nonverbal cues. Specifically,
watch for body language that indicates disagreement, boredom, impatience, or enthusiasm (all
of which are challenging to detect with just a phone call). After all, most experts agree that at
least 70% of all communication is nonverbal.
5. Set A Minimum Requirement For In-Person Attendance.

Some corporations and mission-driven organizations that allow call-ins report that in-person
attendance drops. This can directly impact the dynamic of the group if people get into the
routine of phoning in.
To avoid this, set a minimum requirement for in-person attendance, especially if you intend for
hybrid meetings to be a regular practice. Have a frank discussion with your board that makes it
clear that this is not an alternative to being present at meetings on a regular basis without just
cause.
6. Encourage Interaction.
When running a virtual board meeting, one of the primary challenges involves keeping
everyone engaged in the conversation.
10.7 Face-to-face versus virtual/audio interaction

Differences in Virtual interaction and face-to-face interaction
In Virtual interaction;
 Information can be shared to several persons at a wider range and get organized but not
in face to face aspect.
 Due to the era of technology, people can communicate virtually no matter how far they
are located for instance using emails the way I had done.
 Virtual communication allows an individual to communicate despite engagement in other
schedules hence this can well be practiced by employees and their Employers.
In Face-to-Face interaction;
 Here communication is in person manner and a hundred percent verbal.
 In this form of communication, personal relationship is always easy to establish since an
assurance of physical actions like facial expressions are portrayed to gather trust as
compared to Virtual communication which doesn’t exhibit physical actions.
 Communication in face-to-face only targets the audience available as per that moment
and instance not targeting a wider audience stationed at various locations according to
Prager Microsystems
Face-to-Face Facilitation
Let's start with the most familiar: Face-to-face facilitation simply means facilitating a group of
people in the same physical place at the same time. Pretty much all traditional meetings and
workshops rely on face-to-face meetings, but you can also use digital tools to facilitate the
process, rather than relying on physical flip charts and sticky notes.
The benefits of face-to-face facilitation include:
 Relationship building
 Shared context
 Access to nonverbal cues like expressions and body language
The downsides of face-to-face facilitation include:
 Limited length of interaction
 Deeper knowledge sharing siloed to small groups
 Travel time and costs
 Disruptive in nature
 Manual post-workshop documentation
 Limited number of attendees
Face-to-face meetings and workshops are suitable for situations with a specific agenda and a
clear, short-term goal. However, when it comes to longer and more complex processes, face-to-
face interactions should be complemented with ongoing, asynchronous communication to
ensure that the team continues to work beyond workshops.
Virtual facilitation
Virtual facilitation is when a facilitator guides a group of people remotely in real time. Video
conferencing tools like Zoom, Microsoft Teams, or Google Meet are typically used during virtual
facilitation. In short, virtual facilitation takes place at the same time (synchronous) but
participants join from different places.
The benefits of virtual facilitation include:
 Increased productivity – no time spent on travel

 Cost savings – no money spent on travel
 No need to worry about meeting logistics (like booking a big meeting room or organizing
refreshments
The disadvantages of virtual facilitation include:
 Limited length of interaction
 Limited access to facial expressions and other nonverbal cues
 Lack of context (A great read: why context is important in the workplace)
 Limited relationship-building opportunities
 Limited opportunities for one-to-one communication
 Limited number of attendees
 Poses technical requirements: high speed internet and a virtual meeting tool
Much like face-to-face facilitation, virtual facilitation is suitable for meetings and workshops
with a limited number of attendees and a clear goal. Successful virtual facilitation requires
a skilled facilitator.
Hybrid workshops and meetings—where some participants attend remotely while others are in
the same physical location—can be particularly challenging for facilitators. If you’re running
hybrid meetings, check out our blog post covering 10 facilitation techniques that will make your
hybrid meetings more engaging.
The benefits of digital facilitation include:
 Increased flexibility
 Unlimited number of participants
 Enables asynchronous and synchronous multi-way communication
 Extended length of interaction and the ability to collaborate not only during but also
before, after, and in between workshops
 Opportunity to combine different facilitation approaches
 Reduced need for post-workshop documentation

 Supports different kinds of personalities, learning styles, and communication styles
The downsides of digital facilitation include:
 The facilitator must be willing and able to learn and adjust
 Poses technical requirements: internet connection and a device for each participant
Digital facilitation is suitable for longer engagements like learning programs and organizational
change processes.
Ultimately, the discussion of different facilitation methods shouldn’t be about one versus the
other. Face-to-face and virtual facilitation both have their benefits. In-person meetings will
always play a role in building deeper relationships, and virtual meetings allow for remote work.
All facilitation methods are needed for collaborating at work today. That’s why digital
facilitation is so important: It allows facilitators to get the most out of every meeting, be it
virtual or face-to-face.
Chapter 11
The Role of the Governance Professional in
Influencing the Boardroom Dynamics
While it is now acknowledged boardroom culture matters, not much is understood about how
boardroom culture defines and shapes the exercise of accountability in and around the
boardroom. This understanding is vital to strengthening corporate governance.
Accountability for good governance is often viewed in the context of an outcome or a goal, a
set of formal expectations that can be enshrined in mandates, codes or regulations depicting
what should be done, by whom and how. The reality is very different.
The process of governing does not occur in a social vacuum.
This is the lived experience of non-executive directors (NEDs) who hold multiple directorships
and report different experiences in how accountability is practiced on different boards, even for
similar tasks. These differences have their roots in director interactions, behaviors, routines and
social norms unique to a given board.
Some boards are highly formal and procedural around debate, others are more engaged — with
NEDs actively challenging each other and encouraging contention of ideas and proposals.
11.1 The 21st Century governance professional

Gradually throughout human history, the power to steer society has diffused away from the
chieftain or king towards a broader base of elected representatives, managers, bureaucrats and
interest group leaders. Movement along this long-run trend has been far from linear or
painless, and no one decision-making model has prevailed. Over time, however, economic
growth has combined with changing values and institutions to reshape the nature, scope and
means of exercising authority throughout society – in government, firms, associations and
families.
Recently, there has also been a growing recognition that the ability or power of collective
institutions to chart a particular course depends to an increasing degree on the active
involvement of the governed. Looking to the future, there are signs that the governed of
yesterday could become the governors of tomorrow. This does not mean that every citizen or
worker would become a politician or manager. Instead, tomorrow’s dynamic societies, less
governable by the old methods of command and obedience, may set and achieve both
individual and broad social goals by enhancing decision-making capacities generally.
Such a change would mean a radical break with past as well as with most prevailing governance
models. Traditionally, decisions have been made and implemented using centralized, top-down
and predetermined structures operating in rigidly defined fields of action – whether in a family,
a firm or a nation. Despite today’s general tendency to assign formal power to citizens and
shareholders, in practice the choice of goals and of the means for reaching them remain largely
delegated, centralized and hierarchical.
Decision makers are being pushed to reconsider traditional aims and methods of governance.
The people in positions of authority in many existing international organizations, be they
ministers in national governments or directors of the board or activists that make up an NGO,
are in the midst of redefining the power they wield. Not necessarily because a sovereign state
lacks military capabilities or a board director the formal legal right to vote independently, but
because the nature of global action is changing. These changes, like the emergence of new
planetary issues and new constituencies that lie outside the mandates and/or competencies of
existing international organizations, could be significant enough to call into question the ways
in which authority is exercised at a global level.
Governance practitioners can have a wide range of position titles, depending on the
organization. They may be called, for example, Company Secretary, General Counsel, Chief
Financial Officer, and Chief Governance Officer, Chief Risk Officer or another title.
The title will vary depending on the individual circumstances and needs of each organization.
However, in essence, a governance professional:
 leads and advises on best practice in governance, risk management and compliance
 champions the compliance framework to safeguard organizational integrity
 promotes and acts as a ‘sounding board’ on standards of ethical and corporate behavior
 Balances the interests of the board (or governing body), management and other
stakeholders.
Governance practitioners have a significant impact on the level and quality of corporate
governance and governance culture within an organization, including a pivotal role in assisting
the board achieve the organization’s vision and strategy.
11.2 The Strategic Role Of The Corporate Secretary

More and more countries are introducing the position of the corporate secretary, whether in law or
through regulations, standards, or codes of corporate governance. The reason is that the corporate
secretary is the person responsible in an organization for:
• Identifying what and advising why certain corporate governance best practices should be
adopted by the organization. This may be as a result of compliance with laws, regulations,
standards and codes or because the practices make good operational sense for the organization.
• Implementing within the organization those best practices through the creation and
maintenance of cultures and relationships. This usually requires the corporate secretary to
answer the how do we implement question, which requires corporate secretaries to have
emotional intelligence skills as well as technical skills.
• Facilitating communication between board members, the board and management, the chairman
and the chief executive officer, the company and its shareholders, and the company and its
stakeholders.
Listed companies are required to have corporate secretaries. They are also found more and more in
non-listed companies and in organizations in the public and not-for-profit sectors. This is because these
organizations are also recognizing the importance of corporate governance and of having someone
responsible for it within their organization.
A recent study in the United Kingdom1 determined that for corporate secretaries to carry out their role
effectively they should be “commercially minded” or aware. This they saw as being an important feature
of the job, especially as they advise the board on governance issues. To be commercially aware, an
individual must understand the business he or she is in and make good practical decisions as a result.
For the corporate secretary, this means having the ability to advise the board in a way that supports the
board in making effective decisions. To be commercially aware a corporate secretary should be able to
do the following:
• Understand how their organization makes money and creates value.

• Understand what their organization needs, now and in the future, to continue to make money
and create value.
• Have a thorough understanding of their organization’s competitive advantage.
• Keep up to date with the industry/sector that their organization operates within.
Strategic Role of the CS is summarized below:

11.4 Influencing dynamics in a positive way

It is now widely recognized that board dynamics are a central driver in producing strong organizational
outcomes. This involves not only the relationships among board members but also between the board
and senior management. However, this can a difficult area for boards to deal with even when
dysfunctional relationships are hindering good governance and impeding sound decision-making. The
following are some practical ways in which a board can reinforce or improve its dynamics.
1. Think about behavioral competencies, not just skills
Where possible, a board should seek to ensure that its members represent an appropriate balance
between directors with experience and knowledge of the organization and directors with specialist
expertise or a fresh perspective. However, directors should also be considered on the additional
qualities they possess, their ‘behavioral competencies’, as it is these qualities that will influence the
relationships around the boardroom table and their contribution to discussion and decision-making.
However, how much say the board has over the selection of directors will depend on the organization’s
constitution. If possible under its constitution, a board should ensure it has a governance structure that
will allow it to incorporate behavioral aspects to the nominations process. For example, by providing
prospective directors and nomination committees with clear expectations around boardroom behaviors
in addition to specifics about the roles and responsibilities of a director.
2. Get off to a good start with director induction
Most directors do not join a board fully equipped to govern. To ensure new directors are able to
contribute as quickly and appropriately as possible, a comprehensive induction process is required. This
process should not only be focused on learning facts about the organization, but it should also induct
the director into the culture of the boardroom, set expectations for director behaviors and provide
opportunities for the new director to get to know both their fellow board members as well as members
of the management team. Further, board dynamics can be significantly enhanced by providing
appropriate mentoring and support. If new directors are assigned a mentor they are more likely to feel
welcomed into their position, included into group dynamics, have greater self-confidence and feel
better informed to contribute to discussion.
3. Select the right chair
The chair fulfils a critical role by encouraging desired behaviours and identifying inappropriate
behaviour. Thus, having the right chair is vital to boardroom dynamics. Signs you have the wrong chair
include failure to accept feedback from their peers, dominating discussions or allowing discussions to
stray from the decision at hand, and failing to include all directors in the decision-making process. As
such, having a well-defined process for chair succession planning is an important way to maintain
healthy dynamics. When designing a position description for the chair, as well as general board
competencies, thought should also be given to the additional competencies required of the board’s
leadership position that will foster better dynamics in the boardroom. Boards can also develop potential
chairs by monitoring the performance of committee members and having potential board chairs as chair
of a committee.
4. Evaluate the board’s performance
Boards must know their own strengths and weaknesses to govern effectively. An effective board
evaluation process can provide a forum for directors to review and reinforce appropriate boardroom
behaviours and ensure that any issues that may lie below the surface are identified and addressed.
However, the design of the evaluation is critical if it is to create a positive outcome for the board
especially where the dynamics are poor. For example, the evaluation process can include questions
regarding group and individual contributions, behaviours and relationships, which will help to illuminate
any issues in the boardroom and provide a mechanism for beginning a dialogue about how to resolve
those issues. Leading practice strongly recommends that a board review should not only involve the
board as a whole, but also reviews the contribution of individual directors through an externally
facilitated process of self and peer evaluation.
5. Incorporate board dynamics into the policy framework
The board’s responsibility for the policy framework enables it to shape both board and organisation
behaviours. For example, a change in board policy that introduces pre-meeting board dinners may lead
to a change in the way directors interact due to the fact that the directors become better acquainted
over the meal and learn more about each other as individuals, which can be a problem for groups that
are not in regular contact and may be geographically dispersed. Similarly, a board specific code of
conduct setting out the board’s ethical expectations for director behaviour can encourage better
decision-making at board meetings, the relationships between board members, between the board and
management, and thus the performance of the board as a whole.
11.5 Leadership influence

Leadership influence simply put is an ability to affect others and change their behavior in a
given direction. Effective leaders can use strategies which are designed to impact people’s
attitudes, values, and beliefs. You can use different approaches depending on the objectives
your people or you set forth.
Influence should not be mistaken for control or power. This is not about manipulating your
people to achieve certain goals. It is about becoming aware of what moves your people and
gets their commitment. Then, using the knowledge to leverage goals and outcomes with better
performance.
The ability to influence is an essential leadership skill. To influence is to have an impact on the
behaviors, attitudes, opinions and choices of others. Influence is not to be confused with power
or control. It’s not about manipulating others to get your way. It’s about noticing what
motivates employee commitment and using that knowledge to leverage performance and
positive results.
A leader’s ability to have influence with others is based on trust; in fact, our influence expands
in proportion to the amount of trust that exists in a relationship. Let’s take a look at how
leaders effectively build trust and increase their influence with others.
 Establish credibility Leaders begin to build trust by establishing their credibility.

Stephen Covey, author of The Speed of Trust, described four foundational elements needed to
establish one’s credibility: integrity, intent, capabilities and results. Integrity is being honest; it’s
“walking your talk”. Intent has to do with ensuring your motives are clearly understood.
Capabilities are the skills and knowledge necessary to perform your job well. Results are what
we accomplish, it’s our track record—your ability to get done what you say you will do.
Stephen Covey said that credibility “boils down to two simple questions: 1) Do I trust myself?
and 2) Am I someone others can trust?” By establishing credibility we begin to establish trust,
which is an essential step in gaining influence with others.
 Engage others and build a connection Leadership is not a solo act.

If you want to influence others, they have to be involved. Seek input on important decisions
that will affect them individually or the team as a whole. Involve employees early on when
proposing or implementing changes. Another way leaders increase their influence is through
building connections with others. Seek to understand the needs, motivations, and values of
others. By showing a sincere commitment to what matters to someone else you’ll begin to
build greater influence with them as they realize your actions include a genuine concern for
their interests. Why it matters? People have a choice, and they decide each day how much or
how little they will give to their job. Leadership alone provides a limited source of power and
successful leaders recognize that in order to be effective they cannot rely solely on directive
tactics.
 Clarify expectations and practice accountability

To get great results, leaders must be able to enlist, persuade, and engage others. However,
before expecting employee commitment, leaders must clearly delineate expectations. Define
the results and clearly communicate them to others. Once the results have been defined
practice accountability. Hold yourself and others accountable to the expectations. When
leaders fail to clarify expectations and do not practice accountability they contribute to and
unintentionally create a low-trust environment where mediocrity is the norm. This directly
impacts your ability to positively influence others.
 Share your passion

One of the reasons why passion is so important is that it produces energy; it ignites others.
There is a contagious quality to passion. Passion is not something you can fake. It must be real
and authentic. In their book The Leadership Challenge, Kouzes and Posner state “If a leader
displays no passion for a cause, why should anyone else care”. Research has shown that one of
the traits people admire most in leaders is their ability to be forward-looking. It’s not enough
for a leader to have a vision, he/she must be able to communicate it and get others excited
about it and supporting it. Effective leaders influence others by sharing their enthusiasm and
excitement.
 Be open to influence
Influence should be reciprocal. One of the quickest ways to increase your influence with others
is to be open to influence yourself. This means truly demonstrating openness. Be willing to
listen to others’ ideas, invite and consider alternative viewpoints. Make use of others’ skills and
expertise. By displaying openness you’ll begin to build respect and trust with others and that
will increase your influence. Leadership has been described as the ability to influence others. An
effective leader moves followers into action not with coercion but by eliciting their desire and
conviction in the vision and goals articulated by the leader. Misused influence can bring about
catastrophic results. But properly channeled, positive influence can bring about great change as
individual actions align with group efforts to produce gains that grow exponentially. A leader,
who, through focused and deliberate effort, exerts positive influence in others, will build trust
and become a true driving force toward excellence.
Leadership influence tools:

o building relationships
o networking
o acting politically
o storytelling
o challenging
11.6 Ethical dilemmas

6. Conflicts of Interests
Conflicts of interest abound at the board level. They constitute a significant issue in that they
affect ethics by distorting decision making and generating consequences that can undermine
the credibility of boards, organizations or even entire economic systems.
Many corporations require board members to sign a conflict of interest policy at the time of
appointment or to declare any conflicts of interest at the beginning of board meetings. Conflict
of interest policies normally specify how directors should avoid conflicts of interest. This narrow
focus only scratches the surface, given the scope, responsibilities and dynamics of decision
making in the boardroom.
The real danger lies in the extent to which boards and directors are unaware of the many subtle
conflicts of interest that they are dealing with. The boardroom is a dynamic place where
struggles of ego, power, rules, and authority continuously surface, and it is not always clear, in
the turmoil of group dynamics, what constitutes a conflict of interest or the manner in which
one should participate in board deliberations. Furthermore, director duties tend to diverge
from one company to another and from country to country, which adds even more complexity.
The four tiers of conflicts of interest
A tier-I conflict is an actual or potential conflict between a board member and the company.
The concept is straightforward: A director should not take advantage of his or her position. As
the key decision makers within the organization, board members should act in the interest of
the key stakeholders, whether owners or society at large, and not in their own. Major conflicts
of interest could include, but are not restricted to, salaries and perks, misappropriation of
company assets, self-dealing, appropriating corporate opportunities, insider trading, and
neglecting board work. All board members are expected to act ethically at all times, notify
promptly of any material facts or potential conflicts of interest and take appropriate corrective
action.
Tier-II conflicts arise when a board member’s duty of loyalty to stakeholders or the company is
compromised. This would happen when certain board members exercise influence over the
others through compensation, favors, a relationship, or psychological manipulation. Even
though some directors describe themselves as “independent of management, company, or
major shareholders,” they may find themselves faced with a conflict of interest if they are
forced into agreeing with a dominant board member. Under particular circumstances, some
independent directors form a distinct stakeholder group and only demonstrate loyalty to the
members of that group. They tend to represent their own interest rather than the interests of
the companies.
A tier-III conflict emerges when the interests of stakeholder groups are not appropriately
balanced or harmonized. Shareholders appoint board members, usually outstanding
individuals, based on their knowledge and skills and their ability to make good decisions. Once a
board has been formed, its members have to face conflicts of interest between stakeholders
and the company, between different stakeholder groups, and within the same stakeholder
group. When a board’s core duty is to care for a particular set of stakeholders, such as
shareholders, all rational and high-level decisions are geared to favor that particular group,
although the concerns of other stakeholders may still be recognized. Board members have to
address any conflicts responsibly and balance the interests of all individuals involved in a
contemplative, proactive manner.
Tier-IV conflicts are those between a company and society and arise when a company acts in its
own interests at the expense of society. The doctrine of maximizing profitability may be used as
justification for deceiving customers, polluting the environment, evading taxes, squeezing
suppliers, and treating employees as commodities. Companies that operate in this way are not
contributors to society. Instead, they are viewed as value extractors. Conscientious directors
are able to distinguish good from bad and are more likely to act as stewards for safeguarding
long-term, responsible value creation for the common good of humanity. When a company’s
purpose is in conflict with the interests of society, board members need to take an ethical
stand, exercise care, and make sensible decisions.
Good governance starts with the integrity and ethics of every director on every board. Board
directors have a moral obligation not to take advantage of the company, but to be loyal to the
company, make wise decisions, neutralize conflicts among stakeholders, and act in a socially
responsible way. An ethical board sets the purpose of the company, which in turn influences all
dealings with stakeholders. The four-tier pyramid summarizing the different levels of conflict of
interest can help board directors anticipate and identify potential conflicts, deal with conflicts
and make sensible decisions to chart a course for the future of the company.
7. Regulatory Breaches
Corporate directors and officers may increasingly be targets of shareholder derivative lawsuits
in the wake of the surge of regulatory actions and private litigation around data breaches.
While no individual directors and officers have been held liable for the costs of a data breach to
date, such lawsuits have been filed. Signals from plaintiffs' attorneys indicate that, if they have
their way, the wave will break soon. Corporate leaders need not be caught off guard. As a
recent court decision confirms, the risk of individual liability can be mitigated by taking
proactive measures.
Directors should understand that they can be personally liable for data breaches or other data
protection failures in some circumstances. This means that Directors should appreciate that
they should take steps not only to protect their companies but also to protect themselves.
Given the developing litigation landscape relating to cybersecurity issues, cybersecurity
breaches not only create regulatory and other legal liability for corporations but can also create
personal liability for directors.
Directors contemplating their companies’ cyber security arrangements must elevate cyber
security oversight to the top of the risk register to better protect their businesses – and
themselves and establish a leadership position in managing the emerging and dynamic risk of
cyber-attacks.
8. Compliance with Codes of Conducts

The Board of Directors (Board) should adopt a Code of Conduct ("Code") . This Code should be
intended to focus Board Members on areas of ethical risk, provide guidance to help them
recognize and deal with ethical issues, provide mechanisms to report unethical conduct, foster
a culture of honesty and accountability, deter wrongdoing and promote fair and accurate
disclosure and financial reporting. The Code is not intended to override any applicable laws or
any obligations pursuant to Bylaws, Conflicts of Interest Policy, Governance Guidelines or any
other applicable policies.
No code can anticipate every situation that may arise. Accordingly, a code is intended to serve
as a source of guiding principles and not absolute directives. Generally, however, the goal is to
ensure that Board Members strive to foster a company’s Mission, Core Values and
Commitments in an ethical manner.
CHAPTER 12
12. Effective Talent Management
Talent management practices have evolved over the years to cater to people-specific trends
much like all other aspects of work, and have changed in fast strides over the last few years.
Strategic talent management is a necessity in today’s hyper-change environment. Global trends
in talent and human capital management have led to a renaissance of the work-worker-
workplace equation.
Definition: Talent management is defined as the methodically organized, strategic process of

getting the right talent onboard and helping them grow to their optimal capabilities keeping
organizational objectives in mind.
The process thus involves identifying talent gaps and vacant positions, sourcing for
and onboarding the suitable candidates, growing them within the system and developing
needed skills, training for expertise with a future-focus and effectively engaging, retaining and
motivating them to achieve long-term business goals. The definition brings to light the
overarching nature of talent management – how it permeates all aspects pertaining to the
human resources at work while ensuring that the organization attains its objectives. It is thus
the process of getting the right people onboard and enabling them to enable the business at
large.
Talent Management Process
While often cyclical rather than a generic linear progression of events, the process of talent
management could be considered, to begin with acknowledging the need for talent and leads
to filling that gap and ultimately growing and optimizing the skills, traits, and expertise of
employees, new and old.
The following image depicts the key points of the talent management process:
Key Steps In The Process Of Managing Talent Effectively:
1. Planning: Like in any process with a set outcome, planning is the first step in the process of
talent management. It involves the following identifying where the gaps lie – the human capital
requirement, formulating job descriptions for the necessary key roles to help guide sourcing
and selection and developing a workforce plan for recruitment initiatives.
2. Attracting: Based on the plan, the natural next step is to decide whether the talent
requirements should be filled in from within the organization or from external sources. Either
way, the process would involve attracting a healthy flow of applicants. The usual external
sources include job portals, social network, and referrals. The talent pools that need to be
tapped into must be identified in advance to keep the process as smooth and efficient as
possible. This is where the kind of employer brand that the organization has built for itself,
comes into play because that decides the quality of applications that come in.
3. Selecting: This involves using a string of tests and checks to find the right match for the job –
the ideal person-organization fit. Written tests, interviews, group discussions and psychometric
testing along with an in-depth analysis of all available information on the candidate on public
access platforms help in gauging an all-rounded picture of the person. Today there are software
and AI-enabled solutions that recruiters can use to skim through a vast population of CVs to
focus on the most suitable options and to find the ideal match.
4. Developing: Quite a few organizations today operate on the idea of hiring for attitude and
training for skills. This makes sense because while you would want a predisposition to certain
skill-sets, it is the person that you are hiring and not the CV. Developing employees to help
them grow with the organization and training them for the expertise needed to contribute to
business success also builds loyalty and improves employee engagement. This begins with an
effective onboarding program to help the employee settle into the new role, followed by
providing ample opportunities for enhancing the skills, aptitude and proficiency while also
enabling growth through counseling, coaching, mentoring and job-rotation schemes.
5. Retaining: For any organization to be truly successful, sustainably, talent needs to be

retained effectively. Most organizations try to retain their best talent through promotions and
increments, offering opportunities for growth, encouraging involvement in special projects and
decision-making, training for more evolved roles and rewards and recognition programs.
6. Transitioning: Effective talent management focuses on a collective transformation and

evolution of the organization through the growth of individual employees. This involves making
each employee feel that they are a part of a bigger whole. Providing retirement benefits,
conducting exit interviews and effective succession planning might seem like unrelated career
points but they are all transition tools that enable the shared journey.
Key components of a highly effective talent management process include:
 A clear understanding of the organization’s current and future business strategies.
 Identification of the key gaps between the talent in place and the talent required to
drive business success.
 A sound talent management plan designed to close the talent gaps. It should also be
integrated with strategic and business plans.
 Accurate hiring and promotion decisions.
 Connection of individual and team goals to corporate goals, and providing clear
expectations and feedback to manage performance.
 Development of talent to enhance performance in current positions as well as readiness

for transition to the next level.
 A focus not just on the talent strategy itself, but the elements required for successful
execution.
 Business impact and workforce effectiveness measurement during and after

implementation
12.1 Board talent management overview
As companies plan for a post-pandemic economy, and continue tackling social issues, they must
also contend with rapid business transformation. Talent management is more critical than
ever—and so is director oversight.
Corporate directors have traditionally focused their talent management efforts on the C-suite,
leaving oversight of the broader workforce to senior executives. But the pandemic, pressure to
advance diversity and inclusion efforts, and the astonishing pace of business and digital change
have made it critical for boards to provide greater oversight of talent management at multiple
levels of the organization.
Rethinking talent
Providing oversight of a company’s top talent has long been a core responsibility of corporate
boards. They play a critical role in hiring and firing the CEO, evaluating the performance of top
executives, developing leadership succession plans, and ensuring their companies have a robust
pipeline of talent to execute company strategy.
Traditionally, directors have focused their talent management efforts on the C-suite, leaving
oversight of the broader workforce to senior executives. But many boards have come to
understand that a strategy is only as good as a company’s ability to execute it. And strong
execution requires talented people at all levels of the organization—particularly when most
companies are reinventing themselves amid widespread disruption and planning for a post-
pandemic world.
These days, the ability to attract, develop, and retain the best talent has become a critical
business differentiator. Yet it is a challenge. In a recent survey, CEOs cited the low availability of
key skills as one of the top threats to business. As widespread transformation continues to drive
demand for workers with new skills, not having a comprehensive plan for acquiring and
developing these workers can hurt a company’s ability to grow and innovate.
The COVID-19 pandemic has only compounded the need to rethink talent management. The
initial focus was the immediate crisis of ensuring workers’ health and safety and staying
financially afloat. Now companies are looking at how COVID-19 has changed their business and
working models and what that means for their future talent strategies.
Some of the pandemic’s biggest long-term impacts on the workforce include much higher
numbers of employees working remotely, less corporate travel, and reduced office space. This
gives companies greater flexibility to recruit talent from anywhere. It also means they need to
ensure they have the right technology and corporate culture to support the shift to a more
virtual work environment. The acceleration of digitization and business strategy changes
required during the pandemic may also have a lasting effect on the type of talent companies
need.
Aside from the implications of COVID-19, companies are also grappling with a social crisis that
has heightened the focus on workforce diversity and inclusion (D&I). As a result of all these
changes, boards must play a larger role in ensuring their organizations have the talent they
need to execute new strategies in a post-pandemic world and respond appropriately to the
calls for greater workforce transparency.
Three steps to better board oversight
Taking a more substantive role in talent management oversight isn’t easy. It requires boards to
strike a balance between acting strategically to ensure the company’s strength without
stepping into the role of management. Here’s a framework for maintaining a healthy oversight
balance at three different levels of the organization:
1. The C-Suite
Directors are responsible for selecting and monitoring the performance of the CEO. As part of
that responsibility, the board needs to hold the CEO and other C-level executives accountable
for company performance on talent management. This has become even more important as
CEO tenure has fallen to a median of five years, down from six years in 2013. As tenures get
shorter, CEOs are under more pressure to deliver short-term results. Tackling longer-term
initiatives such as upskilling the workforce and increasing diversity becomes even more
challenging. So, boards must ensure that talent development remains a top management
priority, despite the pressure to meet shorter-term performance targets.
When it comes to C-suite oversight, this can mean setting objectives related to:
 strategic talent management,

 upholding healthy and ethical corporate values to set the right tone at the top, and
 creating a diverse and inclusive culture.
Closely measuring executive performance in each area is critical, along with making it clear to
the team that the board expects them to model proper workplace behavior.
2. Up-and-comers
Boards need to ensure the company has a robust talent pipeline for all C-suite functions. They
can do this by using a “C-suite readiness chart” (see chart below) that identifies senior
executives who could assume those positions now and who might be ready one to five years in
the future. In the meantime, they should take steps to get to know and assess the capabilities
of these high performers by:
 having them present to the board on major initiatives,

 assigning them to work on special board projects,
 or inviting them to board dinners and other social events.
3. Middle management
Getting to know middle managers is particularly difficult for board members. At this level, the
board can provide oversight by understanding the organization’s talent philosophy, culture, and
talent needs for the future.
This includes:
 reviewing talent retention strategies and compensation programs to ensure they

address issues like gender inequity and achieving diversity and inclusion goals,
 reviewing metrics that indicate whether the culture aligns with company strategy, and
 asking how management plans to address current and future skills gaps created by the
adoption of artificial intelligence, machine learning, big data, advanced analytics, cloud
technology, and automation.
Board oversight in action
What tools does the board need to ensure that a company’s talent management approach
aligns with corporate strategy? Here’s where to start:
1. Data
During the pandemic, board reporting shifted. Management sent boards more frequent and
detailed human capital reports as they monitored workers’ health, safety, and productivity.
Even after the crisis, boards can continue to use this data to spot warning signs and make
better-informed decisions. A review of talent management-related key performance indicators
(KPIs) can identify red flags and opportunities for improvement. Helpful data points include:
 high turnover and high-performer departure rates,

 unfavorable exit interviews (particularly those of high-performing employees),
 the race, ethnicity, and gender breakdown of the current workforce, new hires, the
recently promoted, and resignations,
 positions that remain unfilled for long periods,
 succession plan failure rate (number of times management established a plan but
ultimately hired someone else),
 low employee engagement scores (including an analysis of scores by diverse groups),
and
 whistleblower complaints and lawsuits involving HR issues such as harassment and
discrimination.
2. First-hand information
Aside from data, directors benefit from exposure to employees from as many levels of the
organization as possible. Paying attention to employee sentiment and behaviors can identify
areas of strength or concern. This can be done by:
 getting a sense of the tone at the top through observation and the use of quantitative
metrics related to culture,
 observing interactions between management team members during board
presentations to identify potentially unhealthy dynamics, such as an unwillingness to be
candid,
 interacting with employees below the C-suite during social events, site visits, and board
programs,
 using the company’s products and services to interact with frontline employees and get
a sense of its customer service style, or
 reviewing employee engagement surveys and requesting reports and presentations on

corporate culture.
3. Accountability
Focus from the board can ensure that developing and managing talent is one of a company’s
top priorities. Directors should consider six actions as they look to provide greater oversight:
 Assign talent management responsibility to either the full board or a dedicated

committee so everyone understands their roles and responsibilities. Talent oversight is
often allocated to the full board, with committees overseeing certain aspects within
their specific areas of oversight. Many boards choose to assign talent management
oversight to a designated committee, usually compensation. Whichever structure the
board adopts, the important thing is to make sure the allocation of responsibility is
clear.
 Incorporate talent into strategy discussions. When assessing the viability of strategic
initiatives, directors often focus on the financial implications of these decisions. That’s a
big piece of it, but the board also needs to make sure the company has the right people
to execute that strategy. The board can do this by requesting that management include
a “talent component” in every new initiative they present to the board.
 Make talent management experience a selection criteria for new board members and
highlight existing capability. Not every board needs a director with human resources
expertise, but talent management skills can be beneficial. Directors who have managed
companies, divisions, or regions can bring helpful talent management experience.
Companies may wish to highlight this expertise among current directors in the
company’s proxy statement.
 Elevate the chief human resources officer (CHRO) to a more strategic role and ask for
regular updates. Many companies have elevated their human capital leaders, giving
them greater responsibility for overseeing talent development and culture efforts. As a
C-suite member, the CHRO should have a regular spot on the board’s agenda. Some
boards have their CHRO present a talent review to the entire board once a year, with
updates as needed. This talent review should also include a focus on diversity and
inclusion efforts.
 Make talent management a KPI for executive compensation. Set specific people-
development goals in areas like diversity and inclusion, as well as retention targets for
new hires and high-potential performers to encourage leaders to place greater focus on
talent issues.
 Ensure that diversity and inclusion efforts are embedded within the organization. This
also requires management to provide appropriate reporting to the board on D&I goals
and performance against those goals. The board’s efforts in the area are important too.
Examining the board’s own diversity and approach to succession planning—and being
transparent about those efforts—indicates a commitment to the cause.
Building talent for tomorrow
The impact of the COVID-19 pandemic, recent racial protests, new disclosure requirements,
shortage of skilled labor, and astonishing pace of business and digital change are all weighing
on companies. And they are the reasons boards need to shoulder greater oversight
responsibility for talent management. Day-to-day talent development responsibilities, of
course, remain with management. But directors can work to ensure their company’s approach
to talent supports its long-term objectives.
When boards and management teams prioritize investing time and resources in human capital
development throughout the organization, they are more likely to win the talent wars while
becoming more resilient, agile, and innovative.
12.2 Skills and competencies of board members
CLEAR Board Member Competencies
Knowledge
 Familiarity with CLEAR’s mission, vision, values, and goals (including strategic plan)
 Understand the Board of Directors' role in proper stewardship of the organization
 Understand corporate governance (the role of a policy making board) and the difference
between governance and operations
 Expert knowledge and experience in the regulation of professions and occupations
 Knowledge of governance issues for membership organizations and how they differ
from those of regulatory agencies
 Knowledge of CLEAR’s products and services including the work of its committees in
contributing to product development and service delivery.
Skills
Strategic Thinking
 Ability to operate on a strategic level rather than a tactical level
 Ability to be goal and future oriented
 Ability to think critically, ask questions, and challenge unsubstantiated opinions
 Ability to understand issues from different perspectives
 Ability to understand and process large amounts of information effectively and
efficiently
 Ability to set vision and identify new business opportunities, helping the organization
respond to expanding or contracting markets
Communication
 Ability to articulate ideas, opinions, rationales, and comments in a clear, concise, and
logical manner
 Ability to interact with other board members in a group setting, both contributing to
discussions, and valuing the contributions of all members
 Ability to effectively communicate with a culturally diverse team of board members and
staff
 Ability to achieve practical consensus in group discussions
Decision Making
 Ability to use logic and reasoning to identify issues as well as the strengths and
weaknesses of alternative solutions, conclusions, or approaches to problems
 Ability to make informed decisions efficiently and take action when needed
 Ability to participate in the execution of the strategic plan, portions of which may be
assigned to board members
Analytical Skills
 Ability to understand and analyze financial reports
 Ability to review and analyze proposed budgets in light of CLEAR resources, strategic
goals, and priorities
 Ability to analyze reports on a variety of topics (for example business development and
membership; event planning; public relations, marketing and communications;
cybersecurity) from committees, task forces, and other entities, and to comment on drafts
of publications and other documents, as required.
Image. Director competency
Additionally, the core competencies fall into in five categories: group skills, interpersonal
skills, personal leadership skills, technical skills, and personal attributes. While every
association may prioritize a different set of traits, the study suggests that establishing needed
characteristics and capabilities is a critical early step to populating an effective board.
Group skills. These are the assets of team-oriented individuals. People with this competency
are more inclined to solve problems as a group. They will prioritize the best interests of the
board, organization, and members over individual priorities, such as pet projects and personal
advancement. Boards made up of team-oriented individuals can be more adaptable, creative,
and productive than boards comprising more individually focused members.
Interpersonal skills. These include communication, relational, influence, and reputation

competencies:
 Board members with good communication skills are adept at disseminating their
expertise and opinions and receiving differing opinions from their fellow members.
 Relationship-building contributes to board cohesion and effectiveness. A board with
members who have high relational competency are more likely to tap in to the group’s
collective abilities. Board members who are skilled at forging and maintaining relationships
can also connect the organization with stakeholders who can advance their mission.
 Influence is described as three elements of social power: personal, expert, and
positional. Board members with these strengths are comfortable challenging the decisions
and performance of management when there is a need to change the status quo.
 When individual members of a board have a positive reputation, the board conveys
legitimacy to members and the public.
Personal leadership skills. Board members should be able to provide both strategic and
innovative thought leadership. Strategic thinking involves analyzing issues and making decisions
that support the organization’s overarching mission. Board members with the capacity for
innovative thinking make new ideas and solutions possible.
Technical skills. To make informed decisions, individual board members need deep knowledge
about both the field and the organization. Collectively, the board should represent a variety of
life experiences, which improves overall efficiency and reduces the likelihood of significant
knowledge gaps.
Personal attributes. These include commitment, integrity, and capacity:

 When board members are committed because they are emotionally invested in an
organization, the board is likely to be more effective.
 Personal integrity fosters an environment of trust and accountability within the board.
 No matter how great a fit in other ways, if a board member doesn’t have the time to
contribute fully to the work of the board, he or she will not be the best asset to the
organization.
There is no way to guarantee an effective board, and establishing desired competencies is just
one component of a thorough board selection process. But this step has advantages: It can
focus the search and, depending on the nomination process, potentially reduce the number of
applicants. As a step in a deliberate selection process, it allows leaders to actively solicit top
talent with strengths and skills that will move the organization toward its goals.
12.3 Recruitment of board members

It's very important to keep the perspective that your board deserves highly skilled and
participative board members. Don't erode your goals and believe that you are lucky to get
anyone at all.
When you set out to recruit new members, the most important consideration is know what
kind of skills are currently needed by the board. Consider the nature of issues and goals
currently faced by the organization, for example, if you're struggling with finances then seek a
member with strong financial skills.
1. Maintain an up-to-date list of potential board candidates, including the particular skills they
can bring to the organization. This is often done by the Nominating Committee or the Board
Development Committee.
2. Develop a Sample Board Application Form for prospective new board members. The form
should solicit information about the potential new member, including biographical information,
why they want to join this board, what they hope to bring to the board, what they would like to
get from their board membership and any questions they might have.
3. Per any scheduling in the By-laws and/or after strategic planning, reference major strategic
goals for the organization and the chief executive to identify what skills would be highly
useful to the board, e.g., if new people will be hired, the board may desire people with human
resource skills, etc.
4. Reference the list of potential candidates to recruit for board membership and ask to meet
with them.
5. Prospective board members should meet with the board chair and the chief executive, hear
an overview of the organization and receive relevant organizational materials describing the
organization's products or services, receive a board member job description and a board
member application form. The prospective new member should hear about how the
organization orients new members. Provide names of several board members whom the
prospective new member might contact with any questions.
7. Identify if there are any potential conflicts of interest with the candidate, e.g., is he or she
on the board of a competing organization, a vendor of the organization, etc.
8. Invite the prospective new member to a board meeting. Notify current board members that
a potential new member will be attending. Consider name tags to help the potential new
member be acquainted with board members. Introduce the member right away in the meeting
and, at the end of the meeting, ask the potential new member if they have any questions.
Thank them for coming.
9. Shortly after the meeting, call the prospective new member to hear if they want to apply
for joining the board or not. If so, solicit their completed board member application and
provide all applications to the board for their review and election.
10. Notify new members (those who have been elected) and invite them to subsequent board
meetings and the board orientation.
12.4 Introduction of Board Members
Chances are, there is an onboarding process in place for new staff members that allows them to
become acquainted with the team and get acclimated to your work quickly.
New members need to be caught up on a lot of information in a relatively short amount of time
so that they’re able to hit the ground running. A welcome process that outlines current
initiatives, who to contact for information, and your organizations current goals allows new
board members to catch on quickly. Solidifying an onboarding process will ease the transition
into their new roles and ultimately set your entire organization up for success.
How to Welcome New Board Members before the First Meeting
New board members will get a formal introduction and welcome at the first official board
meeting, but connecting with other board members before that initial meeting is crucial. The
idea here is to make them feel like part of the team from the very beginning. Not only does this
exhibit your board’s professionalism, but it also helps to establish camaraderie and to get
everyone on the same page.
Taking the time to onboard your new board members properly ensures that they will be
thoroughly engaged, even if their first official meeting is later in the year.
1. Make a “New Board Member” Announcement.

Extend a warm welcome to new board members by making a public announcement. Not only
does this show them that you’re proud to have them on board, but it also informs supporters
that you have new additions to your team.
Here are three primary platforms where you’ll want to share the news:
1. Newsletter: Your regularly-scheduled email newsletter is a fantastic

opportunity to announce each of your new board members. Have each new
individual write up a short bio stating their background experience as well as
which positions they’ll be filling.
2. On your website: Many organizations maintain an up-to-date page with

current leadership and board members. Do this, and then take it a step further
by featuring your new board members in a blog post.
3. On your social media: Either share a single post showcasing the entire team,
or dedicate a post to each individual with their bio and a headshot. This offers
them something special to share on their own social media, too.
Proactively and publicly welcoming new board members will resonate with them and kick
things off on the right foot.
2. Break the Ice With a Get-Together.

If possible, encourage your current members of the board and leadership team to get together
with new board members to welcome them. Those initial connections and first impressions are
vital, and icebreakers will give new members a friendly face for when they visit your facility or
join their first meeting. Including key team members ensures new board members have
someone to turn to as they get acquainted with your organization.
3. Add Them To Your Email Lists.

It seems obvious, but make sure you add new members to your own email contact list and
other communication platforms to ensure they receive all pertinent information. If you
maintain an online calendar, be sure to add them to it and invite them to any meetings so that
they can plan appropriately.
4. Schedule a Visit.
If possible, invite each new board member to your facility for a brief visit. Meeting on-site
before their first board session is beneficial for a few reasons. They can tour the facility, see the
boardroom, meet staff members and volunteers, and watch your team in action.
5. Hold a New Board Member Orientation.
Some nonprofits host a separate board orientation meeting for new board members prior to
the first official meeting, while others lump it into the first meeting. It’s up to you, but a
separate meeting to go over your nonprofit’s mission, review expectations, and fill out any
necessary paperwork is often the better option.
6. Create a New Board Member Welcome Packet.

When you bring on a new board member, documents are always part of the onboarding
process. While you want to provide them with sufficient information, you certainly don’t want
to inundate your newest board member with reams of paper.
Share a new board member welcome packet with straightforward background materials that
the individual can take home, read, ponder, and formulate questions around. Strike the perfect
balance and help them get oriented quickly by sharing key documents like:
 History one-pager: This outlines your nonprofit’s history. You can start by cutting and
pasting background information from your website. Then, tweak it to be inspirational for your
new board members.
 Board roles and responsibilities: This covers what duties are assigned to each role on
the board. Roles vary across organizations, but a few common ones are president, treasurer,
and secretary.
 Organization bylaws: A copy of your bylaws will give new members a foundational
understanding of their role in the decision-making hierarchy at your organization.
 Financial data: This can include financial information like your approved budget for the
year and the most recent financial audit results.
 List of current leadership and board members: This should include a brief bio, a photo,
and contact information for each of your nonprofit’s leaders and residing board members.
 A calendar: This lists upcoming meetings and events—either programmatic or
development related. Including this allows them to mark their calendars and gives them ample
time to suggest updates if something was missed.
 A list of committees and their charges: Name your nonprofit’s committees and
correlated responsibilities. You should also list committee members’ names and contact
information.
7. Walk Through Expectations and Responsibilities for Each Role
Once you’ve tackled introductions, you can move on to discussing roles, responsibilities, and
expectations for the new members. Ensuring each new board member understands exactly
what their role entails is essential for making progress toward your mission.
Tips for New Board Members
12.5 Board Learning and Development
Given the level of responsibility the board holds, it is vital that every member has the skills and
abilities they need to carry out their role.
Management committees/boards should have or ensure that all their members receive the
necessary induction, training and ongoing support needed to discharge their duties effectively.
To maximize the benefits of training and support, management committees need to take the
time to plan how to ensure they are equipped to carry out their responsibilities. The dynamics
of the role may mean that members find it challenging to commit additional time and
management committees may be reluctant to prioritize resources for training. It is therefore
important to be flexible and creative in how and when training and support is provided.
Board Development includes:
 Recruiting committed board members with the experience, skills and networks needed
by your organization.
 Orienting board members so they are ready to serve and to represent the organization
to the community. Read more about on boarding and orientation here, here, and here.
 Providing learning and leadership development opportunities in board meetings and
through classes, conferences, and webinars.
 Doing regular board assessments to guide board development activities.
 Cultivating the leadership of the board by giving board members opportunities to serve
on committees, task forces, or special projects before they are elected to officer
positions.
 Establish a board development or governance committee that is responsible for
planning a schedule of learning opportunities throughout the year.
Here are some ideas to keep a board engaged and learning.
 “Mission Moment” - Regularly have a program staff member, perhaps with someone
who uses your services, make a short presentation at a meeting.
 Send board members an article, blog, or book to read.
 Include notices about upcoming board trainings, conferences, and webinars on meeting
agendas, or have board members sign up to receive email notices from organizations
that offer regular board training.
 Have members lead a discussion of something they read or a training they attend,
focusing on the implications for your organization.
 Set up a board collaboration site to make it easier for board members to share
information and report on what they learned.
Reasons you should invest in board development

1. It reminds board members of their role and responsibilities
With the best will in the world, roles can get muddled in the heat of debate. Investing in board
development helps board members to raise their heads out of the detail and think together
from a more strategic perspective.
2. It helps build the board team
The real benefit of board learning and development is that it helps them gel as a team. Often
the board has little time in board meetings to get to know each other, as everyone is focused
on the job at hand. Taking time out for board development allows board members to interact in
a less structured environment, and the resulting relationships are more resilient when the going
gets tough.
3. It ensures board members are using ‘reasonable care, skill and diligence’
Keeping the board informed and energized ensures that they can effectively discharge this
duty.
4. It shows that the organization values continual learning
The culture of an organization is set by the board, and permeates throughout the organization.
By investing in board development, a clear signal is sent that the organization values continual
learning. This will encourage staff to continuously learn and develop, creating a vibrant learning
organization that will be the envy of competitors.
5. It helps keep the organization safe and legal

We live in an ever-changing world. If the board is to ensure that the organization is kept safe
and legal, it must be conversant with changes in regulation, legislation and the operating
environment. Boards should be given regular updates on such changes, and should consider
how they affect the organization and what actions are needed.
6. It helps to motivate and retain good board members

Really good board members are committed to continually developing themselves and growing
in their role. They therefore value an organization which also invests in them. This leads to
increased motivation and loyalty.
7. It builds trust
Boards that spend time in reflective and learning mode tend to communicate in more depth
and do more straight talking with each other on the topics that really matter. By doing that,
they develop a level of trust that enhances board team performance.
8. It increases innovation and improves performance

Organizations that invest in people development are the most likely to be at the cutting edge of
new innovations. Linked to an increase in innovation, increased investment in learning and
development leads to improved performance.
9. It helps ‘future-proof’ the board

To develop a learning and development plan, the board will have conducted a skills audit and
mapped the skills available against those that are likely to be needed in the future to add value
to delivery of the strategic plan. Any gaps shown up in the skills audit may also be fed into the
board renewal process, and used to guide the recruitment of new board members.
10. It gives a competitive advantage

Learning and development opportunities offer competitive advantages in the form of both
improved processes, and also an increased likelihood of new products or services to meet
clients’ demands.
Make board development an ongoing activity of the board. Your board leadership will be
stronger and you will attract board members who are eager to learn and who understand the
importance of being a good board member.
12.6 Performance management of board members
Good corporate governance requires effective boards and to evaluate their performance and
appraise directors at least once a year. Board performance evaluation has become prolific.
What has not become generalized is the quality of these board evaluations, which varies wildly
from company to company. The increasing reliance on board management software with board
performance evaluation tools is changing this, but the change to modern governance is slow.
“But despite their growing adoption of evaluation methods globally, board assessments are
falling short of their promise of enhancing board effectiveness in some cases. Boards that take a
compliance-oriented approach — or structure the process in a way that prevents a true
examination of the impediments to board effectiveness — lose the opportunity to gain valuable
shared insight into the operation of the board and ways to improve its composition, processes
and relationships.
The effectiveness of the Board depends on a variety of factors, some of which are:
• Board Structure: its composition, constitution and diversity and that of its Committees,
competencies of the members, Board and Committee charters, frequency of meetings,
procedures;
• Dynamics and Functioning of the Board: annual Board calendar, information availability,
interactions and communication with CEO and senior executives, Board agenda, cohesiveness
and the quality of participation in Board meetings;
• Business Strategy Governance: Board’s role in company strategy;
• Financial Reporting Process, Internal Audit and Internal Controls: The integrity and the
robustness of the financial and other controls regarding abusive related party transactions, vigil
mechanism and risk management;
• Monitoring Role: Monitoring of policies, strategy implementation and systems;
• Supporting and Advisory Role; and
• The Chairperson’s Role.
From the point of view of corporate governance, it is essential for an organization to ensure
that the dynamics of a board of directors is healthy – that is, each director contributes on an
individual basis, as a team member and as a member of committees. Reporting on board
evaluations should show what the board is doing well and less well, what individual directors
performance are contributing, and how individuals may contribute more.
Board Chair Performance Evaluation Tools
A most sensitive topic is the evaluation of the chair. Even a good leader always has to make
difficult decisions, some of which invariably lead to resentment or disaffection among board
members.
So, it is difficult to balance board member assessments of the chair with that of management
and that of the individual.
Here again, board management software and board chair performance tools can smooth out
the process, taking the relevant issues from all evaluations, analysing them in terms of specific
benchmarks, and allowing the entire board to share in a balanced view of the chair’s
performance.
Independent Board Evaluation Tools
There are also issues to be considered when the evaluation is managed by an external, third-
party consultant.
Certainly, there are advantages in this approach: Engaging an external independent expert or
consultant or advisor to facilitate the board evaluation process means that the evaluation
process becomes more independent and transparent.
The disadvantages and challenges are also considerable. An external evaluator can’t know
much about the dynamics of the board, how effective individual strategy decisions have been,
individual contributions from directors, etc. Certainly, the evaluator will ask about all of these
things, but the process of asking specific questions already delimits, to some extent, the nature
of the answers.
Diligent’s Board Assessment Tool – The Cutting Edge of Modern Governance
The Diligent Board Assessment tool offers many valuable features, such as:
 Setting up various types of questions

 Monitoring submissions
 Automatically reporting
 Customising reports
 Adding graphics
The assessment tool includes powerful assessment creation tools with multiple question types,
an intuitive board evaluation questionnaire creation interface with innovative solutions for
glossaries and supplemental information, and e-signature sign-off. It provides safe, secure
recordkeeping – users can view past evaluation results with just a few clicks. They can also
enjoy bulletproof board security with the highest levels of threat protection and encryption.
12.7 The role of the corporate secretary/ governance professional in effective talent
management
 Day-to-day talent development responsibilities, of course, remain with the

management. But CSs can work to ensure a company’s approach to talent supports its
long-term objectives. When a company invests time and resources in human capital
development throughout the organization, it is more likely to win the talent wars while
becoming more resilient, agile, and innovative.
 Advising, where appropriate, on employee benefits and employee incentive plans.

 Advising on intellectual property asset management (for example patents, trademarks,
business and domain names) and trade practices legislation.
 Providing broader legal advice and guidance, for example powers of attorney, work
health and safety, employment law, anti-money laundering requirements.
 Advising on relevant financial issues - accounting, finance, taxation, dividend
reinvestment plans, superannuation.
 Monitoring organizational investments.
 Advising, where required, on environmental issues.
 Advising on privacy legislation.
12.8 Ethical dilemmas in relation to managing talent
Organizational approaches to talent management are often concerned with the ways that a
small proportion of relatively high-performing employees are identified and managed in
relation to the majority.
The ethical framework for talent management is an essential element for ensuring best
practices and corporate social responsibility in the functions of talent management. Injecting
ethics into managing the most variable resource of an organization ensures that sensitive
matters related to preferential treatment for workers is not done in a manner that leads to
discriminatory practices. Advancing the careers of high potential talent and recruiting the
most impactful new employees should never be done in a fashion that subjugates ethical
treatment to discriminatory practices.
The identification of talent must be free of bias. The talent recruiter and the hiring manager
will be picking winners and losers from the pool of potential candidates. The ethical
considerations must ensure that bias does not overly reward applicants on the basis of
identifying factors that may be held common to those choosing winners and losers beyond
performance potential differentiations. It is essential that talent is evaluated using
nondiscriminatory, empirical criteria to ensure that bias is excluded. It is the talent
management professional’s responsibility to ensure that the hiring manager understand the
ethical considerations of bias and the need to not engage in discriminatory selection processes
and to stop the process when there is a reasonable question as to whether the selection is
being done free of bias.
Talent management is a major shift from traditional HRM. In talent management, the
profession extends beyond the utilitarian ethics that may not fully account for personal agency.
Talent managers are now giving ethical consideration of what the organization is able to
provide to the worker in practice of social exchange theory. The individuality and personal
agency of the worker is one of the defining characteristics that makes them a desirable
candidate in talent management. These unique characteristics advance the creativity and
innovation that is required to build organizational competitive advantage.
CHAPTER 13
13. Board Evaluation
Board evaluation has attracted increased attention from investors, regulators, and other
stakeholders. The reason for this is both simple and straightforward. When carried out
properly and effectively, board evaluations can provide a vital tool for directors to review
and improve board performance. This will eventually lead to significant value creation
opportunities for firms.
But are increased regulations and regulatory guidance requiring board evaluations a
realistic or sensible move? And is it necessary for regulators to make boards more active in
the area of selfevaluation? As can often be the case, the risk of regulatory initiatives aimed
at compelling, or even prodding, firms to take greater responsibility is that it simply
encourages “box ticking” behavior in which managing the appearance of responsibility and
compliance becomes the key objective.
Resources devoted to managing an image of compliance are simply wasted and the genuine
gains from meaningful self-evaluation are never realized. Yet, empirical research seems to
indicate that companies listed in countries with more detailed principles and guidance do
tend to adopt a more substantive and accessible board evaluation practice than their
counterparts/peers in jurisdictions with no, or less, detailed requirements. This does
suggest that the “law matters” in this field.
Key Benefits of Board Evaluations as highlighted in the table

The most valuable and effective board assessments are built around four key principles which
offer answers to the following questions:
• When should a board be evaluated?

• What should be evaluated?
• Who should conduct the board evaluation?
• How should the evaluation be reported?
When Should a Board be evaluated?

Clearly, the most common practice is for boards to evaluate themselves on an annual basis.
It follows from most countries’ experience that it makes sense to specify the frequency of
the evaluation. But it is important to realize that there is no “one-size-fits-all” blueprint for
the evaluation of the board of directors, including the timing of such evaluations.
Board requirements and the evaluation needs of a firm are all firm-specific and vary across
life-cycle stages, sectors, and cultures. For instance, if a company seeks to expand to
emerging markets, it should follow that a board evaluation is necessary to assess whether
more international experience and local knowledge of new markets is required on the
board. Board evaluation must be dynamic in nature and responsive to changes in the firm’s
operations.
In an effort to improve market acceptance and investor confidence, boards usually evaluate
immediately and appoint board members with specific market or sector expertise. This
practice indicates that boards of directors may need to conduct evaluations more than once
a year or even continuously assess their performance through a process of constant
evaluation. However, reporting of evaluation may only be necessary once a year.
What should be evaluated?

The regulatory approach in most countries is to include the board, its members (executive,
nonexecutive and independent members) and board committees in the evaluation process.
As discussed above, evaluations need to move beyond the current focus on formalistic
compliance and risk management matters.
Organizational design within large firms needs to be re-directed to innovation, products and
people. In a digital and globalized world, boards should facilitate an environment that offers
the best chance for their companies to retain the “best” talent, deliver the “best” products
and maintain the capacity to constantly re-invent itself in the face of rapid technological,
economic and social change.
The key then is to identify and implement processes that maximize opportunities to deliver
more meaningful and relevant strategic advice to management and other stakeholders in a
company. This is not to suggest that compliance does not matter, but rather to recommend
that a broader range of considerations need to be incorporated into the evaluation
exercise.
Who Should Conduct the Evaluation?

It is essential that boards adopt a robust process to evaluate themselves and their
members/committees for an effective and efficient evaluation. In principle, to achieve this
goal requires all board members to be involved and engaged. The recognition of the
importance of all board members being involved does not mean that all hierarchy is to be
eradicated and nobody takes the lead.
A “kitchen table” approach to the evaluation process is not the solution. Clearly, some sort
of structure and discipline needs to be imposed. For instance, either the chair, lead
independent board, or board committee (usually the nominating committee), should be
explicitly made responsible for the process. They should drive the process, involve the right
people (including third party consultants, if necessary), and ensure that their colleague-
directors are actively engaged. They may also deliver feedback to individual directors, if the
board is not working with a third party or software application to facilitate the process.
The potential use and importance of software solutions and applications to enable more
effective board evaluation processes is often ignored in regulatory discussion. Exploiting
new technologies to manage the extensive data generated by modern board evaluation is
another area that needs further study. Regulators seem well-placed to offer support and
advice regarding technological aspects and possibilities of evaluation today. The leader of
the evaluation process also needs to manage expectations about the process and the
potential benefits that it may bring. Everyone needs to understand that evaluation is not a
panacea to a firm’s problems and that, although important, it is only one element in the
firm’s strategies for developing its operations.
Often, a questionnaire (with multiple-choice and open questions) dealing with the issues
mentioned above, is sent to each board member with additional questions for committee
members and specific questions for the board chairman. Subsequently, individual
interviews are conducted by the leader of the board evaluation process to allow board
members to freely express their views. The leader of the board evaluation process then
provides a report (on an anonymous basis) to the board of directors/supervisory board,
including an action plan and areas for improvement.
Here again, it should be noted that there is no “one-size-fits-all” blueprint for the evaluation
process. Regulators should be cautious when issuing rules, regulations and guidelines that
contain forms and procedures for conducting evaluations as they risk confusing and
frustrating the evaluation process.
How Should Board Evaluation Be Disclosed?
The “law does matter” and the requirement to disclose information about the “board
evaluation process” has a positive effect. Personal and confidential information should not
be publicly disclosed. Yet, investors and other stakeholders appear to appreciate hearing
about the assessment process. Clearly, they are interested in the “why”, “what” and “how”
of evaluations. They are even more interested in the “story” behind the boards: (1) where
do they come from; (2) where are they now; and (3) where are they going. But, at the same
time, these disclosure requirements seem to have resulted in a standardization of how the
information is presented.
The current regulatory approach appears to breed a formalistic style of compliance. This
usually reveals little about the actual mechanics of the evaluation process and the results
and takeaways from the most recent evaluation. Also, companies have a tendency to use
the same statement (with only some minor changes) every year. There are exceptions,
however.
Some firms do embrace a more open style of communication regarding their evaluation
procedures, criteria and methods. There should be + an action plan that enables investors
and other stakeholders to review the process on a year on-year basis and also makes it
possible to keep track of improvements and issues.
Regulators need to emphasize that adopting a detailed and open style of communication
can improve a board’s ability to provide a more meaningful disclosure to stakeholders,
inside and outside the firm. Regulators must make more effort to support, encourage, and
persuade boards to recognize the rewards that come from the open disclosure of the
evaluation process. And the potential rewards do seem clear. At the very least, open
communication of evaluation can increase the commitment and engagement of board
members to participate in the (future) evaluation process, which will, in turn, improve the
functioning and performance of the evaluation and of the board.
Key Issues to be addressed in the Board Evaluation Process
It has become a common refrain, particularly post-Enron and post-global financial crisis, that in
order to be truly effective, a board needs to increase its role in the area of risk management
and managerial oversight. This is also acknowledged in the G20/OECD Principles. But more is
needed.
Most legal systems worldwide now recognize that boards not only have a vital role to play in
monitoring and risk oversight, but also in giving informal advice and strategic support to senior
management. Boards can, and should, play a much larger strategic role in the creation of new
products and/or processes.
A well-functioning board provides companies with a clear competitive advantage and can help
build connections with government, society and other stakeholders. It assists company leaders
in making better decisions and avoiding tunnel vision by providing relevant information on the
current state of the business environment in which they operate. Boards can also help identify
new business opportunities and provide a more coherent sense of their peers and competitors.
Finally, pro-active board members with relevant expertise can help business leaders to identify
“expertise gaps” in their executive teams. It is in this collaborative context that boards can have
the most impact on a company’s business strategy and capacity for innovation.
The dynamics and functioning of the board are key in this regard. For a company to grow, thrive
and reach its full potential, corporate boards are expected to be committed, alert and
inquisitive. More importantly, they should be pro-actively engaged in the company’s business
and affairs. Only those board members who prepare for meetings and frequently attend them
will add value to the discussions.
Board members also need to ask hard questions and challenge the strategic assumptions of
management. And they can only do this effectively when they possess relevant capacities and a
willingness to devote energy to the tasks of both monitoring and strategy building. However,
board members often complain that there is not enough time to discuss future strategy
developments, innovation and value creation. It is an often-heard complaint at conferences

that board members of listed companies often spend 80% of their time at board meetings on
discussing issues related to past-performance and regulatory compliance.
In such a context, the ability of board members to add genuine strategic value is severely
limited. In some countries, such as France, it is becoming common practice for companies to
organize an annual one-day strategy seminar which provides an opportunity for the board to
engage with top management on implementation of strategy. An important reason for this
current over-emphasis on oversight, supervision and risk management (and the subsequent
lack of time for boards to adequately perform their advisory function), is the monitoring-
oriented composition of the board.
If the balance of board members is tilted towards those with general business and finance
expertise, then it is hardly surprising that the agenda (and time) of the board is devoted to
backward-looking issues. This is not to understate or dismiss the monitoring function.
Obviously, in a contemporary regulatory context, it is vital that a board devotes time to
monitoring compliance. But it is equally important to stress the value of board diversity and, in
particular, the importance of board members who can help develop new business strategies in
partnership with senior executives. After all, such strategies are crucial to the long-term success
- possibly even the survival - of any firm.
13.1 Methods and processes options of board evaluation
The most widely-used tool by Circle companies to evaluate the directors is a questionnaire.
Usually, the questionnaires are divided into sections dealing with the following topics:
(i) flow of information;
(ii) leadership and focus of the meetings;
(iii) timeliness and quality of decisions;
(iv) level of Board responsibility;
(v) harmony within the group; and
(vi) directors’ conduct/behavior.
However, differences are found in the size of questions asked: questionnaires comprised of 1–
20 questions are employed in as many companies as those that apply 40–60 questions, and
only one of the surveyed companies uses a 99-question questionnaire. The results of the
evaluations can be either discussed between the Chair and each Board member on individual
basis, or processed and discussed in a combined manner within the Board, without identifying
any particular names.
In some cases, the questionnaire is supplemented with other mechanisms: five out of twelve
companies make use of written comments. Additionally, some companies mentioned the use of
other tools, such as interviews and an evaluation matrix. The time spent in the entire
evaluation process, from its beginning until full completion, generally ranges from one to two
months.
Depending on the degree of formality, the objectives of the evaluation, and the resources
available, boards may choose between a range of qualitative and quantitative techniques.
Quantitative data are in the form of numbers. They can be used to answer questions of how
much or how many. Questions of ‘what’, ‘how’, ‘why’, ‘when’ and ‘where’ employ qualitative
research methods. Most boards undertake evaluations without a clear view of the issues before
them. When the evaluation’s objectives are to identify the key governance problems, screen
alternative solutions and/or uncover new approaches, qualitative research comes to the fore.
Qualitative data does, however, have several drawbacks.
The major drawback is that interpreting the results requires judgment on the part of the person
undertaking the review and analysis. This is best addressed by using experienced researchers
for the task and having several participants review the conclusions for bias. Bias can also be
mitigated by using both quantitative and qualitative techniques.
The three main methods used for collecting qualitative data in governance evaluations are
interviews, questionnaires, board observation and document analysis:
• the interview provides a unique opportunity to collect complex and rich data. It is an excellent
way of assessing directors’ perceptions, meaning and constructions of reality by asking for
information in a way that allows them to express themselves in their own terms
• observation of a board meeting is especially useful when the evaluation objectives relate to
issues of boardroom dynamics or relationships between individuals
• documents can also be a rich source of information in the governance evaluation process. It
can be a method of triangulation for use in conjunction with other data collection techniques.
While quantitative data lack the richness of qualitative data, they have the advantage of being
specific and measurable. Surveys are by far the most common form of quantitative technique
used in governance evaluations and can be an important information-gathering tool. It is vital
to understand, however, that surveys are attitudinal instruments.
There is no best methodology. Research techniques need to be adapted to the evaluation

objectives and board context.
Seven Steps to Effective Board Evaluations
Step 1: What are our objectives?
Step 1 is to establish what the board hopes to achieve.

Clearly identified objectives enable the board to set specific goals for the evaluation and make
decisions about the scope of the review. Such issues as the complexity of the performance
problem, the size of the board, the stage of organizational life cycle and significant
developments in the firm’s competitive environment will determine the issues the board
wishes to evaluate. Similarly, the scope of the review (how many people will be involved, how
much time and money to allocate) will be determined by the severity of the problems facing
the board and the availability of sufficient resources to carry out an evaluation.
The first decision for most boards to consider is the overriding motivation for the evaluation
process. Generally, the answer to this question will fall into one of the following two categories:
• corporate leadership — for example, ‘We want to clearly demonstrate our commitment to
performance management’, or • problem resolution — for example, ‘We do not seem to have
the appropriate skills, competencies or motivation on the board’.
Step 2: Who will be evaluated?

Comprehensive governance evaluations can entail reviewing the performance of a wide range
of individuals and groups.
Boards need to consider three groups: • the board as whole (including committees) • individual
directors (including the roles of chairperson), and • key governance personnel. Considerations
such as cost or time constraints, however, often preclude such a wide-ranging review.
Alternatively, a board may have a very specific objective for the review process that does not
require the review of all individuals and groups identified. In both cases, an effective evaluation
requires the board to select the most appropriate individuals or groups to review, based on its
objectives.
Step 3: What will be evaluated?

Having established the objectives of the evaluation and the people/groups that will be
evaluated to achieve those objectives, it is then necessary to elaborate these objectives into a
number of specific themes to ensure that the evaluation: • clarifies any potential problems •
identifies the root cause(s) of these problems, and • tests the practicality of specific governance
solutions, wherever possible.
This is necessary whether the board is seeking general or specific performance improvements,
and will suit boards seeking to improve areas as diverse as board processes, director skills,
competencies and motivation, or even boardroom relationships.
Step 4: Who will be asked?
The vast majority of board and director evaluations concentrate exclusively on the board (and
perhaps the CEO) as the sole sources of information for the evaluation process. However, this
discounts other potentially rich sources of feedback. Participants in the evaluation can be
drawn from within or from outside the company. Internally, board members, the CEO, senior
managers and, in some cases, other management personnel and employees may have the
necessary information to provide feedback on elements of a company’s governance system.
Externally, owners/members and even financial markets can provide valuable data for the
review. Similarly, in some situations, government departments, major customers and suppliers
may have close links with the board and be in a position to provide useful information on its
performance.
Step 5: What techniques will be used?

Depending on the degree of formality, the objectives of the evaluation, and the resources
available, boards may choose between a range of qualitative and quantitative techniques.
Quantitative data are in the form of numbers. They can be used to answer questions of how
much or how many. Questions of ‘what’, ‘how’, ‘why’, ‘when’ and ‘where’ employ qualitative
research methods. Most boards undertake evaluations without a clear view of the issues before
them. When the evaluation’s objectives are to identify the key governance problems, screen
alternative solutions and/or uncover new approaches, qualitative research comes to the fore.
Step 6: Who will do the evaluation?

The next consideration is to decide who the most appropriate person is to conduct the
evaluation. If the review is an internal one, the chairperson may conduct the evaluation.
However, for reasons of impartiality there are times when it may be more appropriate to
delegate either to a non-executive or lead director, or to a board committee.
.In the case of external evaluations, specialist consultants or other general advisers with
expertise in the areas of corporate governance and performance evaluation lead the process.
However, the specialized nature of a board review often requires skills outside the customary
scope of many general advisers.
Step 7 What do you do with the results?

The review’s objectives should be the determining factor when deciding to whom the results
will be released. Most often the board’s central objective will be to agree a series of actions
that it can take to improve governance. Since the effectiveness of an organization’s governance
system relies on people within the firm, communicating the results to internal stakeholders is
critical for boards seeking performance improvement. Given that virtually all governance
reviews are conducted with a view to improving the governance system, boards are rarely
faced with the decision of whether to communicate the results internally. Rather, the decision
is who within the organization needs to know the results.
13.2 Evaluating director personal characteristics

A good director should have:
1. The ability to focus on material issues and not “sweat the small things”.
“Small things” are burdensome for management and a time waster for the board, and
can deflect focus from more critical issues.
2. The ability to see the “big picture”.
3. The ability to deal with pressure from external sources.
4. The ability to influence effectively at the board table.
5. The ability to respect alternative viewpoints.
Director skills can be split between job-specific skills and knowledge, and the personal
attributes you bring to a role. Developing and maintaining your director skill set can be seen as
a juggling act between non-negotiable skills needed to discharge director duties properly (e.g.
finance, governance and strategy) with those that make you a competent and effective leader
and team player.
These different skills can be learnt and refined over time, through industry experience and a
commitment to and investment in continuous education and training. A successful director has
the ability to apply these skills, backed by their experience, in a variety of boardroom scenarios.
Director-specific skills:
 Leadership
 Accounting and finance
 Legal, regulatory and governance
 Risk management
 Negotiation
 Strategy
 People management
 Industry knowledge
Personal qualities:
 Good judgment
 Communication skills
 Active contributor
 Confidence
 Integrity and honesty
 Intellectual curiosity
 Discipline
 Genuine interest
13.3 Evaluating board dynamics
Boards can have the structures, the boxes ticked, and the protocols and policies on paper, but if
they are not lead properly, if they don’t behave as a team, and if they don’t have proper
oversight over the CEO, they won’t be as effective as they can otherwise be.
It’s hard to determine these factors from outside the boardroom. Indeed, a reason researchers
can’t find a clear causal relationship between boards and performance – even though directors
state emphatically that boards do matter – is because what happens inside closed doors is
largely invisible to outsiders. But board dynamics – including leadership, teamwork and
behavior – matter greatly even if they can’t be measured from the outside.
What to Consider When Evaluatiing Board Dynamics
1. The Board Chair conducts an effective decision-making process (i.e., ensures that, for
crucial decisions, alternatives are generated, a thorough discussion and analysis ensues,
relevant perspectives are brought to bear, the best decision is made, and the decision is
supported).
Here, we are trying to understand how effective the Chair is, particularly in chairing meetings
and shaping key decisions. This is a key weakness of ineffective chairs.
2. The CEO welcomes the Board’s constructive input into our Organisation’s strategy (i.e.,
by being sufficiently candid, open and responsive; and encourages the same from direct
reports).
Here, we look at the behavior of the CEO. CEOs can easily hold back, block, or try to “manage” a
board.
3. The Non-executive Chair (or a leading or senior independent Director) has a
constructive working relationship with the CEO (i.e., mentoring, supportive and
collaborative, open yet independent, candid and professional).
Here, we look at the nature of the relationship between the Chair and CEO.
4. Boardroom discussions are constructive (i.e., Directors disagree without being
disagreeable, assumptions are constructively challenged, views are skillfully explored,
differences of opinion are appropriately acknowledged and resolved, and consent is
forged).
Here, we look at how debate and decisions get made within the boardroom, in real time.
5. The Management (including the CEO) do not inappropriately influence meetings (e.g.,
by filtering or managing the flow of information to predetermine an outcome, not
providing independent data, not facilitating access to independent advisors, etc).
Here, we look at “undue influence” or the attempt to shape or funnel information, agendas or
outcomes. If this happens, the board will miss something.
6. The Board displays at all times a culture of diversity of views and open dissent (i.e.,
Members sufficiently challenge one another, differences of opinion are fully aired and
accepted gracefully, no topics are “off-limits” for discussion, and Members feel free to
speak out openly and honestly without fear of criticism, even when voicing a minority
position or asking a probing question).
Here, we look at “constructive dissent” and how (or whether) it happens within the boardroom,
including whether “groupthink” happens.
7. Each regular reporting member of Management has a constructive relationship (i.e.,
characterized by respect, responsiveness, openness, transparency, candour,
professionalism and accountability) with the Board and each Committee of which I am a
Member.
Here, we look at the interface between committees and reporting management and whether
there is blockage or dysfunction. Committees are where the work gets done. If something gets
missed, it often happens here.
8. The Board reacts in an appropriate fashion towards reporting Management (i.e.,

predictably, constructively, confidentially and deliberatively) in order to build trust on
Management’s part to come forward with their real concerns in a candid manner.
Here, we look at the board’s behavior in shaping trust and candor with management. Trust is a
two-way street and how the board behaves also matters. If the board dominates, leaks or is
unpredictable, management simply closes up. Then, something can get missed or the board
does not add full strategic value as management is holding back.
9. The discussions significantly improve the quality of Management decisions (e.g., by

engaging of Management in thorough and constructive sessions that stimulate, guide
and enhance Management’s thinking and performance, impact outcomes and add
value).
Here, we look at whether the board adds strategic value. A “360 degree” assessment that
incorporates management’s views can bring a reality check to a board that thinks they add
value when they may not.
10. The (Board and Committees) are not overly reliant on (or influenced by) a particular
individual (e.g., with the most relevant skills and experience or tenure, or in a particular
role or reporting relationship) given the work that we undertake.
Here we look for pockets of undue influence. It could be a shareholder, a director or a manager
that can influence debates and outcomes, acting out of self-interest.
Whether a board is effective or not, for the most part, comes down to factors inside the
boardroom. The above factors are uncomfortable to ask, and data is limited, but they matter.
Board dynamics is known mostly by directors themselves. The regulations and guidelines
focusing on having a majority of independent directors, a certain size, a separate chair, etc., are
important but are inadequate to ensure effectiveness and ultimately performance of the
company. For boards to succeed, and for shareholders and other stakeholders to receive
returns, more of the above factors should be focused on.
13.4 The corporate secretary as a board consultant
A corporate secretary in the boardroom is one of the most important resources the board has.
Under state corporation laws, every public company is required to have a corporate secretary,
and the individual who fills this role is a valuable member of the executive management team.
The corporate secretary’s role has expanded over time to include many administrative and
managerial duties. Corporate governance is important to public companies because it provides
them with a defense for ensuring corporate compliance and for addressing activist shareholder
initiatives. Good governance protects companies against class-action lawsuits over securities
disclosures and helps navigate Securities and Exchange Commission (SEC) enforcement
initiatives. By committing to good governance, companies demonstrate that they’re invested in

productivity, enhancing public relations and getting more involved in their communities. Among
other things, good governance supports employees and gives boards a pathway toward
increasing shareholder value.
10 Important Responsibilities of the Corporate Secretary

The role of the corporate secretary has evolved over time. As a result, the 10 most important
responsibilities of the corporate secretary have also evolved and they’re very different today
than they were even 10 years ago.
Here’s a look at what the responsibilities for a corporate secretary look like today:
1. Ensuring that the Board has the resources to fulfill its fiduciary duties to a company’s
shareholders.
Today’s corporate secretary is the main “go-to” person whenever a board director, executive or
committee needs guidance, advice or resources. If the corporate secretary doesn’t have the
answer, it’s their responsibility to find it.
2. Preparing minutes of board actions during board and committee meetings to reflect
the board’s proper discharge of its fiduciary duties.
The corporate secretary plays a key role in setting the agenda, writing meeting minutes and
getting them approved, as well as engaging in pre-meeting planning.
3. Serving as a key consultant to the board of directors and to the executive

management team.
The role of the corporate secretary has evolved into the role of a senior corporate officer who
provides advice to the board about corporate governance issues. This responsibility has evolved
out of the need for a greater focus on corporate governance by boards, executive management
and other stakeholders. The corporate secretary is the leading board expert regarding the
design and ongoing maintenance of a sustainable governance framework. In addition, the
corporate secretary serves as a key member of the executive management team as it pertains
to implementing and supporting the governance framework.
4. The corporate secretary is responsible to ensure that the corporate governance

framework for the company is properly designed, implemented and maintained.
The governance framework encompasses the board and its committees. Committees usually
include the audit, finance, compensation, risk management and disclosure committees.
5. The corporate secretary is responsible for legal entity governance management.

All board directors are directly responsible for legal entity governance management. The
corporate secretary is responsible for overseeing this area, which includes ensuring that all
board directors operate according to the provisions of the company’s Articles of Incorporation,
bylaws, charters and other founding documents.
For companies that have subsidiaries, the corporate secretary also serves the subsidiaries, joint-
ventures and other entities.
6. The Corporate Secretary is also responsible for engaging with and being the liaison for
third-party corporate governance service providers/
They carry out roles such as:
 Agenda management and Board reporting solutions

 Board portal providers
 Legal entity management system providers

 Registered agents
 Stock transfer agents
 Director education resources
 Annual meeting service providers
 Shareholder identification services
 Abandoned property compliance services
 Director recruiter and related services
7. Corporate secretaries are responsible for the company’s governance program and
process development and enhancement.
As so many changes are taking place rapidly in the marketplace, there is a need for companies
to ensure that their governance programs keep pace with it. Corporate secretaries are
responsible to review and develop their governance programs to ensure that they’re updated
and in keeping with best practices.
8. The corporate secretary is responsible for board director training and development.
While board directors bring a certain degree of expertise to the board, they often need training
and development in corporate governance, finance, cybersecurity or various other areas.
Corporate secretaries are the lead people who administer board evaluations, conduct
corporate governance audits, help to resolve succession planning issues and assist directors
with education, training and orientation programs.
9. Corporate secretaries play an integral role in collaborating with the executive team.
The corporate secretary is the primary person who sets the board meeting agendas. Their role
requires them to collaborate with the board and the executive team to identify and prioritize
discussion items for the board and committees. This responsibility extends to assisting
executives with producing annual reports, sending financial press releases and reviewing
insurance policies.
10. Corporate secretaries are the keepers and point people for all corporate documents.
Many situations arise in which another party needs access to documents related to a sale,
acquisition or divestiture to complete the due diligence process. External auditors, lenders or
regulatory bodies often request corporate documents. Due diligence for transactions requires
having a corporate secretary that practices good corporate governance and has good internal
controls because many transactions require authorization or signature authority. Companies
that are preparing for their initial public offering (IPO) also rely heavily on the corporate
secretary to gather all necessary documents and comply with the SEC and stock exchange
listing requirements to implement the IPO.
Concluding Thoughts on the Responsibilities of the Corporate Secretary in the Boardroom

While many corporate governance responsibilities relate to securities regulations for public
companies, the role of the corporate secretary is equally as important for private companies.
Both types of companies need to comply with the same corporate laws of the states of their
incorporation and to manage legal liability risks. All companies must be able to produce
corporate governance-related documents to third parties, such as outside auditors, lenders and
regulators.
Corporate secretaries can put their best foot forward with a Diligent Corporation board
management software system and other digital software solutions for corporate boards.
Obstacles to evaluations
1. The first obstacle to conducting an evaluation is opposition by board members

themselves. Simply put, directors and CEOs are reluctant to evaluate high-profile board
members. For example, how does one critically assess a peer without causing conflict
and harming working relationships? And, is it reasonable to evaluate busy executives
who participate on boards on a part-time basis? At the same time, these questions
highlight the importance of constructive evaluations in improving the performance of
both the individual director and the board itself.
2. CEOs and boards of directors worry that evaluating the performance of individual board
members could drive away good candidates who feel they have already proven
themselves. At a time when there is heavy competition to attract top directors,
appraisals might deter good candidates.
3. The question of who should actually evaluate the directors is also an obstacle. Board
members are peers, and may be reluctant to critique a colleague’s performance. They
may also lack the information needed to make an accurate assessment because boards
spend relatively little time together, and what occurs in meetings may not be the best
gauge of a director’s contribution
4. Since each director brings a different set of competencies to the board, it can be difficult
to establish criteria for assessing members. A universal set of criteria may overlook the
different ways in which individual members contribute.
5. Finally, research on team effectiveness clearly supports the idea that when individuals
such as board members are interdependent, it is more important to evaluate and
reward the overall effectiveness of the group. Otherwise, individuals tend to optimize
their individual performance rather than contribute to the team’s effectiveness. The
primary focus in appraisals should be on the performance of the board at the group
level rather than the individual level. The implications for reward systems are clear:
Director pay should be tied to overall corporate performance through stock and bonus
plans, not to individual performance.
CHAPTER 14
14. Power and Politics in Organizations
There are few business activities more prone to a credibility gap than the way in which
executives approach organizational life. A sense of disbelief occurs when managers purport to
make decisions in rationalistic terms while most observers and participants know that
personalities and politics play a significant if not an overriding role. Where does the error lie? In
the theory which insists that decisions should be rationalistic and nonpersonal? Or in the
practice which treats business organizations as political structures?
Whatever else organizations may be (problem-solving instruments, sociotechnical systems,

reward systems, and so on), they are political structures. This means that organizations operate
by distributing authority and setting a stage for the exercise of power. It is no wonder,
therefore, that individuals who are highly motivated to secure and use power find a familiar
and hospitable environment in business.
At the same time, executives are reluctant to acknowledge the place of power both in
individual motivation and in organizational relationships. Somehow, power and politics are dirty
words. And in linking these words to the play of personalities in organizations, some managers
withdraw into the safety of organizational logics.
14.1 The art and science of power in organizations
Organizations provide a power base for individuals. From a purely economic standpoint,
organizations exist to create a surplus of income over costs by meeting needs in the
marketplace. But organizations also are political structures which provide opportunities for
people to develop careers and therefore provide platforms for the expression of individual
interests and motives. The development of careers, particularly at high managerial and
professional levels, depends on accumulation of power as the vehicle for transforming
individual interests into activities which influence other people.
A political pyramid exists when people compete for power in an economy of scarcity. In other
words, people cannot get the power they want just for the asking. Instead, they have to enter
into the decisions on how to distribute authority in a particular formal organization structure.
Scarcity of power arises under two sets of conditions:
1. Where individuals gain power in absolute terms at someone else’s expense.
2. Where there is a gain comparatively—not literally at someone else’s expense—resulting in a

relative shift in the distribution of power.
In either case, the psychology of scarcity and comparison takes over. The human being tends to
make comparisons as a basis for his sense of self-esteem. He may compare himself with other
people and decide that his absolute loss or the shift in proportional shares of authority reflects
an attrition in his power base. He may also compare his position relative to others against a
personal standard and feel a sense of loss. This tendency to compare is deeply ingrained in
people, especially since they experience early in life the effects of comparisons in the family
where—in an absolute sense—time and attention, if not love and affection, go to the most
dependent member.
The fact that organizations are pyramids produces a scarcity of positions the higher one moves
in the hierarchy. This scarcity, coupled with inequalities, certainly needs to be recognized.
While it may be humane and socially desirable to say that people are different rather than
unequal in their potential, nevertheless executive talent is in short supply. The end result
should be to move the more able people into the top positions and to accord them the pay,
responsibility, and authority to match their potential.
On the other side, the strong desires of equally able people for the few top positions available
means that someone will either have to face the realization of unfulfilled ambition or have to
shift his interest to another organization.
Still another factor which heightens the competition for power that is characteristic of all
political structures is the incessant need to use whatever power one possesses. Corporations
have an implicit “banking” system in power transactions. The initial “capitalization” which
makes up an individual’s power base consists of three elements:
1. The quantity of formal authority vested in his position relative to other positions.
2. The authority vested in his expertise and reputation for competence (a factor weighted by
how important the expertise is for the growth areas of the corporation as against the
historically stable areas of its business).
3. The attractiveness of his personality to others (a combination of respect for him as well as
liking, although these two sources of attraction are often in conflict).
This capitalization of power reflects the total esteem with which others regard the individual.
By a process which is still not too clear, the individual internalizes all of the sources of power
capital in a manner parallel to the way he develops a sense of self-esteem. The individual knows
he has power, assesses it realistically, and is willing to risk his personal esteem to influence
others.
A critical element here is the risk in the uses of power. The individual must perform and get
results. If he fails to do either, an attrition occurs in his power base in direct proportion to the
doubts other people entertained in their earlier appraisals of him.
14.2 Sources of power in organizations
Five sources of power in an organization are
1) Legitimate Power
Legitimate power is also known as positional power. As these names suggest, legitimate power
is the power that a person in the organization holds because of his/her position and that is
considered to be legitimate. A manager who leads a team has certain responsibilities and also
the right to delegate tasks/her to his subordinates as well as review their work and give
feedback.
This power that a manager enjoys is because of the position that he/she hols and is ‘legitimate
power.’ Job descriptions make it clear as to who an employee will be reporting to and the team
that the employee will be leading, if any. For legitimate power to be respected in an
organization, the manager should be able and have the experience, expertise and qualifications
that the job requires. Ex. CEO.
2) Expert Power
Again, as the name suggests, expert power is that kind of power which an employee has due to
the knowledge and expertise that he/she possesses. Knowledge is wealth in today’s world and
is highly sought after by organizations. Nice specializations and extensive research work is
highly valuable to businesses which are increasingly becoming complicated and specialized.
Expert power also acts as a stepping stone for employees to gain legitimate power. A good and
acceptable display of expert power will lead to promotions and make an employee
indispensable for the company. The promotions will result in legitimate or positional power. Ex.
Medico-Legal experts.
3) Coercive Power
Coercive power is the power that a person has which he/she uses to coerce or threaten other
employees. Coercive power is used to enforce strict deadlines and punishable actions in the
workplace and scare employees.
Salary cut, leave cut or even terminations are certain threats that are used by bosses to get the
work done by their employees. Bosses need to be strict with their employees and are justified
in expecting professionalism and timely completion of work. Coercive power, if used optimally
can improve the performance of employees and make them challenge themselves constantly.
4) Referent power
Referent power is power that is a resultant of the personality of a person. The relationships that
a person develops with co-workers and the charisma with which a person is able to present
himself/herself to others results in a certain level of respect and approachability towards that
person. Referent power can also be a result of closely knowing senior people in the
organization or those who are at a position of leadership and authority of any kind.
5) Reward Power
Reward power arises out of the authority that a person has to recognize and reward people.
Ways to do this can be by salary hikes, bonuses, paid leave, and company sponsored vacation
or even promotions. Employees who possess reward power can influence the performance of
employees considerably.
If used, as a motivating factor, reward power can make employees work harder and smarter
and contribute more effectively to the organization. But if this is used in an unfavorable manner
and any kind of favoritism is displayed, then it can severely harm the morale of employees and
reduce their productivity, leading to the wastage of company resources. Ex. Power that HR
personnel have to decide CTC, bonus etc.
Using these 5 sources of power, employees, corporates and businesses can motivate their
employees and have better implementation of work. At the same time, coordination between
departments, discipline and decorum can all be achieved with the proper use of the sources of
power
14.3 Power and influence
 Power is capacity to get others to act based on positional authority that is exercised
over others; often leading to resentment
 Influence is the ability to modify how a person develops, behaves, or thinks based on
relationships and persuasion; often leading to respect
Fundamental Differences between Power and Influence:
1. Power is forced while influence is voluntary

Power relies heavily on forcing team members to do something through the use of threats,
whether they’re implied or explicit. Intimidation is achieved by creating the belief that if an
employee does not comply, they will face punishment – whether that means being fired, losing
out on a promotion or being berated in a public space. This kind of negative leadership can
create the feeling amongst team members that they have no choice but to do things a certain
way.
Influence leads to an entirely voluntary approach to completing work. Through the use of
positive affirmations and encouragement, influence results in the team feeling that they have a
choice in both the work they’re required to complete as well as the means they take to get it
done. Threats are traded in for persuasion and negotiation to allow employees more control
over the work they’re doing.
2. Power is undemocratic while influence focuses on the team
Power remains in the hands of one person, or a small group. This independent approach to
leadership means that the team is not consulted during the decision-making process, and are
often micromanaged to ensure that the leader’s methods are upheld. This undemocratic
response to leadership removes a sense of responsibility from the team, decreasing morale.
Influence understands that teamwork is a dependent process: the team is dependent on their
leader for guidance and the leader is dependent on employees to produce excellent work. As a
result, there is a shift from autocratic decision-making to an emphasis on transparency and
getting the team involved at various stages of a project’s inception. This approach means that
team members feel valued, and as a result, produce work that reflects that.
3. Power makes uses of one-way dialogue while influence creates a conversation
Power is exerted by leaders who enjoy a sense of hierarchy in their organization. That hierarchy
is most apparent in the way in which teams communicate. When only a powerful leader is
present, teams will be talked down to through orders and instruction. This results in ambiguity
and unclear expectations, as there is little room for asking questions or giving feedback.
Transparency is not valued in leadership that depends on power and, as a result, employees can
become disengaged.
Influence is concerned with the thoughts and feedback of the group. Influential leaders
encourage straightforward conversation where processes can be improved and creative ideas
are pushed forward. This approach to leadership fosters trust and relies on negotiation to make
team members feel valued and heard. Influence does not do well in systems of hierarchy.
4. Power can cost a business money while influence improves retention

Power in the United States alone, only 32.6% of employees are engaged at work, which can
cost a business up to $550 billion a year.4 This is the result of unhappy employees who are less
likely to feel a sense of loyalty to their organization and are more likely to hand in their letter of
resignation. The consequences of bad leadership are not just social or emotional – a business’s
bottom line can directly be affected.
Influence 46% of HR specialists say that retention is their biggest challenge when it comes to
staff concerns.5 Influence boosts engagement in staff because they feel personally invested in
the work they’re creating. This is coupled with the fact that exerting influence as a leader is
inexpensive – it focuses on soft skills that can be learnt and practiced and doesn’t require
additional resources.
Power Tactics
People use a variety of power tactics to push or prompt others into action. We can group these
tactics into three categories: behavioral, rational, and structural.
Behavioral tactics can be soft or hard. Soft tactics take advantage of the relationship between
person and the target. These tactics are more direct and interpersonal and can involve
collaboration or other social interaction. Conversely, hard tactics are harsh, forceful, and direct
and rely on concrete outcomes. However, they are not necessarily more powerful than soft
tactics. In many circumstances, fear of social exclusion can be a much stronger motivator than
some kind of physical punishment.
Rational tactics of influence make use of reasoning, logic, and objective judgment, whereas
nonrational tactics rely on emotionalism and subjectivity. Examples of each include bargaining
and persuasion (rational) and evasion and put downs (nonrational).
Structural tactics exploit aspects of the relationship between individual roles and positions.
Bilateral tactics, such as collaboration and negotiation, involve reciprocity on the parts of both
the person influencing and the target. Unilateral tactics, on the other hand, are enacted
without any participation on the part of the target. These tactics include disengagement
and fait accompli. Political approaches, such as playing two against one, take yet another
approach to exert influence.
People tend to vary in their use of power tactics, with different types of people opting for
different tactics. For instance, interpersonally-oriented people tend to use soft tactics, while
extroverts employ a greater variety of power tactics than do introverts. Studies have shown
that men tend to use bilateral and direct tactics, whereas women tend to use unilateral and
indirect tactics. People will also choose different tactics based on the group situation and
according to whom they are trying to influence. In the face of resistance, people are more likely
to shift from soft to hard tactics to achieve their aims.
The Role of Influence in Leadership
Influence occurs when a person’s emotions, opinions, or behaviors are affected by others. It is
an important component of a leader’s ability to use power and maintain respect in an
organization. Influence is apparent in the form of peer pressure, socialization, conformity,
obedience, and persuasion. The ability to influence is an important asset for leaders, and it is
also an important skill for those in sales, marketing, politics, and law.
In 1958, Harvard psychologist Herbert Kelman identified three broad varieties of social
influence: compliance, identification, and internalization. Compliance involves people behaving
the way others expect them to whether they agree with doing so or not. Obeying the
instructions of a crossing guard or an authority figure is an example of compliance.
Identification is when people behave according to what they think is valued by those who are
well-liked and respected, such as a celebrity. Status is a key aspect of identification: when
people purchase something highly coveted by many others, such as the latest smartphone, they
are under the influence of identification. Internalization is when people accept, either explicitly
or privately, a belief or set of values that leads to behavior that reflects those values. An
example is following the tenets of one’s religion.
How Leaders Use Influence
In an organization, a leader can use these three types of influence to motivate people and
achieve objectives. For example, compliance is a means of maintaining order in the workplace,
such as when employees are expected to follow the rules set by their supervisors. Similarly,
identification happens when people seek to imitate and follow the actions of people they look
up to and respect, for example a more experienced co-worker or trusted supervisor.

Internalization results when employees embrace the vision and values of a leader and develop
a commitment to fulfilling them.
Leaders use these types of influence to motivate the behaviors and actions needed to
accomplish tasks and achieve goals. Individuals differ in how susceptible they are to each type
of influence. Some workers may care a great deal about what others think of them and thus be
more amenable to identifying the cues for how to behave. Other individuals may want to
believe strongly in what they do and so seek to internalize a set of values to guide them. In
organizations and in most parts of life, sources of influence are all around us. As a result, our
behavior can be shaped by how others communicate with us and how we see them.
14.4 Managing change through power
Best use of power is to drive change
If you have power, the most productive use is not to assert dominance or control, which can
erode team spirit and even culture over time. The most productive use is to drive needed
organizational change. That means using your power to make things happen that wouldn’t
otherwise happen without you. Because if things are going the way you believe they should,
there’s no need to intervene. It’s only when things go off-course that effective leaders bring out
their “edge.”
That means that if you observe your boss’s power, it’s probably because he/she is trying to
modify some behavior – be it a person challenging him/her in a meeting or a business unit
heading in the wrong direction. Sometimes power can be experienced as a gentle redirect;
other times it can be felt as a very pointed jab.
Three power moves for one-on-one course correction
One fascinating thing is how leaders use their power across different settings: with individuals,
in groups and in organizations. Consider the choices a leader has with an individual when
seeking to change behavior and performance.
1. The off-line coaching conversation. As we all know, if you want to redirect someone’s
actions or plans, it’s best to start one-on-one, in a private venue. That setting allows the team
member to save face publicly with peers and allows for a learning dialogue to occur. It doesn’t
have to be a big deal – artful leaders often start with a question, concern or thought.
The leader’s job is to learn how to conduct these conversations well – with a moderated tone,
using only the number of words required to make the point; allowing for silence, if needed, so
the team member can think and ask questions about what he/she is hearing.
In the best delivery, the team member can sense that he has your support. This conversation
doesn’t jeopardize that. This is all about coaching to improve the game, not criticizing to belittle
or berate. Doing this well, especially early in one’s development as a leader, requires preparing
in advance, thinking deeply about what the feedback actually is and how best to characterize it,
and to give specific examples and concrete alternatives to show how key situations might have
progressed differently.
Conversely, the team member’s job is to receive the feedback gracefully – to listen carefully,
not take it personally, but constructively; to ask questions, to make sure he/she understands
the direction. While these coaching conversations may not be the most comfortable, it’s always
better to hear the feedback than not. And it’s a universal truth: no one ever developed into a
great leader receiving only praise.
2. The public redirect. That said, there are times in group settings, when an individual goes off-
course (perhaps repeatedly in a single meeting despite a private coaching conversation or two).
When that happens, the leader may feel the need to correct more publicly to get the point
across. To do that, a seasoned leader may start with a gentle signal, such as a reframing
question, inquiring about some stated facts or asking the team member to offer a more
detailed explanation of what he or she is thinking.
The astute employee picks up the cue and self-corrects or perhaps goes silent for a few
minutes, in order to reflect. This then allows the whole team to move in the desired direction in
a natural and calmly energizing way.
The leader’s job in these situations to develop a light touch, staying calm and measured. The
goal here is to master the art of the probing question as an unobtrusive means of individual and
team correction.
3. The rebuke or sideswipe. The coaching conversation and the redirect exemplify the more
delicate uses of power. They are not the ones where you necessarily see or feel a leader’s
“edge” – especially if the leader has strong EQ and is a seasoned people coach.
But for the individual who doesn’t take the hint, power may come in the form of public and
pointed correction or critique. When a rebuke happens, the leader may cut off the speaker,
publicly disagree with what is being said or challenge the speaker on his/her reasoning or logic.
This type of action unsettles the meeting and creates a more charged tone. But it serves its
purpose if the direction of a conversation or project needs to be reestablished or bad behavior
stopped.
On the rare occasions when an individual proves particularly obtuse or obstinate, the leader
may take control of the agenda even more forcefully, with language that takes the individual
“off-line” verbally, even reputationally. This public “sideswipe” can have negative
repercussions – for the individual and sometimes the surrounding relationships as well - so it
should be used selectively. But, when used appropriately, the sideswipe makes the point, both
to the individual who is affected and as a cautionary tale of what not to do for onlookers, that
the leader means business.
Developing and deploying the full spectrum of power moves
The best leaders have the full spectrum of power moves at their disposal in order to make the
right things happen. Each serves its purpose and the ease with which it is enacted often
depends on the leader’s interpersonal capabilities, experience and situational assessment. Big
challenges and big personalities often evoke edgier displays, but the strongest leaders learn
how to execute all of these moves – and more.
Your job as a subordinate is to learn how to hear and read the moves. Your job as a leader is to
master the moves themselves. That mastery takes measured observation and assessment to
figure out what is needed when. It takes practice as you learn to finesse your execution over
time, and it takes on-going self-reflection as you continually finetune your own game and, with
that, your team’s and your organization’s performance.
Power dynamics: Managing change in an organization
The conventional model of organisational change is largely a structural one – viewing

organisations as moving from one more-or-less stable state to another, using a sequence of
prescribed methods. Models of change speak of creating a ‘burning platform’ so that people
see the need to change, of the importance of creating management buy-in or the need to
manage resistance. Mostly, we are more-or-less happy to go along with the idea that if we pull
the right levers in the right sequence, we will get the change we desire. The only difficulty with
all of this is that it doesn’t work very well. In fact, research suggests failure rates between 28%
and 93% for change initiatives, depending who you ask and how you define success.
One reason for this is that organisations are not formed solely of structural qualities such as
processes and systems; they have relational qualities too – the day-to-day dynamic human
relationships which allow us to work together and get things done. But people don’t just come
together and start achieving things, they need to organise themselves, and that requires the
operation of power among the group. Power allows the members of an organisation to agree
what needs to be done, who is responsible for what, and how the profits of the enterprise will
be shared. But what is it? For the purposes of this paper, power is the ability to influence the
framework within which dialogue and meaning-making takes place.
Power arises from meaning-making – from the creation of knowledge – because in creating
knowledge we codify our world, arriving at descriptions of what it is and what it is not. In doing
so, we create a kind of map of reality, emphasising some features and marginalising others, and
the way that a group creates their particular map legitimises some behaviours and precludes
others. Think of an oak tree for example. Some may understand the quality of its timber, what
can be built from it and see its felling as a logical conclusion of its production. Others, however,
may see the tree as an ecosystem, calculating its bio-diversity value and that of the organisms it
hosts – such a group would view felling it as disastrous. Whoever is able to influence the sense
we make of the tree has power, because the sense we make of things influences how we
behave – and it’s the same for our organisations.
Without power, modern organizational structures would be impossible. Yet all structures both
enable and constrain. While the ways in which we operationalize power enable control of day-
to-day operations, they can also constrain change as an accidental consequence of the
entrenched ways of thinking they require to operate effectively.
14.5 Leading with power.
The concepts of power and leadership are interconnected. While an individual may exert power
without being a leader, an individual can’t be a leader without having power.
Organizational trends relative to power and leadership suggest that while power isn’t typically
misused by top leaders, it does tend to be concentrated on a select few individuals. However,
flatter organizational structures and self-directed work teams are becoming more
commonplace, which may increase the level of empowerment that employees experience in
future years.
Organizations also reward leaders who empower the people they lead, thereby encouraging
overall employee empowerment; however, fewer organizations fully leverage opportunities to
teach leaders how to effectively use their power for the greater good of the organization. This
leaves the definition of appropriate and effective use of power largely up to individual leaders.
Sources of Leadership Power
When most people think about power, they immediately think about the control that high-level
leaders exert from their positions atop the organizational hierarchy. But power extends far
beyond the formal authority that comes from a title (or from having a corner office with a
view). Leaders at all levels have access to power, but that power often goes unrecognized or
underutilized.
Research identifies 7 bases of power that leaders may leverage:
1. The power of position is the formal authority that derives from a person’s title or
position in a group or an organization.
2. The power of charisma is the influence that’s generated by a leader’s style or persona.
3. The power of relationships is the influence that leaders gain through their formal and
informal networks both inside and outside of their organizations.
4. The power of information is the control that’s generated through the use of evidence
deployed to make an argument.
5. The power of expertise is the influence that comes from developing and communicating
specialized knowledge (or the perception of knowledge).
6. The power of punishment is the ability to sanction individuals for failure to conform to
standards or expectations.
7. The power to reward others is the ability to recognize or reward individuals for
adhering to standards or expectations.
How to Leverage Power and Leadership Effectively
All in all, our research findings suggest that leaders can be more effective when they emphasize
the power of relationships and the power of information, and also develop their other available
bases of power.
Here are some strategies for leveraging power in leadership effectively:
1. Make relationships a priority. Your ability to use the power of relationships will be
compromised if you’re not connecting with the right people. Therefore, identify the people
with whom you need to establish or develop a relationship, and invest time and energy into
your existing relationships. Seek to understand others better and acknowledge others’ needs to
build the social capital required to influence others now and in the future.
2. Don’t overplay your personal agenda. While the power of relationships can be an effective
method for promoting your own agenda, it also risks others perceiving you as self-serving
rather than a “team player.” It’s important for leaders to be aware of these negative
perceptions to effectively leverage the power of relationships. Ensure that advancing your own
agenda is not perceived as a misuse of power.
3. Maximize your communication network. Think about the people you communicate with the
most. Are they providing you with access to unique information or redundant
information? Expand your network to find people who may be untapped sources of
information.
4. Be generous with information. If you are a central node or conduit of information,

remember that keeping information to yourself can have negative consequences. Share
information broadly and with integrity. You don’t want to be perceived as hoarding information
for your personal gain. Of course, you don’t want to make the opposite mistake and reveal
confidential or personal information.
5. Make the most of your position. Research and experience suggest that authority doesn’t
automatically accompany a formal leadership role. We can all think of peers who, despite their
similarities in tenure and level, may have more or less power than we do. In other words,
position doesn’t always mean power. You may want to find some subtle ways to communicate
your formal authority, such as including your title in your email signature, communicating in
meetings where you normally keep quiet, or modifying your style of dress so that you resemble
people at the level above you. This is also a good example of effective self-promotion at work.
6. Develop your brand of charisma. How would you feel if you were in an audience where your
normally low-key CEO “borrowed” the style of an energetic, larger-than-life motivational
speaker? At best you might be amused; at worst, you would see the CEO as a pathetic
impression of the real thing.
Regardless of your level of charisma, the key is to make small changes in your leadership
image while maintaining your authenticity. Maintain the characteristics that make you who you
are, but try to identify 2 or 3 behaviors that might increase your ability to connect with others
(such as making more eye contact, smiling more often). Practice those new behaviors, enlisting
help from a coach or mentor if needed.
7. Be the expert. Perhaps the most interesting thing about power is that it’s generally in the
eyes of the beholder. You can’t just have power de facto unless there are people willing to
perceive you as having power. The same holds true for expert power – it comes from actual
expertise (such as an advanced degree or relevant experience) or the perception of expertise.
Don’t be shy about putting your credentials on your business cards, in your email signature, on
social media, or talking about your experience and expertise.
8. Tailor your power to reward others. Many leaders mistakenly assume that leveraging
reward power only means giving people more money. While this option sounds attractive, it’s
not always possible. Consider recognizing and incentivizing your team members in other ways.
Ask your team members what they would find rewarding. Some team members may find a
group picnic or outing highly rewarding; others may find this tedious or tiring. Time off or
flexible hours might work for some employees; others may not even take notice. Whatever
their incentive, don’t make the mistake of assuming that one reward fits all.
9. Reward with words. Give positive feedback often. Our experience with leaders across
industries tells us that during the course of a typical working relationship, it takes a ratio of 4:1
(4 positives for every negative) for a receiver of feedback to believe that the feedback has been
fair. This does not mean that you have to give a team member 4 positive pieces of feedback
every time you have a negative message to deliver. It does suggest that many of us have a long
way to go in terms of acknowledging what our people are doing right.
At the same time, when team members fail to live up to expectations, communicate and
enforce your standards, but be sure to provide support along the way. We recommend using
SBI to provide feedback in a talent conversation. Also, be explicit about consequences for
behavior or results that don’t meet expectations – and follow through consistently.
10. Teach others. Leveraging your full power doesn’t mean hoarding it. If you want to empower
the people you lead, you also need to teach them how to use the power they have available to
them. Think about the people you lead. What are those at the top of the list doing effectively?
What could those at the bottom of the list be doing better? Use the 7 bases of power as a way
to evaluate, communicate, and teach about leadership power in your organization.
Chapter 15
Contemporary Issues in Boardroom Dynamics
1. Risk Management: Figure out what’s an opportunity and what’s a threat.
In today’s global and active economy, the lines between competitive markets have never been
blurrier.
is Amazon a consumer company, for example, since it sells everything from groceries to garage
door openers? Or is it a technology company, since it owns and operates the legions of
computer servers that make e-commerce—its own and others—possible? With all the
crossover, it’s very difficult for board members to assess whether all the disruptions are
accelerators to the organization’s growth, or roadblocks.
2. Talent Alignment: Close the gaps between strategy and talent.
This is a huge topic because of the rapid pace of change and needs of leadership with the onset
of artificial intelligence and the changing nature of commerce, as our society potentially moves
from an exchange of goods to a thought exchange. Typically, there is a good amount of lead
time for any transformational innovation, but once it takes hold it tends to be exponential.
Boards really need to be able to see around hairpin turns and to fly at a high enough elevation
to anticipate appropriately.
Boards needs to step up in a different way and think with a different level of expansiveness,
involvement and opportunity building. The day of boards just evaluating based on what’s
happening today is not enough, it takes years to build those outcomes. It’s not just about
identifying problems, but also about awareness. Boards need to ask the right questions (not
just regulatory) that help to improve leadership. Boards need to look at the world and create a
lens that the CEO would not have complete access to without the directors.
One way to think about it is: Do you have the right board to pick the next CEO? Do you have the
right CEO in place to have the right leaders? Are the right leaders the ones to really define the
right workforce of the future? How much of that workforce is human and how much of it is
evolving into artificial intelligence and robots?
3. Information Overload: Everyone has information, learn how to connect the dots better.
Access to information used to be a huge cost for businesses. That has gone down enormously.
Today, the real questions are: What does the information say? What does it mean? And how do
we use it? Whole businesses are changing. The boards have to adapt. What boards have to do is
to step up to a different kind of leadership, anticipating what will create value, how that
impacts the organization, and evaluating if the right leadership is in place to make those pivotal
operating decisions on a day-to-day basis. Boards of the future must look forward in a different
way and think with a different level of expansiveness, involvement and opportunity building.
In the end, it all comes back to talent and succession, which are tightly aligned. Talent starts
with the board and goes down to the lowest level of employees. It will take different kinds of
thinking in the boardroom to effectively anticipate all of these issues. The need for diversity in
the boardroom to do that effectively and anticipate things effectively has never been higher,
not because it’s a do-good cause but because it will require nimbleness in thinking and diversity
of perspectives to make that happen.
Resolving Boardroom Challenges
1. Lean in quickly to tough issues. As one CEO reminded me, “problems are not like fine wine:
they do not get better with age.” It is essential that the board get aligned at the onset of an
issue around these kinds of questions:
• What is the real problem we’re facing?
• How do we identify a process to deal with this?
• Do we need outside expertise?
2. Form a special committee, if needed. Whether a separate special committee is called for is
not necessarily the point. The point is that the board needs a small group of its independent
directors to follow through with the process and outcomes desired. In addition, certain
directors may have conflicts, necessitating them being walled off from certain deliberations
around the issue at hand.
3. Use executive sessions early and often. The independent lead director/non-executive
chairperson plays a pivotal role, especially in the midst of a challenge. It is important for
him/her to convene as many sessions as necessary so that the tough questions get on the table,
directors are apprised of progress, and there is buy-in to the resolution.
4. Protect the board’s deliberations while documenting the decision-making process. One of
the panelists, Caroline Blitzer Phillips, a partner with Vinson & Elkins, said: “Documenting all of
this is very important today because of the increased involvement of activists…you must
protect the board’s decision-making process so that directors can be honest and serve their
fiduciary responsibility.”
5. Be transparent with relevant stakeholders. This should be a core tenet, but particularly
when there are activist investors or regulators asking questions or when a crisis emerges. Once
the directors and management agree on a plan, the appropriate stakeholders must be
informed. Diane de Saint Victor, general counsel and company secretary of ABB, Ltd., stated:
“It’s not about being victimized by transparency. Transparency has dramatically changed the
overall dynamics in the boardroom. It ends up driving more honesty and the overall outcome is
probably better and more in line with the values of the company.”
The role of a director today is much more complex than ever, necessitating a sharper focus on
the critical questions during tough times. The boards that take an early leadership role in
stepping up to problems and to the process of resolution will help their respective companies
thrive in turbulent times.
Case Studies in Boardroom Dynamics
Case Study 1
Outline of the case
You are a professionally qualified accountant, recently retired from your position as the
financial director of Company A, which is a listed company. Company A operates in the heavy
engineering industry and you worked there for over 12 years. Prior to this, you had spent 10
years as an audit partner in a large accountancy firm.
You receive a phone call from a head-hunter with an executive recruitment agency, acting on
behalf of a company’s nominations committee. After the usual small talk, he cuts to the chase:
“You have been recommended to me as a suitable candidate for a very prominent non-
executive role that is available at the moment. The company, Company B, is a listed company,
seeking a non-executive director who will also serve as the chair of the company’s audit
committee.”
He adds that Company B is a well-known financial services company. You are not struggling
financially. You have a reasonable pension, but the extra cash from this role would come in
handy. Additionally, you are finding it difficult to fully unwind after years spent working to tight
deadlines and coping with difficult challenges on a daily basis. Therefore, you find this potential
opportunity very attractive. You advise the head-hunter that you will think about his proposal
and get back to him as to whether you wish to be considered for the role.
You hang up and then consider the matter in greater detail. Your first instinct was to say to him,
whilst he was on the phone, that you wished to be considered for the position. However, due to
your prudent nature, you decided that it would be wise to give yourself some time to reflect
fully on the issues before making a decision.
You are keen to be put forward for this role, but you have a nagging doubt at the back of your
mind: you have no work experience in the financial services sector. Twelve months ago your
doubts may not have been so acute, but recent well-publicised events have certainly raised
your awareness of the complexities of the transactions which many financial services
companies undertake.
You are caught between two stools: on one hand, there is little doubt that your business
acumen will be of benefit to Company B; on the other hand, you feel that your lack of expertise
in this sector will leave you struggling to contribute constructively at times.
Key fundamental principles

Integrity: You should safeguard your integrity by only allowing your name to be put forward for
positions where you believe that you have (or can readily attain) the technical skill set required,
or where you can serve effectively as a lay member of the board, and the board is balanced by
the presence of other technical experts.
Objectivity: The ability to make an informed, unbiased decision must be preserved. The
potential financial rewards are obviously a threat to your objectivity, but ultimately you should
not let these cloud your judgement in considering the interests of shareholders and other
stakeholders.
Professional competence and due care: Can you quickly acquire adequate knowledge of the
commercial, strategic, technical and regulatory requirements of the proposed role?
Considerations
Identify relevant facts: Consider the technical and regulatory requirements which impact on
Company B’s business and the legal responsibilities of a non-executive director. You have to be
satisfied that you can acquaint yourself with these requirements quickly. Find out whether
Company B provides a comprehensive induction programme for its new non-executive
directors, as this might help to alleviate your concerns. It would be helpful to find out whether a
more detailed specification is available for the role.
Identify affected parties: Key affected parties are you, the head-hunter, the nominations
committee, other directors of Company B, and the shareholders of Company B.
Who should be involved in the resolution: You should involve the head-hunter in the
resolution process, as he may have access to much of the information you require. The
nominations committee may also be involved through their contact with him.
If you do decide to be put forward for the role, then you should be open and transparent in
your discussions with Company B. The nominations committee may, in fact, be looking for
someone who is unfamiliar with the financial services industry, or who has the specific qualities
that you possess, in order to bring a fresh perspective to the workings of the company’s board
and audit committee.
Possible course of action
Ultimately, you have to exercise professional judgement in this matter. If you do not feel
comfortable being put forward for the role, then you should inform the head-hunter
accordingly. You may, of course, decide to be put forward for the role, but if your concerns are
not adequately addressed, and if you are offered the role, you should decline the appointment
at that stage. You should also consider contacting your professional body for advice. You need
to establish what Company B is looking for. Try to obtain a detailed specification of the role and
the skill set of the person that the company requires. Ask the head-hunter why, in his opinion,
you were “recommended” to him as a suitable candidate.
You need to ensure that you are aware of the responsibilities associated with a non-executive
director’s role. You should also undertake your own due diligence on Company B and on your
prospective fellow directors. Do you believe that, even if you have, or can acquire, the
necessary skill set, this is a company on whose board you would want to serve? Do you believe
that the board would then have the correct composition and balance?

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BOARDROOM DYNAMICS 1

A candidate who passes this paper should be able to:

2. Evolution of Codes of Corporate Governance

4. Skills, Competencies and Diversity of the Board

4.1.2 Director skills and experience

5. Understanding Boardroom Dynamics

6. Board Decision Making

8. Culture in the Boardroom

8.6 Country culture - Hofstede’s Cultural Dimensions

10. The Effect of Meeting Design on Boardroom Dynamics

12. Effective Talent Management

13. Board Evaluation

14. Power and Politics in Organisations

14.1 The art and science of power in organisations

15. Contemporary Issues and Case Studies in Boardroom Dynamics

In recent years, high-profile corporate failures, maturing codes of governance, and an

After successful completion of this module you should be able to:

1.1 Defining Boardroom Dynamics

1. The theory and application of the behavioral aspects of board functioning.

As an adjective describing the dynamics of boards, board dynamics are:

2. The psychological processes that influence how boards function.

1.2 The Evolving Focus on Corporate Governance

Corporate Growth Places Emphasis on Developing Corporate Governance

The 1980s Brought a Corporate Governance Reform Counter-Reaction

The “Deal Decade” Leads to Shareholder Activism

Financial Crisis of 2008

The history of corporate governance continues to be rewritten. How we define corporate

1.3 The three phases of board evolution

The Real Risk of Value Destruction

The Evolution of the Board

2. The Liberated Board

The Progressive Board

1.4 Building blocks of a progressive board

Sophisticated information architecture is key to successful boards. An easy rule of thumb is

3. Focus on substantive issues

1.5 Impact of boardroom dynamics on organizational

Board diversity involves having a well-balanced board membership that is made of

Keeping a well-diversified cognitive board create an in-house self-reliance whereby

7. Boardroom dynamics enhances individual decision making process in terms of integrity

8. Facilitates collective responsibility/accountability within an corporation while taking

1.6 Interest in human factors (Gross national happiness,

 Leadership Development and Succession

1.7 Shifts in approaches to leadership

Situational era: contingent and situational theories (1960s)

1.8 Focus on ethics

1.9 A broader model for corporate governance

This quadrant is the traditional area of focus of corporate governance.

1.10 Organizational failures and impacts on boardroom

1. Loss of Shareholder Confidence and Trust

2. Ineffective board cultures

3. Difficulty Raising Capital

decision is the level of implementation of corporate governance principles (public disclosure of

information, protection of shareholder rights, and equal treatment of shareholders) and

profitability, which ensures return on their investment.

4. Increased Government Oversight

5. Unhealthy company culture

7. Unhealthy company culture

8. Information glass ceiling

9. Dysfunctional group dynamics - Unaddressed individual behaviors that trigger

1.11 Role of the corporate secretary in Board room

7. As it channels information flows between the board of directors and executive

2.0 Evolution of Codes of Corporate Governance