Group 4

Board of Directors: Selection,

Compensation, and Removal
 Members

01 02 03

Trần Ngọc Nhi Bùi Thị Quỳnh Như Hồ Bùi Ngọc Vân

04 05

Nguyễn Kiều Oanh Trần Vĩnh Đức

 Outline

01 02 03

Overview about The selection process Director

Board of Directors Compensation

04 05 06

Board Evaluation Removal of Directors Case study

1.
OVERVIEW ABOUT
BOARD OF
DIRECTOR
1. Overview about Board of Directors
Board members tend to retire voluntarily.
1.1 Market for Directors:
According to Audit Analytics, only about 2%
of directors who leave the board are
Among public corporations in
dismissed or not reelected.
the U.S:

~40,000
Directors

7 YEARS
Average year, director stays
on a corporate board

72 YEARS OLD
Mandatory age limit
The typical board consists of a mix of professionals with managerial, functional, and
other specialized backgrounds.
 1.2. Examine the qualifications and
criteria of board members:

Companies look for a diverse mix of personal

and professional backgrounds:

A diverse mix of personal and

Have industry experience.
professional backgrounds.

Financial, international, risk

management, information
Have senior-level experience. technology, marketing,
regulatory, and digital or
social media experience.
 1.3. Four specialized types of directors:
1.3.1. Active CEOs:

Active CEOs sit on an average of 60% external boards.

Directors with CEO-level experience offer a useful mix of managerial, industry,
and functional knowledge so they can contribute to multiple areas of
oversight, including strategy, risk management, succession planning,
performance measurement, and shareholder and stakeholder relations.
In some cases, active CEOs are too busy, unable to serve on time-consuming
committees, to participate in meetings on short notice and for not being good
listeners.
 1.3.2. International Experience:

1 2 3

Directors with this Directors may have

International experience knowledge help the contacts with
is important as board understand government officials,
companies enter new strategy, operations, suppliers,
markets. finance, risk, and manufacturers,
regulations. distributors, and
customers.
 1.3.3. Special Expertise:

Companies also have demand for directors with special expertise that matches the
functional or situational needs of the firm.

01 02 03 04
Research, Corporate Regulatory Mergers,
development, and turnaround or or legal. acquisitions, or
production. financial divestitures.
restructuring.

In some cases, individuals with specific expertise are not formally elected to the board but
instead, participate in board meetings as observers or advisory directors.
1.3.4. DIVERSE DIRECTORS:

Companies might seek directors of diverse personal

perspectives when they believe the diversity contributes to
board deliberation or decision-making.

Ethnic Cultural Gender Societal

origins factors
 1.3.5 PROFESSIONAL DIRECTORS:

Professional directors are individuals whose full-time careers are serving on boards of directors.
Professional directors might be effective as advisors and monitors. However, relying on professional
directors can be risky.

Advantages of Professional Directors Disadvantages of Professional Directors

They have extensive experience on boards. They tend to be busy.

They might also have more time to dedicate to their Might not have the motivation to be effective
board responsibilities. monitors.

Professional directors might lack independence and

Professional directors bring extensive personal and
may be unwilling to stand up to management or fellow
professional networks.
directors.
2.
Director
Recruitment
Process
 2. Director Recruitment Process

A key responsibility of the nominating and governance committee.

01 Evaluating the needs of the company.

02 Identifying gaps in the board’s desired capabilities.

03 Assembling the list of potential candidates:

Through personal network or search firm.
The method varies with firm size.

04 Ranking them in preferential order.

05 Decide who they wants to nominate before
meeting face-to-face.
The meeting’s like an invitation rather than an
interview.
Inappropriate to approach a qualified candidate just
to reject.
2. Director Recruitment Process

Companies do not tend to engage in succession planning among

board members.

+ 49% companies begin the process before an outgoing

director announces plans to step down.
+ 40% companies develop a formal written document.
“Should the outgoing CEO remain on the board as a director after
stepping down from it as an executive?”

Supportive comments Critics comments

Lend stability to the Undermine the credibility and

transition process. leadership of the incoming CEO.

According to a survey by Korn/Ferry

Provide advice and mentor the
Institute, 72% of directors believe that the
incoming CEO.
former CEO should not sit on the board.
3.
Director
Compensation
Compensation must be sufficient to 3.1.
attract and retain qualified professionals.
Compensation
Compensation should be structured to
of Directors
motivate directors to act in the interest
of shareholders and stakeholders.

Compensation covers time directly spent

on board matters, cost to keep schedule
flexible to address urgent issues, and
financial and reputational risk from
corporate scandal or lawsuit.
 3.1. Compensation of Directors
Compensation level varies by company size.
But, the compensation mix does not vary significantly
by company size
some relation exists between compensation risk
and reward, based on the nature of the industry
 3.1. Compensation of Directors

Many companies also pay fees for

serving on committees - an annual
retainer or might be awarded on a
per-meeting basis.
Fees are intended to compensate for
time, expertise, and potential risk of
being named in shareholder litigation.
 Many companies require directors to maintain
3.2. minimum ownership levels of company equity.
Ownership Equity ownership by directors is intended to improve
guidelines the alignment between their interests and those of
shareholders.

Equity ownership guidelines may be stated as a specified number

of shares, dollar value, or a multiple of the annual cash retainer.
3.2. Ownership guidelines
There are potential drawbacks to equity ownership
guidelines:
+ Directors are not managers.
+ Directors might become risk averse (e.g., fail to approve
long-term projects if near-term expenditures reduce stock
price).
+ Directors may make decisions from the standpoint of
personal benefit rather than professional judgment.
+ Ownership guidelines are not calibrated to personal
wealth, and so may have varying impact on directors.
The research evidence is mixed on whether equity
ownership by nonexecutive directors improves firm
performance.
 4. Board Evaluation

A board evaluation is the process by which the

01 entire board, are evaluated for their effectiveness in
carrying out their stated responsibilities.

Each committee is required to perform its own

02
self-evaluation.

Companies are not required to perform an

03 evaluation of individual directors.

Evaluations are important because they enable the

04 board to understand whether it is meeting its own
expectations for performance.
 Composition

Accountability

Evaluations can
address a
variety of Information
topics

Meetings

4. Board Evaluation
Relations
5. Removal of Directors

People debate whether

Director want to
directors and officers
leave a corporate
Generally directors of failed companies
board. These reasons
leave voluntarily should be elected to
can be benign or more
directorships at other
troublesome
firms.
=> same as company
 Removal of Directors

A company may replace a director for a variety of reasons, both good and bad:

Requires new Company Director Director has

Negligent or
skills and wants to irresolvable
wishes to performing
capabilities on “refresh” disagreement with
retire. below
the board. the board. other directors or
expectations.
management.
Case study
 World’s Top 40 Dairy Producer

Nguyen Hanh Phuc

Chairman of the BOD
Head of Nomination Committee
Member of Remuneration Committee

Mai Kieu Lien

Executive BOD member
Head of Strategy Committee
Chief Executive Officer
Member of Nomination Committee
 Started operations in 1996 under the name Ma San Shipping
Top three largest private sector companies in Vietnam

Danny Le Nguyen Dang Quang Truong Cong Thang

CEO of Masan Group Chairman of Masan Group CEO of Masan Consumer Corporation
MICROSOFT American multinational technology corporation
Headquartered in Redmond, Washington

Best-known software pproducts:

- Windows operating systems
- Microsoft 365
- The Edge web browser.
 Board of Directors

Microsoft was founded by Bill Gates and Paul Allen on April 4, 1975.
Thanks For Listening