The Handbook of Board Governance

Book description

Build a more effective board with insight from the forefront of corporate governance

The Handbook of Board Governance provides comprehensive, expert-led coverage of all aspects of corporate governance for public, nonprofit, and private boards. Written by collaboration among subject matter experts, this book combines academic rigor and practitioner experience to provide thorough guidance and deep insight. From diversity, effectiveness, and responsibilities, to compensation, succession planning, and financial literacy, the topics are at once broad-ranging and highly relevant to current and aspiring directors. The coverage applies to governance at public companies, private and small or medium companies, state-owned enterprises, family owned organizations, and more, to ensure complete and clear guidance on a diverse range of issues. An all-star contributor list including Ram Charan, Bob Monks, Nell Minow, and Mark Nadler, among others, gives you the insight of thought leaders in the areas relevant to your organization.

A well-functioning board is essential to an organization’s achievement. Whether the goal is furthering a mission or dominating a market, the board’s composition, strategy, and practices are a determining factor in the organization’s ultimate success. This guide provides the information essential to building a board that works.

  • Delve into the board’s strategic role in value creation
  • Gain useful insight into compensation, risk, accountability, legal obligations
  • Understand the many competencies required of an effective director
  • Get up to speed on blind spots, trendspotting, and social media in the board room

The board is responsible for a vast and varied collection of duties, but the singular mission is to push the organization forward. Poor organization, one-sided composition, inefficient practices, and ineffective oversight detract from that mission, but all can be avoided. The Handbook of Board Governance provides practical guidance and expert insight relevant to board members across the spectrum.

Table of contents

  1. Cover
  2. Praise for The Handbook of Board Governance
  3. Title Page
  4. Copyright
  5. Dedication
  6. Foreword
  7. Preface
  8. I: The Board's Responsibilities
    1. Chapter 1: The Handbook of Board Governance: An Introduction and Overview
      1. Introduction and Overview
      2. Diversity of Authorship
      3. Drivers and Impediments to Improved Corporate Governance
      4. Précis of This Handbook's Chapters
      5. Part I: The Board's Responsibilities
      6. Part II: What Makes for a Good Board? Independence, Competency, Dynamics, and Behaviors
      7. Part III: Risk Governance, Assurance, and the Duties of Directors
      8. Part IV: The Rise of Shareholder Accountability
      9. Part V: The Unsolved Governance Problem: Performance Measurement And Executive Pay
      10. Part VI: Governance of Information Technology
      11. Part VII: Governance of Sustainability: Boards' Changing Roles
      12. Part VIII: Governance of Different Forms
      13. Conclusion: Future of Board Governance and Unresolved Issues
    2. Chapter 2: Boards That Lead
      1. A New Model of Collaborative Leadership
      2. “One of the Greatest Business Decisions of All Time”
      3. Monitor and Leader
      4. Duty of Leadership
      5. When to Lead, When to Partner, and When to Stay Out of the Way
      6. Recruiting Directors Who Build Value
      7. The Director's Checklist
      8. Conclusion: Boards That Lead
      9. Notes
      10. References
    3. Chapter 3: Trends in Corporate Governance
      1. Trend 1: Increased Usage of Corporate Governance Codes
      2. Trend 2: Higher Levels of Regulation and Enforcement
      3. Trend 3: Greater Board Diversity
      4. Trend 4: More Focus on Strategy, Value Creation, and Corporate Responsibility
      5. Trend 5: Greater Emphasis on the Governance of Risk
      6. Trend 6: Greater Emphasis on Information Governance
      7. Trend 7: Greater Emphasis on Compensation Governance
      8. Trend 8: Greater Emphasis on Accountability and Responsibility to Shareholders and Other Stakeholders
      9. Trend 9: Increased Usage of Board Evaluations and Board Performance Development
      10. Trend 10: Director and Board Development
      11. Conclusion
      12. Notes
    4. Chapter 4: Governance as a Corporate Discipline
      1. What Is Governance?
      2. Developing the Governance Document
      3. Keeping the Governance Document Up-to-Date
      4. Who Should Have Access to the Governance Document?
      5. What Should the Governance Document Contain?
      6. Summary
      7. Conclusion
    5. Chapter 5: The Nonexecutive Chairman: Toward a Shareholder Value Maximization Role
      1. Key Responsibilities of a High-Performance, Nonexecutive Chairman
      2. Characteristics, Experience, and Skills to Look For in a Chair
      3. Communication with Shareholders
      4. Addressing Concerns of Activist Shareholders
      5. Conclusion
      6. Notes
    6. Chapter 6: CEO Succession: An Owner's Guide for Directors
      1. The Talent Disconnect
      2. The Reluctant Retiree
      3. The Absence of Human Resources
      4. The Assessment Tool Obsession
      5. The Irrelevant Criteria
      6. The Culture Conundrum
      7. The Mysterious Talent Pool
      8. The Never-Ending Transition
      9. The Forever CEO
      10. The Persistent Myth: It's Just for the Big Guys
      11. Conclusion
      12. References
    7. Chapter 7: CEO Succession Planning: CEO Succession Planning
      1. The Market for Chief Executive Officers
      2. CEO Turnover
      3. Incoming CEOs
      4. Models of Succession Planning
      5. Common Practices in Succession
      6. Conclusion
      7. Notes
  9. II: What Makes for a Good Board? Independence, Competency, Dynamics, and Behaviors
    1. Chapter 8: Director Independence, Competency, and Behavior
      1. The Regulatory Focus on Director Independence May Occur at the Expense of Industry Expertise
      2. Moving Beyond Director Independence
      3. Regulatory Emphasis on Director Independence
      4. Boards Should Collectively Decide: How Much Compromising of Director Independence Is Acceptable?
      5. Director Competency
      6. A New Requirement: Board Diversity Matrix
      7. Director Behavior
      8. Assessing Overall Director Effectiveness
      9. Conclusion
      10. Notes
      11. References
    2. Chapter 9: The Criticality of Board Director Team Intelligence (TQ) in Economic Value Creation
      1. The Existing Paradigm Is Long Overdue for a Change
      2. Defining and Measuring Team Intelligence Impact on Corporate Performance
      3. Findings about the Relationship between TQ and Firm Performance
      4. Theoretical Support
      5. Recommendations for Boards
      6. Conclusion
      7. Notes
    3. Chapter 10: Lessons from the Banking Crisis: Leadership and Effective Board Behaviors
      1. Background and Context
      2. Learning from the Banking Crisis
      3. Leadership in the Boardroom
      4. Board Norms
      5. Information Flow
      6. Board Structure and Process
      7. Discussion and Summary
      8. Conclusion
      9. References
    4. Chapter 11: The Challenge of Director Misconduct
      1. Defining Expectations for Director Behavior
      2. Forms of Director Misconduct
      3. Disclosures of Confidential Information
      4. Valued Behaviors for Directors
      5. Appropriate Dissenting Director Behavior
      6. Strategies to Prevent Director Misconduct
      7. Director Resignations: Form 8-K Disclosure Obligations
      8. Addressing Director Misconduct
      9. Conclusion
      10. Note
  10. III: Risk Governance, Assurance, and the Duties of Directors
    1. Chapter 12: The Rise and (Precipitous, Vertiginous, Disastrous) Fall of the Fiduciary Standard
      1. Conclusion
      2. Notes
    2. Chapter 13: The Duties and Liabilities of Directors—Getting the Balance Right
      1. Why Should Directors Have Duties?
      2. The General Duties of Directors under Corporate Law
      3. What Objectives Should Directors Pursue?
      4. The Business Judgment Rule—A Get-Out-of-Jail Card for Directors?
      5. Enforcing Directors' Duties
      6. Beyond Corporate Law—Other Sources of Liability for Directors
      7. Directors' Personal Exposure to Financial or Criminal Liability—Overwhelming Burden or Empty Threat?
      8. Conclusion: The Balance between Personal Accountability and Liability Overkill
      9. Notes
    3. Chapter 14: Best Practices in Parent and Subsidiary Governance
      1. Part I: Overview of Parent and Subsidiary Governance
      2. Part II: Parent Company Liability for the Actions of Subsidiaries
      3. Traditional Exceptions for Holding Parent Companies Liable for Their Subsidiaries
      4. Emerging Tort Law Liability as a New Exception
      5. Part III: Leading-Edge Practices in Subsidiary Governance
      6. How Much Direction and Oversight Should a Parent Corporation Exercise over Its Subsidiaries?
      7. Part IV: Conclusion
      8. Notes
    4. Chapter 15: The Role of the Board in Risk Management Oversight
      1. The Challenges
      2. Risk Management Methodologies
      3. ISO 31000
      4. COSO ERM 2004
      5. Financial Institutions' Regulatory Requirements
      6. What Is Enterprise Risk Management?
      7. Accountability for Board Oversight
      8. Overview of the Board's Role
      9. The Board and Internal Audit
      10. Conclusion
      11. Notes
      12. References
    5. Chapter 16: Board Oversight of Internal Audit: How to Maximize Internal Audit Value
      1. The Internal Audit Mandate
      2. The Relationship of Internal Audit and Enterprise Risk Management (ERM)
      3. The Chief Audit Executive (CAE)
      4. The Independence and Motivation of a CAE
      5. Planning
      6. Reporting Issues
      7. Follow Up on Internal Audit Reports
      8. Building Trust
      9. Conclusion
      10. Appendix
      11. Notes
    6. Chapter 17: Three Lines of Defense versus Five Lines of Assurance: Elevating the Role of the Board and CEO in Risk Governance
      1. The Origins of the Three Lines of Defense (3LoD)
      2. Regulatory Endorsements to Date
      3. 3LoD Contrarian Positions
      4. Suboptimal and Even Dangerous Elements of 3LoD
      5. Five Lines of Assurance—What Is It?
      6. Five Lines of Assurance—Why Is It Better?
      7. Benefits of the Five Lines of Assurance versus 3LoD
      8. Conclusion
      9. References
    7. Chapter 18: Commercial and D&O Insurance for Large Corporations: Best Practices in Protecting the Assets and Liabilities of Directors and Officers and Their Organizations
      1. The Key Organizational Risks (Insured and Not Insured)
      2. Directors and Officers Insurance
      3. Summarizing Insurance and Claims for Board Oversight Purposes
      4. Roles and Responsibilities
      5. The Insurance Marketing Process
      6. Conclusion
      7. Appendix A: Checklist of Key D&O Policy Extensions
      8. Appendix B: Broker Responsibilities, Sample Broker Service Agreement
      9. Appendix C: Checklist—The Process for Marketing Large Insurance Programs
      10. Appendix D: Director's Questions
      11. Notes
  11. IV: The Rise of Shareholder Accountability
    1. Chapter 19: The Happy Myth, Sad Reality: Capitalism without Owners Will Fail
      1. Received Wisdom
      2. Ownership
      3. Free—In the Sense of Not Being Accountable—Cash
      4. Drones
      5. Pfizer
      6. ExxonMobil
      7. Capitalism as Corruption
      8. Increased Regulation
      9. Better Boards of Directors
      10. Enlightened Management
      11. Faute de Mieux20—Back to Ownership
      12. Postscript
      13. Notes
      14. References
    2. Chapter 20: Board–Shareholder Engagement1
      1. Part I: 2014—The Year of Engagement
      2. Part II: Factors Supporting Board–Shareholder Engagement
      3. Part III: The Costs and Benefits of Engagement
      4. Part IV: Responses to Increasing Engagement
      5. Part V: Questions for Further Research
      6. Conclusion
      7. Notes
    3. Chapter 21: The Individual's Role in Driving Corporate Governance
      1. From Robots to Democracy
      2. Companies without Owners
      3. Taking Responsibility
      4. Life-Affirming Foundations
      5. When Humans Bring Their Values to the Corporation
      6. Current Pay Practices Work Against Creating Long-Term Value
      7. Status and Power
      8. The Example of Norway
      9. How Much Will Government Help?
      10. Fiduciary Duty
      11. Research Points to Public Opinion as a Driver
      12. Retail Investors Who Made a Difference
      13. Conclusion
      14. Notes
    4. Chapter 22: Thoughts on the Origins and Development of the Modern Corporate Governance Movement and Shareholder Activism
      1. Welcome to the 1980s
      2. Big Daddy and the Birth of the Council of Institutional Investors
      3. The 1990s: The Transition from Defense to Offense
      4. The Birth of Activism
      5. Notes
  12. V: The Unsolved Governance Problem: Performance Measurement and Executive Pay
    1. Chapter 23: Peer Groups: Understanding CEO Compensation and a Proposal for a New Approach
      1. Peer Benchmarking
      2. CEO Successions
      3. Empirical Support
      4. What This Means for CEO Pay
      5. Conclusion
      6. Notes
    2. Chapter 24: The Effective Compensation Committee
      1. Keys to an Effective Compensation Committee
      2. Compensation Committee Charter
      3. Compensation Philosophy
      4. Compensation Committee Calendar
      5. Aligning Pay to Performance: Best Practices
      6. Succession Planning and Talent Development
      7. Say-on-Pay and Shareholder Engagement
      8. Conclusion
      9. Notes
    3. Chapter 25: Human Resource Management: The Role of Boards
      1. Human Resources Information Available to Boards
      2. Human Resources Expertise on the Board
      3. Monitoring Human Resources Effectiveness
      4. Sources of HR Information and Knowledge Gap
      5. What Price Do Boards Pay for the HR Gap?
      6. How Boards Can Address Their HR Effectiveness Gap
      7. Establish Quadruple Bottom Line Public Reporting
      8. Capacity Development
      9. Conclusion
      10. References
    4. Chapter 26: Designing Performance for Long-Term Value: Aligning Business Strategy, Management Structure, and Incentive Design
      1. Defining Performance and Missing Metrics
      2. What About Earnings per Share (EPS) as a Performance Metric?
      3. Connecting Current and Future Value to Total Shareholder Return
      4. Aligning Management Structure with Innovation and Future Value
      5. Current Value, Future Value, and Rethinking Long-Term Incentive Design
      6. Explaining Performance and Pay for Performance
      7. Conclusion
      8. Glossary
      9. Notes
    5. Chapter 27: Measuring and Improving Pay for Performance: Board Oversight of Executive Pay
      1. The Three Basic Objectives of Executive Pay
      2. A Brief History of Executive Pay
      3. Why Percent of Pay at Risk Is Not a Meaningful Measure of Incentive Strength
      4. Measuring the Three Basic Objectives of Executive Pay
      5. The Design Implications of the Measurement Analysis: Perfect Pay Plans
      6. Benchmarking Pay for Performance
      7. Why Say-on-Pay Approval Rates Are So High
      8. Why the Guidance from CalPERS, NACD, ICGN, and ISS Is Not Very Helpful for Directors
      9. The Challenge Facing the Individual Director
      10. Conclusion
      11. Notes
  13. VI: Governance of Information Technology
    1. Chapter 28: Information Technology and Cybersecurity Governance in a Digital World
      1. The Nature of Information Technology
      2. The Evolution of Corporate IT Risk
      3. Effective IT Governance in Practice
      4. The Never Ending Cybersecurity War
      5. Conclusion
      6. Notes
    2. Chapter 29: The Board's Role in the Governance of Enterprise Information and Technology
      1. The Skill Shortage
      2. What Is Governance of Enterprise Information and Technology (GEIT)?
      3. How Bad Is the Board Capability Problem?
      4. Benefits of Boards Building IT Leadership Capability
      5. Winners and Losers
      6. Areas of IT Risk Boards Must Capably Govern
      7. Three Barriers to Effective GEIT
      8. Are Current Governance Oversight Practices Serving Your Board When It Comes to Technology Risk?
      9. IT Governance Reporting to the Market and Investors
      10. The Role of Audit in IT Risk, and the COBIT5 Control Framework
      11. Board Accountabilities and New Competencies
      12. Practical Steps to Get Started Transforming Your Board
      13. Conclusion
      14. Notes
      15. References
  14. VII: Governance of Sustainability: Boards' Changing Roles
    1. Chapter 30: Responsible Boards for a Sustainable Future
      1. What Do All These Developments Mean for the Corporate Boards Around the World?
      2. Role of the Board of Directors
      3. Emerging Standards of Sustainability
      4. Responsible Boards
      5. Crafting the Sustainability Vision
      6. Building Sustainable Boards
      7. Integrating Sustainability into the Organization
      8. Conclusion
      9. Notes
    2. Chapter 31: The Board's Role in Sustainability Governance: Connecting Long-Term Value Creation and Executive Compensation
      1. What Is Sustainability?
      2. The Relationship between Sustainability Performance, Value Creation, and Executive Compensation
      3. The Current State of Sustainability Governance and Compensation on Sustainability Performance
      4. Action Steps
      5. Conclusion
      6. References
    3. Chapter 32: Board Governance for a Better World
      1. Chocolate Is Bittersweet
      2. Volkswagen: A Cautionary Tale
      3. COP21
      4. Boards Build Shareholder Value
      5. Global Challenges Present Opportunities for Businesses
      6. Boards That Lead
      7. Society Holds Businesses Accountable
      8. Boards Must Build a Better World
      9. References
    4. Chapter 33: Corporate Governance: Ethics and Legal Compliance, Risk Management, and Political Activities
      1. Legal Compliance and Ethics
      2. Risk to Reputation
      3. Board Role and Legal Incentives
      4. Board Committees
      5. Corporate Political Role
      6. Conclusion
      7. References
  15. VIII: Governance of Different Forms
    1. Chapter 34: Transforming Nonprofit Boards to Function in the Twenty-First Century
      1. Improving Board Structures and Seeking the Best Board Members
      2. Improving Board Operations
      3. Fundraising—A Team Effort
      4. How Does Your Nonprofit Retain Termed-Out Board Members?
      5. Strategic Planning—Long Term Pays Off
      6. Evaluating the CEO—Rigor Required
      7. Board Compliance—More Than Financials
      8. Conclusion
      9. Notes
    2. Chapter 35: Startup Boards—All In for the Company
      1. Startup Board Evolution
      2. Boards That Are All In
      3. The Cash Nexus
      4. The Path to Exit
      5. Venture Capitalist Conflicts of Interest
      6. Startup Board Diversity
      7. Startup Board Mechanics
      8. Conclusion
      9. Notes
    3. Chapter 36: Systemically Overlooked Anomalies of Governing Small-Cap Companies
      1. One-Size-Fits-All
      2. Conflicts of Interest and Needlessly Dilutive Financings
      3. The Epidemic of Asymmetric Information and Groupthink
      4. When the Selection and Management of Professional Service Providers Creates Enterprise Risk
      5. Conclusion
      6. Notes
    4. Chapter 37: Boards and Value Creation in Family Firms: An Extended Team Production Approach
      1. Understanding Values and Value Creation in Family Firms
      2. Boards and Value Creation in Family Firms
      3. The Extended Team Production Approach for Understanding Boards and Governance
      4. The Contribution of Boards in the Value Chain
      5. Board Competences, Core Capabilities, and the Value Chain
      6. Developing Boardroom Dynamics in Favor of a Team Production Culture
      7. Conclusion
      8. References
    5. Chapter 38: Succession in Family Businesses
      1. Introduction
      2. The Succession Plan
      3. The Prodigal Child System
      4. Qualifications and Employment
      5. The Gender and Age Issues
      6. The Nonfamily Successor (the Hired Gun)
      7. The Family Owners
      8. Conclusion
      9. Notes
    6. Chapter 39: From Regulation to Enforcement of Corporate Governance in the Middle East and North Africa
      1. Capital Markets Supervision Framework
      2. Corporate Governance Enforcement
      3. Priorities for Reform
      4. Conclusion
      5. Notes
      6. References
  16. About the Editor
    1. Richard Leblanc, Editor
  17. About the Authors
    1. Alissa Amico
    2. Yılmaz Argüden
    3. Roger Barker
    4. Andrea Calabrò
    5. Dennis Carey
    6. Ram Charan
    7. Solange Charas
    8. Jay A. Conger
    9. Steven De Haes
    10. Charles M. Elson
    11. Adam J. Epstein
    12. Craig K. Ferrere
    13. Richard Fields
    14. Eugene H. Fram
    15. John R. S. Fraser
    16. Jonas Gabrielsson
    17. Anthony Goodman
    18. Holly J. Gregory
    19. Steven Hall
    20. Steven Hall Jr.
    21. Mary Halton
    22. Lauren C. Hanlon
    23. John M. Holcomb
    24. Morten Huse
    25. Alice Korngold
    26. David F. Larcker
    27. Edward E. Lawler III
    28. Richard Leblanc
    29. Tim J. Leech
    30. Jon Lukomnik
    31. Stephen J. Mallory
    32. Nora McCord
    33. James McRitchie
    34. Nell Minow
    35. Robert A. G. Monks
    36. Mark B. Nadler
    37. Stephen F. O'Byrne
    38. Douglas Y. Park
    39. Chris Pierce
    40. Poonam Puri
    41. Adam Quinton
    42. Drew Stein
    43. Brian Tayan
    44. Greg Timbrell
    45. Michael Useem
    46. Elizabeth L. H. Valentine
    47. Mark Van Clieaf
    48. Henry D. Wolfe
    49. Ronald Zall
    50. Bob Zukis
  18. Index
  19. End User License Agreement

Product information

  • Title: The Handbook of Board Governance
  • Author(s): Richard Leblanc, John Fraser
  • Release date: May 2016
  • Publisher(s): Wiley
  • ISBN: 9781118895504