Making corporate boards more effective

Krishna Pale, Guan Submarines and Walter Salmon. abstract Presented by Brent Lengthener, Chairman and chief executive officer of Lengthener &038 Associates, jury Member of TAP oil colour &038 Gas and Merit. sort awayicipants Board members from various organizations. fractional of the group was made up of planetary representatives with a inviolable contingent from Africa, Australia, the I-J and well-nigh other destinations. This proved to be in truth provoke in that their insights were from a different position throughout.Preface This is Part 2 of my notes and subsequent inquiry performed from the week I spent with Jay Lowers and a handful of Harvard Business School susceptibility members discussing tabular array effectiveness. I am stressful to sh ar this info to the best of my abilities so that others arse gain additional insights for the companies they lead. Note, these are my notes solely I do not necessarily agree with all told of the comments and/or insights f ortuned. Also note that these professors are all pro- business and serve on menus as swell.In Part 1, we poleed with nerve dissect 7-Bank of America and Merrill Lynch Case resume 8 Hew permitt-Packard Company The War in spite of appearance This was a continuation of Case Studies 5 and 6. In September 2006, Haps Board of Directors was in despair. The acquisition of Compact (Case canvass 5) had taken a toll. Board members were leaking confidential randomness and felony counts ensued. All of this marred what chance uponmed to be a heavy(p) turnaround for HP low Mark Hurt. break Questions Included 1. How and wherefore did HP get into this situation? 2. What could shake up been done to anticipate this? 3. How do we prevent this from happening to our boards? tombstone Takea focusings on Board Dysfunction Mistrust Poor communication No true team in any case many lone rangers No consensus on strategy No boundaries between board oversight and management execution move pe rsonal agendas first Independence. Integrity. Innovation. 2 Key Questions Included 1 . Was Cancan Justified in attacking Target? 2. Who would you side with? Cancan or Target? Why? 3. Could Targets board need done anything differently to avoid the universal conflict this fixd? 4. If Target can be attacked, then what are the implications for other boards, corporeal governance, proxy access and more than regulative oversight?Key takeaways Economic downturns create more stress, especially with investors. Rational thought affect an quickly go out the door. Presently, guess about anyone operating in the disjunction of Mexico and how the stress has increased. Target is one retail outlet that does not fear Wall-Mart. They find their own strategy and are very successful. They have no desire to be a copycat. They are proud of who they are. The board is constantly revamping itself and is considered excellent in governance. rase with all it had going for it, they still came under at tack. Everyone is vulnerable- especially today with the peeled changes.The nominating process will become much more important going forward. Being vigilant is ALWAYS key. Additional Discussions The day is orgasm when re-nominating boards will be very important. Investor get outings may want to aggressively share what board members are doing, press releases, website, etc, want they do with management. Companies should reach out to full-grown and influential shareholders from time-time. Conference calls and shareholder meetings may need to be rethought so as to get more interaction. act sure the board you have works well as a team. When crisis hits, they need to see themselves as a team versus individuals. Case Study 1 1 FL-CIO affair of Investment and floor Depot On January 3, 2007, Home Depot fired Robert Narrated, its chief operating officer and Chairman, following controversy over his salary package. Marinades departure was partly the result of the cogitate thrusts of the FL-Coos Office of Investment. The office had executed a website and led an aggressive campaign think on his pay. Narrated made $240 million in 6 years, but the stock had evidently gone down even with a 19% acquire back. Home Depots name one competition (Lows) was beating them at every turn, including watching its market peak go from $16 billion to $47 billion.Key Questions 1 . How can a order call with a focused effort like this? 2. How did Marinades wages impact Home Depot? Key Takeaways There can be a wide variety show of different shareholder groups, all vary and all with different, and maybe opposing, agendas. It is important to think out compensation plans from beginning to end not only the costs, but the reasoning, the optics, and the story. Make sure you proactively tell the true story regarding compensation versus letting someone else do it for you. Their perception can become other peoples reality.Error as much as possible with doing based compensation versus fixed remunerates. confine plans understandable and simple. For more good information on excellent pay practices, go to Case Study 4 (in Part 1) about Recruit Benchers PAL. Case Study 12 The Board of Directors at Morgan Stanley &038 doyen Witter On June 13, 2005, Phillip announced that he would anesthetise as Chairman and CEO at Morgan Stanley &038 Dean Witter as soon as a refilling was found. Morgan Stanley &038 Dean Witter had been playacting poorly and was losing its key talent. His resignation brocaded two main problems for the board 1 how to go about finding a bran-new CEO and 2. How to determine the next direction of the firm. 6 Key Questions 1 . What is your assessment of how the board cover upd the situation? 2. How do you explain their decision? Terrible practices were in place and the company had become send Board became infatuated with a strong CEO personality or woolly-headed focus A possible successor being guaranteed the CEO role in five years is a fla gitious practice The board sacrificed the vision and bang of the company for friendship and interlocks Most did not understand the business, especially the huge deflection between Morgan Stanley and Dean WitterTo remove the CEO, 75% of the board had to agree, which was virtually impossible The way they allowed the CEO to dictate any would-be(prenominal) successor cut them off from some great candidates Case Study 13 Citreous-Wichita-Wells Fargo On October 3, 2008, the CEO of Citreous, who had Just worked out an exclusive agreement to debase Wichita, authentic a call from Washouts CEO aspect they had Just cut a new deal with Wells Fargo. Wells Farads commotion was $7/share versus the $1 Citreous had cracked. The matcher was the IBID. They first worked the deal with Citreous but later reworked a new deal with Wells Fargo.Even more interesting was new legislation that was being approved to let a pro jibable bank buy another bank and use its brighten Operating Loss immediately . This, at the time, truly only worked for Wells Fargo and is one of the reasons it could offer more. 1 . If you were on Agitprops board and hear there was a new deal with Wells Fargo, what would you do? 2. If you were on Washouts board, how would you handle the two opportunities? 3. If you were Wells Fargo, after the fond tax law change, what would you do? 4. tax what the IBID did by, in essence, brokering to both. Www. Lengthener. M 7 5. Key takeaways Interestingly, we had one of Washouts negotiators in the room so he gave us some great insights Citreous was going to cherry-pick Washouts assets and Wells Fargo was going to buy all. Citreous was not a cultural fit so chances that this would have worked were slim at best. Plus, Citreous did not know retail like Wells Fargo. Wichita believes Wells Fargo has been a improve fit. The IBID Chair, Sheila Pair, brokered the deal first with Citreous and then, during the due patience period, was working on a divulge deal with Wells Fa rgo. From a court-ordered perspective