Lecture 2 Flashcards
What are the two types of boards? What characterizes them?
Unitarian board
* e.g Anglosaxian + Sweden, Switzerland
* Have one board with both directors and different numbers of executives
Two-tier board
* e.g. Germany, The Netherlands
* One Supervisory board and one Management board
What are the different compositions of a board? Describe them and give examples
1) The all-executive-director board
* Top management = directors
* e.g. small familiy firms, start-ups and subsidaries
2) The majority-executive-director board
* Top management still dominates the board
* E.g. growing start ups/family firms
3) The majority-non-executive-director board
* Outsiders dominate the board
* A requirement in many CG codes
* A ”professional board” or a ”control/complience board”?
* Often CEO/CFO only insiders
* E.g. large PLCs in US, UK and some EU countries
4) The all-non-executive-director board
* Only outsiders
* Sometimes referred to as ”stakeholder board”
* Managers ”invited” to board meetings
* E.g. Not-for-profit organizations, hospitals, sport clubs etc
They are all unitarian
What differs are there between Board and Management? Give examples of the different tasks of the two
Decision management = management
* Initiation
* Implementation
Decision control = board
* Ratification
* Monitoring
Describe Tricker’s model for board processes
It implies a more involved board and a less clear interface
Four tasks of the board (about balancing the four):
* Accountabilty (outward-looking + Past and presence focus)
* Strategy formulation (outward-looking + future focused)
* Supervising executive activities (Inward-looking + Past and presence focus)
* Policy making (Inward-looking + future focused)
Work with and through the CEO
How does the board avoid spending too much time on the supervising and accountability (day-to-day work)? (Tricker’s model)
- Delegate, hire the right people. Hedge yourself from daily issues by hiring competent managers below you.
What are three important committees?
Audit committee
* Works with auditors
* Includes CFO
Remuneration committee
* Compensation packages
* Incentive programs
Nomination committee
* Big shareholders have their say in appointing new directors to the board
They enable focus and reduce the burden on the board as a whole
Name some generic core competencies of a director
- Strategic reasoning, perception & vision
- Capability of quantitative and qualitative analysis
- Planning and decision-making capabilities
- Communication and interpersonal skills (face media and angry people)
- Network and political abilities (when recruiting a director, also recruit this ones contacts. E.g., recruiting someone with important bank contacts)
- Knowledge of the enterprise (history, politics, organization, financials, industry, etc)
Tricker’s 6 Cs
- Commitment (need commitment from members)
- Culture (have to face current culture, maybe change)
- Collaboration (all individual experts? Teamwork)
- Competence
- Creativity
- Contribution
What are the role of the Chair
- Usually not the CEO
- Usually a part-time INED
- Usually elected by the other directors (first among equals)
Important roles:
* (Strategic… and less strategic) Leadership (set the tone, take initiative, influence board structure and processes, evaluate performance, etc)
* Managing meetings
* Linking the board with management
* Arbitration
* Being the public face of the company
Different types of directors
Shadow
Alternate
Nominee
Governing
Corporate
Employee
Associate
Cross-directorship
Ways of recruiting a CEO
External
* External market for global leaders
* New blood
* Higher risk
* Previous industry experience
Internal
* Creation of internal labour market
* Knows the fabric of the org
* Lower risk
* Previous experience
* Ability for socialisation
What determines how much an executive leader can influence an organisation according to Cannella, Finkelstein & Hambrick (2008)?
Managerial discretion
What does low discretion entail according to Cannella, Finkelstein & Hambrick (2008)?
in situations of low discretion, the following could be expected: older CEOs who are promoted from within (to fulfill largely figurehead roles), low executive compensation, little use of incentive executive compensation, low administrative intensity, low involuntary turnover of CEOs, stable strategy, and changes in organizational performance tied closely to changes in the task environment. (Situations of high discretion would tend to show opposite effects.)
What is the difference between high and low discretion according to Cannella, Finkelstein & Hambrick (2008)?
if high discretion exists, executive orientations become reflected in organizational outcomes; if low discretion exists, they do not.
