Sessions 5-6 Flashcards
Chemistry and Comfort with nominating committee
Focus on this can promote board teamwork, but it also limits board members to people they already know
CEO involvement in nominating committee
CEO knows company better than anyone and can pick the best fit. However, he can also just pick stooges.
CEO influence over NC has
decreased
Formal search process in NC
- helps measure professionalism
2. may get a more thorough measure of a person
Informal search process in NC
- Chemistry and comfort can be measured better
2. if you want to get an important person on your board, making them jump through hoops won’t help
Demographic diversity vs diversity of thought
Sometimes they are correlated, sometimes they are not. More diversity gets the board out of potential bubbles
Why is the NC the least risky committee to be on?
The NC has no reason to be ripped on, as it is not publicly associated with disasters
What two areas are GC slacking in?
- meaningful evaluations of directors
2. director education
What is the main difficulty of being apart of a governance committee?
It’s hard to tell important people what they are lacking in
What are two trends that result from SOX 404?
- less 404 problems due to tougher audits, more resources and more to lose in large companies than small companies
- controls are stronger in public companies because more regulations and more to lose
Where is ERM more likely to be used?
big companies and financial institutions
What is the issue with internal audit heading ERM?
This would have internal audit reviewing their own work.
What is keeping ERM and strategic planning from being integrated?
ERM is seen as a compliance issue instead of a strategic issue. This means ERM is given over to the head of internal audit instead of the CEO (who is in charge of strategy).
What are the four ways a GC would promote board effectiveness in an ideal world?
- conduct substantive evaluations of the board
- develop meaningful governance principles that guide the board in its oversight duties
- thoroughly assessing board committee membership and leadership, getting people in the right place
- actively promoting meaningful director education that enhance industry knowledge
What are the four threats to GC effectiveness?
- GC chair becoming more compliance/ritual than actually effective
- CEO involvement in GC
- Attorneys and litigation fears
- Board culture: does the GC think their duties are important?
