The Directors Manual: A Framework for Board Governance

Acknowledgments ix

Peter C. Browning ix

William L. Sparks x

Preface xi

Why We Wrote This Book xi

Chapter 1 The Changing World of Board Governance: How We Got Here 1

What’s in This Chapter? 1

How and Why Boards Have Changed 2

Why These Events Are Important 3

A Barometer for CEO Compensation 5

2002—A Board Governance Tipping Point 9

Impact of the 2008 Financial Meltdown 14

Chapter Summary 17

What’s Next? 18

Chapter 2 Role of the Board 19

What’s in This Chapter? 19

Home Depot’s Leadership Question 20

Two Key Guiding Principles 22

Why Boards Exist 23

Three Critical Questions That Boards Ask 24

Is the Right CEO Running the Company? 25

Is a Robust Succession Plan in Place? 29

Determining the Right Strategy 30

Chapter Summary 31

What’s Next? 32

Chapter 3 Key Board Leadership Roles 33

What’s in This Chapter? 33

Public Outcry for Action 35

Changes in NYSE Listing Requirements 36

The Debate over the Separation of Roles 37

Nonexecutive Chairman, Lead Director, or Presiding Director 40

The Challenge of Board Leadership 42

Chapter Summary 45

What’s Next? 45

Chapter 4 Board Culture 47

What’s in This Chapter? 47

Understanding Board Culture 48

Examples Illustrating Schein’s Model of Culture and Board Dynamics 50

The Three Elements of Board Culture 51

The Leadership and Board Performance Cycle 58

Transforming Board Culture 63

Chapter Summary 66

What’s Next? 67

Chapter 5 Group Dynamics and Board Decision Making 68

What’s in This Chapter? 68

Why Working in Groups Is Difficult 69

Groupthink: Managing Conflict in the Boardroom 72

Understanding and Avoiding Groupthink 74

Getting Past The Abilene Paradox 76

Chapter Summary 81

What’s Next? 81

Chapter 6 Board Structure and Schedule 82

What’s in This Chapter? 82

Board Size 83

Meeting Requirements and Preparation 84

Effective Meetings and Service 90

Chapter Summary 91

What’s Next? 92

Chapter 7 Assessing Board Performance 93

What’s in This Chapter? 93

The Evolution of Board Assessments 94

Customizing the Assessment Process 96

Finding Your Own Best Practice 98

Chapter Summary 101

What’s Next? 101

Chapter 8 The Challenge of the Disruptive Director 103

What’s in This Chapter? 103

Disruptive Members a Common Issue 104

The Ying and Yang of Conflict 105

An Effective Dissenter 106

Five Types of Disruptive Directors 107

Dealing with Disruptive Directors 109

How Assessments Help 110

Chapter Summary 111

What’s Next? 112

Chapter 9 The Other Succession Challenge: The Board of Directors 113

What’s in This Chapter? 113

Why a Board Needs to Plan for Succession 114

Demographics and Board Service Realities 115

Enron, the 2008 Financial Collapse, and Dodd-Frank 115

Building a Board Succession Plan 117

Educating, Onboarding a New Member 123

Chapter Summary 124

What’s Next? 124

Chapter 10 What’s Next in the Boardroom? 125

What’s in This Chapter? 125

Ongoing Scrutiny of Executive Compensation 127

Continuing Demands for More Proxy Information 129

More Shareholder and Investor Activism 130

Greater Demands for Proxy Access 132

Sharper Focus on Risk Management 133

Ever-Increasing Scrutiny of Board Composition 134

The Way Forward 134

Chapter Summary 135

What’s Next? 136

Appendices Board of Directors Assessment Forms 137

Appendix A Board of Directors Self-Assessment 138

Appendix B Audit Committee Assessment 152

Appendix C Compensation Committee Assessment 154

Appendix D Governance/Nominating Committee Assessment 156

Appendix E CEO Assessment 158

Appendix F Lead Director Assessment 163

Appendix G Nonexecutive Chairman Assessment 165

Appendix H Peer Assesssment 167

Notes 169

About the Authors 179

Index 183