Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...
By Kelsey Penna
June 18— As a result of increased scrutiny and pressure by investors, public, private and nonprofit boards are encouraged to implement three specific tools to maintain and improve board effectiveness.
That's according to Kristina Veaco, founder of Veaco Group, a corporate governance consulting team, who spoke June 18 during the “Tools to Support Board Effectiveness: Board Composition and Succession Planning, Skills Assessments and Evaluations” webinar sponsored by Bloomberg BNA.
“Companies are rapidly changing,” said Cheryl Sorokin, a consultant at Veaco Group, who led the webinar with Veaco. “As company strategies change, boards need to change along with them.”
Veaco and Sorokin, who co-author Bloomberg BNA's portfolio The Role of the Corporate Secretary: Facilitating Corporate Governance and the Work of the Corporate Boards, explained that boards should implement (1) composition and succession planning, (2) skills assessments and (3) evaluations.
First, boards need to focus on their own composition if they want their companies to have future success, said Veaco.
They need to ask themselves whether their board members have the right skills and competencies given the company's business or mission.
“When you have a process like this, the tendency to rely on the ‘old-boy' or ‘old-girl' network or the tendency to put people that are just alike on boards becomes much harder when the skills that the board needs are focused on,” said Sorokin.
Age, length of service, term limits, diversity and committee assignments are areas that boards should consider when reviewing their composition, said Veaco.
Boards annually should collect and review this data so that they are prepared and have a plan before a triggering event happens, like the Target data breach in November 2013.
“There is a need for boards to be proactive, to be prepared and to anticipate and not just react,” said Veaco.
The second tool, the skills assessment, is an analytical process that goes beyond the data collected in the composition and succession planning process. It helps the board identify the skills and competencies needed for its ideal composition, if these skills currently exist, and any gaps to be filled in the event of vacancies.
“There is no standard template [for the assessment],” said Sorokin. “It needs to be tailored to each individual board and needs to be regularly refreshed because skills and competencies change over time.”
During this process, boards should assess common skills such as financial expertise, industry expertise and passion for the mission, as well as personal characteristics, independent thinking, leadership skills and collaborative work ability, said Sorokin.
“Once the assessment is done, it really opens the board's eyes to the skills gaps that are lacking on the current board,” said Veaco.
According to Veaco, the third tool, board effectiveness studies, enables board members to reflect on how the board is functioning by seeing what works and where improvements are needed.
“The self-assessment aspect is important to include to focus the mind on personal service,” said Veaco.
Written questionnaires, oral interviews or a combination of the two are common forms the studies can take. It is important to tailor the process to the individual organization, Sorokin said.
Reporting the results back to the board is essential to resolve issues and for the study to be effective. It also is important to change the process from time to time so it doesn't become rote, or a “checking the box exercise,” said Sorokin.
Veaco recommends combining all three of these tools to serve as a catalyst for improving board effectiveness.
To contact the reporter on this story: Kelsey Penna in Washington at email@example.com
To contact the editor responsible for this story: Ryan Tuck at firstname.lastname@example.org
To purchase “on demand” access to the webinar, go to /tools-support-corporate-w17179890795/
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)