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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.
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